Abstract
The high market price of new anticancer agents has stimulated debate about the long-term sustainability of healthcare systems and whether these new agents can continue to be supported by public healthcare or by private insurers. In addition, some drugs have been approved with limited clinical benefit, raising concerns about setting a minimum requirement for medical benefit. Options to resolve these problems include raising the bar for approval of new drugs and/or pricing of new agents based on the medical benefit that they offer to patients. In this commentary, we suggest that new agents should be marketed in a two-step process that would include first the approval of the new drug by the regulatory agencies and second the introduction of a market price based on the medical benefit that the new intervention offers to patients. Introduction of value-based pricing would maintain the sustainability of health care systems and would improve drug development, as it would pressure pharmaceutical companies to become more innovative and avoid the development of compounds with limited benefit. Value-based pricing could also stimulate the funding of research directed to development of new anticancer drugs with novel mechanisms of action. Cancer Res; 76(11); 3127–9. ©2016 AACR.
The development of new anticancer drugs is a long and expensive process with a high risk of failure. In oncology, only 10% of all new molecular entities under preclinical evaluation will be marketed and estimates of the cost of bringing a new drug to market range from about 100 million to more than one billion dollars (1–3). These costs have been used by pharmaceutical companies to justify the high market price for new approved anticancer agents.
The rapidly rising cost of new drugs raises questions about long-term sustainability. The cost of one year of treatment has increased more than ten times from 2000 to 2012 while average household income in the United States has decreased by 8% in the last decade (4). In addition, some new drugs have better therapeutic effects when given in combination and this can lead to huge overall costs. For example, ipilimumab (average cost when given alone ∼$160,000) and nivolumab (average cost when given alone ∼$100,000) lead to better outcome when given in combination to patients with metastatic melanoma. Because of a longer progression-free survival leading to longer duration of treatment, the total cost is approximately $300,000. Although these drugs are effective, public health systems and private insurers cannot reasonably support their prices. The increase in drug prices might be justified if new products brought to market showed substantially greater efficacy than old ones. Although there are some notable exceptions, including imatinib, trastuzumab, and the immunotherapy drugs listed above, there is no association between the magnitude of clinical benefit and the market price of drugs (5). The market price of new drugs appears to be independent of their mechanism of action, their efficacy or toxicity, the costs of synthesizing, extracting or purifying them, the cost of basic and clinical research to develop them, or the feasibility of using them in routine clinical practice. The main consideration in setting price is that it will be more that the launch price of the most recently approved anticancer drug (6). In addition, "me too" drugs are not less expensive than those with new mechanisms of action. Without explicit price-fixing agreements between companies, prices are not reduced by competition between drugs within a specific therapeutic area (7).
Regulatory agencies such as the FDA and the European Medicines Association (EMA) usually approve agents based on a statistically significant difference in a time-to-event efficacy endpoint (ideally overall survival) between the investigational and control arms of a randomized clinical trial. That is not the same as a clinically relevant improvement (8). Patients, physicians, and medical societies will vary in what they consider to represent clinically meaningful benefit, so that changing criteria for the approval of new anticancer agents will have ethical concerns. One way to implement this objectively is to relate the price of a new agent to its level of clinical benefit, i.e., to institute value-based pricing as for almost all other commodities that can be purchased (4). Clinical benefit depends on both efficacy—improvement in survival and/or its quality attributed to a new drug—and toxicity, which can lead to deterioration of quality of life of patients and can be associated with direct health care costs. Ideally, these properties of a new drug should be evaluated in everyday practice. Patients that participate in clinical trials are highly selected and a difference in outcome due to a new drug (i.e., its clinical benefit) can be diluted when translating that agent to routine clinical practice. New agents often have less activity and more toxicity when used in general oncologic practice (9). For these reasons, some authors have proposed raising the bar for the approval of new anticancer agents (5, 10). A substantial increase in duration or quality of survival or a validated surrogate for one of these two fundamental outcomes should be required for all new agents.
Recently, oncology societies have introduced the concept of medical benefit scales that attempt to quantify efficacy and toxicity and thereby seek to obtain a more objective definition of clinical value that can be related to cost (11, 12). Value-based pricing would represent an extension of these strategies, whereby pricing of drugs would be required to reflect their clinical value as a criterion for marketing approval. Methods are available to relate clinical value to cost. Well-conducted randomized trials allow estimation of median life-years (LY) gained as a result of using the new treatment in place of the current standard; survival can also be adjusted by a quality factor to estimate the gain in Quality-Adjusted Life Years (QALY), although this is usually subject to greater uncertainty. Differences in cost of new and standard therapies then allow estimation of the dollar cost per median LY or QALY gained (13). For example, a new drug that costs $100,000 for a year of treatment, and provides a median 6 months gain in survival compared with current standard treatment that costs $5,000, with minimal difference in overall quality of survival, would cost $190,000 per LY or QALY gained. With value-based pricing, all anticancer agents that show a statistically significant difference in a recognized outcome (such as survival) could be approved, but the market price of these drugs would be required to fall within an upper limit in relation to their cost per LY or QALY.
