Over at Slate, NBC's Robert Bazell takes on the drug pricing issue, focusing on the newer oncology therapies. There's no denying that some of them are really costly, and that this is a situation that probably can't continue under the current system (which, to exaggerate only slightly, works like this: every cancer patient gets to try everything, and insurance/Medicare pays for it no matter what.) But the problem with Bazell's article is that it bungles enough other points that his main ones are obscured. One of them goes like this:
"Why are these drugs so expensive? It's hard to know exactly, since drug pricing is a sacred prerogative protected by acts of Congress and the details remain shrouded in trade secrets. But the simplest answer is that drug companies can charge whatever price they want. "
Ahem. That's as opposed to the perfectly transparent pricing mechanisms for, say, cars, toothpaste, and fish sandwiches, I guess. And those aren't even "sacred prerogatives"! Imagine what those things would cost if the businesses that provided them could charge whatever prices they wanted to! Good thing we don't let them. (And yes, I know that cancer drugs aren't exactly discretionary purchases - we'll come back to that one.) Bazell goes on:
"Erbitux and Avastin are both laboratory-produced antibodies (Erbitux blocks a chemical signal that tells cells to grow; Avastin cuts off blood supply to tumors). True, these antibodies are more expensive to produce than most pills, but only slightly-the technology can be replicated in any college biology lab. Production costs amount to few dollars a dose at most."
I hate to put myself in the position of defending Imclone and Erbitux, but this argument is exaggerated to the point of nonsense. I know what he's trying to say - that making monoclonal antibodies is an established technology - and up to a point, it is. But Bazell makes it sound like a bunch of undergraduates could whip up a batch of Erbitux for fifty bucks or so, and that is, to use a term of the pharmaceutical art, complete bullshit. Antibodies are actually a lot more expensive to produce than small molecules. Getting reproducible purity and performance from them is a completely different problem than with small synthetic molecules, and once made, they're significantly harder to formulate, store, and handle. (That's one reason why Iressa, for example, is cheaper by a factor of ten than Erbitux.)
Here's a challenge for Robert Bazell: Let's pick a random college biology lab or two by riffling through a directory, and see if they could produce a steady supply of GMP-grade doses of Erbitux (or any other antibody therapy). Let's just call them up and ask them! Anyone want to put some money down on the results? Bazell goes on:
". . .Like all pharmaceutical companies, BMS and Genentech cite research costs and the huge risks involved in drug development (many drugs fail; clinical trials are expensive ... but haven't we heard it all?) as explanations for the high prices of their drugs. But the real reason is that market forces do not apply to drugs."
I'm sorry that we're boring him. Unfortunately, those explanations get trotted out over and over again because they're true.
"Few individuals purchase these drugs as they would a head of lettuce, say, or a refrigerator. In the case of cancer drugs, health-insurance companies are the consumers. For those lucky enough to have insurance, their plan might pay; and indeed, oncologists say that, surprisingly, so far few have balked."
Now we're down to that nondiscretionary spending issue. It's a real one, and it applies not just to pharmaceuticals, but to every sort of health care. People value their health very highly, as they should. And it's not that market forces don't apply to drugs, it's that no one seems to want them to. If they did so more directly, insurance companies would indeed start to balk, and drug companies would have to decide if they could lower the prices of their new therapies coming through the research pipeline. And if they couldn't, they would have to decide not to take them through clinical trials at all. We would end up with fewer therapeutic options than we have now.
But a therapy that no one can afford is arguably about the same as no therapy at all, so that's not as much of a tragedy as it sounds. And it's certainly true, as the article goes on to point out, that many of these new cancer treatments aren't as effective as everyone would like. Unfortunately, the only way to find that out was to go ahead and spend the money and time to develop them, and take them all the way through clinical trials and regulatory approval. That's when you find out that your wonder drug isn't as wonderful as you'd hoped. But I'll stop right there; I can hear Robert Bazell starting to yawn. Here he comes again:
"But even the current meager benefit will encourage all cancer patients to seek (these drugs), and those who cannot get them, because they lack health insurance or their plan won't pay, to feel cheated. And a marketplace with absolutely no price control will only propel the drug companies to charge even more for future drugs, some of which may offer even less benefit."
Why, exactly, would we enter the market with something that's demonstrably worse than what's already out there? I know that the industry gets hammered for me-too drugs, but those work at least as well as the existing therapies, and they need some selling point that lets you argue that they're even better. I can testify, from personal experience, that projects get killed all the time in the drug industry because we can't beat the competition, either what's already on the market or in clinical trials. I've helped kill them. This hasn't been as big an issue in oncology, but it does happen, and it's going to be happening more often.
And the answer to all this, presumably, is price controls. Hard to say, since that's where Bazell's article ends, but that seems to be the prescription. I can just imagine what kind of price a group of elected officials will decide what is fair. We'll be tied up, top to bottom. It's not clear to me - it never has been - how forcing companies to earn less money from their drugs will cause them to produce better ones. (Think how much Imclone could charge if Erbitux actually worked better than it does.)
If you want a more detailed take on the cancer drug pricing issue, go back a couple of weeks to Matthew Herper's article in Forbes. It covers the same ground, but in a clearer fashion. Ultimately, I think what's going to happen is that there will be patients who will not get some of these drugs, largely because they won't do very much good - or none at all. If we get past the treat-everyone-with-everything style in oncology, it'll force us in the drug industry to modify our projections of market size, and we'll have to come up with a way to deal with it. Pushback from the insurance companies and physicans is a better check on the drug industry, to my mind, than a Central Office of Pharmaceutical Pricing could ever be.