Five factors driving up the cost of oncology drugs

January 22, 2018

The high cost of specialty drugs continues to plague the healthcare industry. Here’s why.

One of the key factors that leads to higher costs with all drugs-not just those for cancer treatment-is the way the cost of these drugs is reimbursed, says Anna Kaltenboeck, program director and senior health economist at Memorial Sloan Kettering’s Center for Health Policy and Outcomes.

“The purchasing and reimbursement system that we have in place favors higher prices, because the purchasing and prescribing intermediaries that are involved in that supply chain have proportional incentives associated with the price of drugs,” she adds.

Kaltenboeck notes that pharmacy benefit management firms also have an impact on drug prices, in particular when it comes to rebates. “They also benefit from that higher list price that they can negotiate down from,” she says.

Here are four more factors that are driving up the cost of oncology drugs, according to experts:

1. It’s not easy to make medication changes.

Kaltenboeck highlights that it’s really hard to push patients off an oncology drug. That’s particularly the case, she says, when a patient is responding well to the treatment.

“For instance, if you have someone taking Gleevec, it doesn’t make sense to take that patient off [the treatment] if they’re responding well to it. Once you have a group of patients who are controlled on a particular drug, it doesn’t stand to reason that you would simply change their treatment because of the fact that a cheaper drug became available.”

2. There’s no national system to evaluate drug cost effectiveness.

There’s no national program for evaluating the drugs to determine the clinical value of the drugs that a company brings to market, says Steve Pearson, MD, founder and president of the Institute for Clinical and Economic Review, a Boston-based nonprofit that evaluates the value of medical treatments. What that means is companies are generally left to set drug prices at their own discretion, he says.

Obviously, we need to think about potential competition with existing drugs or drugs to come, but the system doesn’t push back in any other way. Certainly, compared to other countries, that’s one of the reasons that prices in this country are significantly higher,” adds Pearson.

Next: Factors 3 and 4




3. Significant investments in cancer drugs drive higher prices.

“There have been huge investments in the cancer space because the incentives in our reimbursement space are aligned toward higher prices,” says Kaltenboeck.

In addition, it’s hard for providers and payers to say “no” to a drug, she adds. Medicare can’t negotiate with drug companies on the cost of drugs, which means that Medicare then has to cover the cost of those drugs.

“There’s a reason for that,” she says. “You don’t want health plans discriminating against patients who are really sick, so you want to offer the full plethora of cancer drugs.”

This dynamic has created a system where cancer drugs increasingly cost more, and payers feel they can’t restrict access. One of the impacts of this system is payers aren’t in a position to manage the cost effectiveness of these drugs, she adds.

4. The stakes are so high.

Unlike with many other diseases, cancer is often viewed from an emotional standpoint, meaning that cancer, if untreated, can lead to patients’ deaths.

“It’s often striking people in the middle age, where they have families and it is a very frightening diagnosis and it’s one that people, individually, are certainly willing to pay a lot of money to try to get a beneficial treatment,” says Pearson.