Here's a post from back in the spring which goes into why I think that the cancer drug market is in the process of changing. As we figure out which patients will respond to which drug - which will happen, albeit slowly - the standard industry assumptions about market size will have to be rethought.
For now, we in the business can continue to assume that everyone will be given most everything for most everything. That's why Gleevec sells at the level it does - it's really an orphan drug which has benefited from the let's-give-it-a-shot mentalily more than anyone thought possible. The thing is, most of the people who've received the drug (and the other new agents) for totally different kinds of cancer than they're known to treat have wasted their time and hopes, and their insurance companies have wasted their money. It's true that this kind of clinical practice can lead to new treatments (there are always some surprises), but it leads to a lot of lost effort, too.
But as we move into the world where we know more about what we're doing, that's going to change (see that post linked above for details.) Cancer is going to slowly turn into a constellation of hundreds (thousands?) of orphan diseases, each of which will have its own particular preferred therapy. We won't need new drugs for all of them - many of these will be particular combinations of known agents - but we'll need a lot more than we have now. And the market size for each of them might be at least an order of magnitude smaller than we'd like.
That, naturally enough, will mean that the prices of these drugs will go up, because they're probably not going to be any cheaper to develop. So we'll have a lot of drugs, each of which can do great things for a small set of patients, and each of which will cost a heap. Doctors will have no problems with this, and patients will adapt to this world without many complaints. We'll adapt to it in the drug industry. But think about how this is going to look to an insurance company or HMO. . .
All of their cancer-patient customers will be taking highly expensive medications - different ones, true, but the bottom line will be the same. And they'll all have to stay on them for a long time, since we still don't know how to make cancer reliably go away very well - we can just keep it in check. How's that sound over on the insurance side of the street, guys? Guys?
(For those who are interested, I wrote a few other posts on the issue of cancer therapies (and their prices) back in the summer - try here and here if you haven't seen them.)