The introduction of value-based pricing to all new approved agents is an approach that would have the benefit of providing a framework to rationalize use of health care resources from public funding systems and those supported by private insurers. Value-based pricing would also put pressure on pharmaceutical companies to develop innovative drugs that have an impact on patients' outcomes and to halt the development of drugs where there is a signal of only minimal benefit from early clinical studies. In contrast, if research in cancer is not driven by profit, global investment might be reduced and moved to other areas. However, a substantial proportion of the current cost of drug development is from bringing drugs to expensive phase III trials despite signals of limited benefit from preclinical studies or early-phase clinical trials (10). Thus, costs could be reduced and substantial profits could still be obtained from truly effective agents.
Why should value-based pricing be of interest to the readers of Cancer Research? Many innovative drugs do not originate with big pharmaceutical firms but from scientists undertaking peer-reviewed research in academic research laboratories (the core readership of Cancer Research), and/or in biotech companies that license their products to big corporations that then market the product. Examples are the new hormonal agents for prostate cancer, abiraterone acetate and enzalutamide, developed in laboratories at Institute of Cancer Research (London, United Kingdom) and Memorial Sloan-Kettering Cancer Center (New York, NY), respectively (14, 15), trastuzumab and TDM-1 for metastatic HER2-positive breast cancer developed in the laboratories at University of California Los Angeles (Los Angeles, CA; ref. 16) and ImmunoGen Inc, respectively, or palbociclib for advanced hormone receptor–positive breast cancer developed by Onyx Pharmaceuticals. Bringing these innovative products to market depends on their being attractive to pharmaceutical companies in comparison with other drugs with less potential for benefit. With value-based pricing, pharmaceutical companies will realize more profit from developing innovative drugs that provide greater benefit to patients in comparison with other agents that are likely to give small, albeit statistically significant, benefits in large clinical trials. Value-based pricing will lead to greater support of research to develop innovative and truly effective drugs.
To achieve value-based pricing by the registration agencies, the FDA and EMA would require a change in their statutes, which at present only allow them to evaluate efficacy and safety as criteria for registration. In the United States, congressional approval would be required to change the mandate of the FDA. Alternatively, novel governmental agencies could be created to legislate maximum pricing after regulatory approval. Value-based pricing would be an extension of systems that are in place in the United Kingdom, Canada, and other countries that limit public health spending on drugs. Registration of drugs is based only on efficacy and safety, but governmental agencies like the National Institute of Health and Care Excellence (NICE) in United Kingdom then decide which drugs will be supported from the public purse, based generally on a maximum price per life-year or QALY saved (currently ∼$50,000, with some upward adjustment for effective anticancer drugs), and/or will negotiate with companies to modify drug prices or conditions (e.g., payment for drugs found to be effective in an initial time-frame). This strategy does not influence the pricing of drugs paid out of pocket or by private insurers, which is also reaching unsustainable levels, and value-based pricing would have the advantage of relating value and price for all payers.
Opposition to value-based pricing would be expected from the pharmaceutical industry and its supporters and lobbyists, but its adoption should lead eventually to the business becoming more competitive and profitable, and globally more attractive for investors. Pharmaceutical companies might come to favor value-based pricing, as it would differentiate competitive and innovative companies from those that are not. All stakeholders, including patients, physicians, policy makers, insurers, and pharmaceutical companies must realize that the current system is not sustainable and innovation is needed. Value-based pricing for health care interventions would help to promote excellence in privately funded research and would also support a sustainable framework for publicly funded health care systems and private insurers. The market for therapeutic drugs is at present the only one that we are aware of where there is no relationship between value (i.e., therapeutic efficacy) and price, a property that seems alien to both ends of the political spectrum.
Disclosure of Potential Conflicts of Interest
No potential conflicts of interest were disclosed.
Authors' Contributions
Conception and design: A. Ocana, I.F. Tannock
Development of methodology: A. Ocana, E. Amir
Acquisition of data (provided animals, acquired and managed patients, provided facilities, etc.): A. Ocana, E. Amir
Analysis and interpretation of data (e.g., statistical analysis, biostatistics, computational analysis): E. Amir, I.F. Tannock
Writing, review, and/or revision of the manuscript: A. Ocana, E. Amir, I.F. Tannock
Administrative, technical, or material support (i.e., reporting or organizing data, constructing databases): I.F. Tannock
Study supervision: A. Ocana, I.F. Tannock