Rising cancer treatment costs annual epidemic

DALLAS — Kim Harris approached the communion rail at Zion Lutheran Church with a vial of pills in his hand. The thin, dying man and the Rev. Robert Preece were alone in the sanctuary.

They had met many times this way — the 62-year-old cancer patient seeking a blessing for his therapy, and the Dallas pastor who regarded Harris as the “strongest witness of faith in crisis” he’s ever known. The two men prayed for the pills to be empowered with the spirit.

On that day, Harris had a two-week supply of pills. Their price: $18,000. New cancer drugs sell for an average of $120,000 a year.

Medicare, the federal health insurance program, is barred by law from negotiating with the pharmaceutical industry over these prices. In most states, commercial insurers are compelled to offer coverage. It’s illegal to import them, even though the same drugs are far less expensive abroad.

Oncologists get most of their money from reselling drugs to their patients.

The higher the cost of the drug, the more money for the doctor. Many hospitals can get big discounts on cancer drugs under Medicare rules. But they don’t have to pass those savings on to patients. So hospitals, too, profit from higher-priced drugs.

Prescription drug prices are rising much faster than other health care costs.

There is little competition or control to put the brakes to the trend, insurers and some oncologists say.

In 2014, the cost of prescription drugs jumped 13.1 percent, according to

Express Scripts, a pharmaceutical benefits company. Specialty drugs, like cancer drugs and the hepatitis C treatments, increased 30.9 percent in 2014.

Their prices are expected to go up another 44 percent this year.

The cost of specialty drugs was $87 billion in 2012. United Healthcare estimates that could reach $400 billion by 2020. Total prescription drug spending in 2014 was about $300 billion.

Cancer patients without adequate insurance have only the starkest choice: your money or your life.

“I couldn’t believe the cost of some of these drugs,” said Harris, whose insurance picked up the tab. “I mean, $18,000?”

Harris was diagnosed with colorectal cancer in August 2008 and survived years longer than his oncologist expected. He exhausted his drug options last year and entered hospice care in February. He died March 12.

• • •

Five years ago, cancer treatment accounted for just $157 billion of the nation’s annual $2.6 trillion health bill. Propelled by new drugs and an aging population, however, cancer spending is rising quickly. A forecast from the National Cancer Institute said spending could hit $207 billion by the end of the decade.

About 1.6 million Americans will be diagnosed with cancer this year. Annual spending for the average patient is already more than $20,000 higher in the U.S. than it is in Europe.

By 2030, the number of cancer diagnoses is expected to rise 45 percent. By then, oncologists predict cancer will eclipse heart disease as the nation’s leading cause of death.

The cancer drugs used by Kim Harris and other patients do not cure. In rare instances, they offer a way to stabilize a cancer. More often, they offer a few additional years, months or even a few days of life. To Harris, that was priceless.

But Dr. Hagop Kantarjian, the chair of the leukemia department at Houston’s M.D. Anderson Cancer Center, argues the prices of these new cancer drugs are “absolutely immoral.”

“Since the 2006 Medicare Reform Act (providing drug insurance), Medicare has been prevented from negotiating prices with the drug companies,” he said. “That left the drug companies as the only (entities) setting prices. They’re like a child alone in a candy store.”

His most egregious example: Gleevec.

A breakthrough treatment for some types of leukemia, Gleevec keeps cancer at bay as long as the patient continues to take the pills. It also shows results in treating colorectal cancer.

A pricing database developed at Memorial Sloan Kettering Cancer Center in New York shows Gleevec entered the market in 2001 priced at $3,401 a month.

Pharmaceutical companies enjoy a monopoly on their formulas for up to 20 years under patent laws. With Gleevec’s patent expiring in July, Swiss pharmaceutical maker Novartis now has the drug priced at $11,000 a month. Kantarjian’s indignation with these drugs is not about their value to patients.

“I have nothing against Gleevec. Gleevec is a great drug,” Kantarjian said. “But they know that patients with cancer are desperate. It’s either pay or die.”

Novartis recorded net income of $10.3 billion last year on sales of $57.8 billion.

Gleevec, with sales of $4.7 billion, was the firm’s best seller. The profit margin for the company’s pharmaceutical sector was 26.6 percent.

In Canada, Gleevec sells for about $3,170 a month. A generic version of the medication sells there for about $735 a month. The generic won’t be available in the U.S. until next year.

• • •

Dr. Lee Newcomer, senior vice president for cancer care with insurer United Healthcare, said everyone with health insurance absorbs the cost of these cancer drugs through higher premiums.

“Right now, I don’t have the ability to say no” to these drugs, Newcomer said. “Insurance regulations across the country mandate that I pay for that drug, no matter how little or how much value that has.

“Pharmaceutical companies know that, and they’ll set the price as high as society will tolerate,” he said. “But I have no legal ability to say no. It’s an environment that is clearly broken.”

Dr. Clifford Hudis, former president of the American Society of Clinical Oncologists, says the billions needed for research and development of these medications is an important consideration. But he says drug pricing isn’t tied to cost.

“We don’t have a functioning marketplace as regards cancer and drugs. One result is everybody in this space is victimized,” said Hudis, chief of the breast medicine service at Sloan Kettering. “The automatic correcting effect of a marketplace isn’t there.”

The U.S. Justice Department, in a memo filed last year with the Paris-based Organization for Economic Cooperation and Development, explained the U.S. drug market this way: “Competition is complicated by the fact that the insurer or employer who pays for pharmaceuticals generally has little influence over what is prescribed, the prescriber ordinarily does not bear the costs of the pharmaceuticals prescribed, and the ultimate consumer, the patient, typically has little influence on either the pharmaceuticals prescribed or the prices he will pay for them.”

One example: Gilead Sciences makes Sovaldi, a drug that cures most cases of hepatitis C. When Sovaldi was introduced last year, it was priced at $1,000 a pill. Government and private health insurers complain the widespread incidence of the disease and Sovaldi’s $84,000 price for a full course of treatment will drain the nation’s budgets.

Sovaldi, however, cures. These cancer drugs buy much less.

Astellas, a Japanese firm with annual sales of $11.7 billion, sells two of these cancer drugs. Xtandi, a drug for prostate cancer, was introduced in 2012.

Clinical trials for Xtandi showed it could add six months to the life of a patient with metastasized prostate cancer. A month’s supply sold for $7,078 in 2012, according to the Sloan Kettering database.

Tarceva was introduced in 2005 after a trial showing it could add 10 days to the life of a pancreatic cancer patient. It was priced at $4,174 for a month’s supply of pills, according to the Sloan Kettering database.

Tarceva has since been approved for some types of lung cancer, where it can give a patient an extra five months. Prices today are in the range of $6,800 a month.

Tyler Marciniak, director of Astellas’ oncology communications and advocacy at the company’s U.S. headquarters in Illinois, said these drugs are priced competitively.

“We price our products and our treatment based on what we perceive the value to be. Part of it is the cost to bring the drug to the market, but also what they can bring to patients. ... What does this give patients that the current option today doesn’t? We’ll look to price accordingly,” he said. “If society doesn’t see the benefit of a certain cost, that cost will change.”

Astellas expected profits to rise 16 percent to $1.6 billion in the fiscal year that ended March 31.