As high prices of cancer drugs spark the kind of patient outrage that high AIDS-drug prices unleashed more than a decade ago, a few pharmaceutical and biotech companies are weighing caps and other cost-containment measures, before the outcry turns into a public-relations crisis for the industry.
ImClone Systems Inc. and Bristol-Myers Squibb Co., co-marketers of Erbitux, one of the most expensive cancer drugs on the market, are "well down the road" toward establishing an annual patient price cap for the drug if its market expands, says Ronald Martell, senior vice president of commercial operations at ImClone. Such a program would set an annual ceiling on individual patients' drug-treatment costs, beyond which companies would provide the drug free of charge or at a steep discount. Genentech Corp., of South San Francisco, Calif., is considering cost-containing alternatives for Avastin, which is currently approved for treatment of early-stage colorectal cancer.
While the backlash against cancer-drug prices is nowhere near as big as the one against AIDS-drug prices, ImClone's Mr. Martell says the industry should make changes in its policies now. "Otherwise, at some point there will be a confluence of events -- social pressure, volume of dollars -- and something will have to give," he warns.
Erbitux, priced at $10,000 a month, is currently approved only for patients with metastatic colorectal cancer who have failed a certain kind of chemotherapy. Their average total cost of treatment is currently about $40,000: In most of these patients, the illness has advanced to the point where they are only a few months from death.
But later this year, ImClone and Bristol-Myers, both based in New York, hope to win Food and Drug Administration approval to market Erbitux for patients in earlier stages of colorectal cancer, who have longer life expectancies. Approval for these patients would result in a sharp rise in the average cost of treatment with Erbitux -- and a sharp rise in profits.
In the case of Genentech's Avastin, the current cost of treatment -- $4,400 a month, or $52,000 a year -- could rise sharply if the FDA approves the drug as a treatment -- at double the dose -- to treat lung cancer and breast cancer. Such approvals, expected over the next year, could result in thousands of new patients paying, at current prices, more than $100,000 a year to take Avastin.
The Medicare Modernization Act of 2003, which extended prescription-drug benefits to the elderly, has put financial pressure on elderly cancer patients, the age group with the highest rates of the disease. Under the old system, cancer patients receiving drugs intravenously at a hospital in practice often weren't forced to make their 20 percent co-payment: The hospital would bill Medicare directly, and the Medicare reimbursement price -- as much as 25 percent above the drugs' market price -- provided a sufficient profit cushion so that hospitals often didn't collect co-payments.
But now, Medicare reimbursements are in line with drugs' actual selling prices, and physicians and hospitals can no longer afford to forgive co-payments. As a result, many elderly cancer patients without supplemental prescription-drug insurance end up on the hook for thousands of dollars.
"There's a groundswell of patients who are outraged," says Jerry Flanagan, health-care policy director for the Foundation for Taxpayer & Consumer Rights, a Los Angeles watchdog group.
The Medicare overhaul has made a drug-price cap difficult to design. Medicare drug reimbursement rates are now set at a drug's average wholesale price plus 6 percent. Every time ImClone gives Erbitux free to patients, the government formula would count a sale at a price of zero dollars -- driving down the drug's average price. "It would send the drug into a downward spiral," ImClone's Mr. Martell says. The more free Erbitux dispensed, the lower the price would go.
As a result, ImClone instead is considering directing patients who exceed the cap and meet income guidelines to an independent charitable program that would provide the drug free or at a fraction of the price. Mr. Martell says ImClone and Bristol-Myers haven't agreed on the dollar value of the cap yet, and pricing decisions ultimately rest with Bristol-Myers. Bristol-Myers declined to comment for this story.
"If we do a program like a cap," ImClone's Mr. Martell says, "it would not only help patients but it would help the system as a whole" by limiting the burden on government and private insurers.
Because most cancer drugs don't have competition, an increase in demand usually drives prices up. A surge in patients taking a drug at higher doses would substantially raise costs for private insurers and government.
Genentech says it is also weighing the use of an independent charity, among other options, for giving away Avastin to patients who exceed a certain annual spending limit. "We're trying to balance the interests of patients, the interests of society and the company's interest -- and our desire to innovate for the best drugs," says David Ebersman, Genentech's chief financial officer.
A spokeswoman for the Centers for Medicare and Medicaid Services says companies can provide free drugs to charities without affecting the average sales price. But Walter Moore, vice president of government affairs at Genentech, says hurdles remain, including Medicare reimbursement, which pays oncologists for infusing a drug only in conjunction with paying for the drug.
Cancer drug prices, always considered high, have skyrocketed in recent years. Patient outcry was muted when few patients shouldered the cost of drugs directly. But now, some private insurers and employers are requiring patients to pay 10 percent to 50 percent of the cost of expensive pills and infused drugs, such as Erbitux, adding up to annual drug bills in the tens of thousands of dollars.
Fears about the price of the cancer drug Revlimid prompted the International Myeloma Foundation, an advocacy group, earlier this year to seek a meeting with the manufacturer, Celgene Corp., of Summit, N.J. Celgene had priced the drug at around $4,600 a month, or $55,000 a year, after the FDA approved it in December for a rare blood disorder called myelodysplastic syndrome. Early this year, patients with a different disorder, multiple myeloma, began to worry they wouldn't be able to afford the drug if it were approved for their disease, which investors expect in June. The dose for treating multiple myeloma is 2 1/2 times the dose required for treating the approved disorder. Patients did the math and envisioned drug costs of $135,000 a year.
Susie Novis, the myeloma foundation's president, says Celgene executives in February assured her the price increase would be limited but declined to be specific. A spokesman for Celgene says the company will price the higher dose at less than 2 1/2 times the price of the lower dose.
Protests over AIDS-drug prices peaked in the U.S. in the late 1980s. Activists in 1989 staged demonstrations against Wellcome PLC, now part of GlaxoSmithKline PLC, which makes the AIDS drug AZT. In one protest, five activists chained themselves to a balcony inside the New York Stock Exchange holding a banner that read, "Sell Wellcome." Wellcome lowered the price of AZT several times from $10,000 a year in 1987 to $4,000 by 1998.
Today, AIDS drugs remain much cheaper on average than cancer drugs. To avoid antagonizing AIDS activists, Celgene priced the drug thalidomide at $6 a 50-milligram pill in 1998. But when doctors stopped prescribing the drug as an AIDS-wasting treatment and started prescribing it primarily for cancer, Celgene gradually raised its price to $63.50 a pill. Celgene says it raised prices because the value of the drug increased.
Cancer-drug prices raise eyebrows even on Wall Street. Steven Harr, a Morgan Stanley biotech analyst, estimates oncology drugs will make up 22 percent of U.S. drug spending in 2007, compared with 16 percent in 2004. He expects government and private health insurers to push back.
Fred Hassan, chief executive of Schering-Plough Corp., maker of Temodar, a drug for brain tumors, says the controversy over escalating cancer-drug prices is creating "a healthy debate." "These prices are high, $100,000 a year is high," he says. Still, he adds, high prices are partly justified by the high cost of cancer research and the high rate of product failure.
By John Carreyrou and Geeta Anand, The Wall Street Journal
B (RANK) expression was observed in OCs when cultured in the presence of imatinib, providing a mechanism for the decrease in OC function. In vivo analysis of the effect of imatinib on OC activity in adult mice following 8 weeks of imatinib treatment also demonstrated a decrease in OC activity. These results suggest that imatinib may have therapeutic value as an antiosteolytic agent in diseases such as osteoporosis, metastatic bone disease, and multiple myeloma.
