Why Are Most Cancer Drugs So Expensive And So Ineffective?
For-Profit Medicine Trumps For-Patient Medicine.
Posted Oct 15, 2015
Monopoly is defined as: "a situation in which a single company or group owns all or nearly all of the market for a given type of product or service. By definition, monopoly is characterized by an absence of competition, which often results in high prices and inferior products."
The pharmaceutical industry is the most powerful monopoly in the United States. Not surprisingly, it delivers mostly second rate products at ridiculously inflated prices. The results are unprecedented profits and bad patient care.
Pharma's monopoly power is exerted in a variety of interacting domains.
Poltical Monopoly: Big Pharma is a dominant player in Washington power politics. Examples: 1) It lobbied successfully for the 'right' to advertise directly-to-consumers—banned in other developed nations because it leads to wildly excessive use of drugs; 2) it controls the regulatory agency meant to control it—in 2008, the Food and Drug Administration approved only 33% of new drug applications; this year, it has approved 96%, and 3) Congress has denied the US government's Medicare program, the world's largest drug purchaser, the right to negotiate drug prices.
Price Monopoly: Drug prices in the US are dramatically higher than anywhere else in the world. The sky seems to be the limit as drug prices and profits grow astronomically. The absence of competition is arranged in a number of ways. Patent lives are extended by creating phoney 'me-too' versions of existing drugs. Generic companies are bought up, so that generic prices have also become exhorbitant. Cost is not allowed as a consideration in drug approvals. And buyers are forced to pay, without negotiation, prices that bear no relationship to value.
Monopoly of lnformation and Fear: Drug companies are given the right to test their own products, but not given the responsibility to open their data for analysis by neutral observers. They consistently exaggerate and hype the benefits of drugs, while hiding or minimizing their risks. Disease awareness campaigns are designed to stoke up fear of disease and exaggerate benefits of treatment.
I have asked Vinay Prasad, M.D., M.P.H., to summarize how drug companies manipulate the price and perception of cancer drugs. He is one of the smartest people I know and certainly the best informed on cancer drug efficacy, safety, and cost. Dr. Prasad is Assistant Professor of Medicine in the Division of Hematology Oncology at the Knight Cancer Institute at Oregon Health & Science University. His new book is Ending Medical Reversal: Improving Outcomes and Saving Lives. 
Dr. Prasad writes:
"Cancer drugs are outrageously expensive; but they are worth every penny, right?
When you pay a lot for something, you want it to be great. This is true of a new car, a new computer, a new pair of shoes—but it doesn’t seem to be true for cancer drugs.
Recently, we heard that profiteers are raising the price of old, established medicines. For many Americans, Turing pharmaceutical and Martin Shkreli have become four letter words.
But the problem of inappropriate prices is not just a few exceptional cases; it is the norm in cancer medicine.
Before we talk price tag, let’s consider what we get for our money. In medicine, there is always nuance, and it exists here. For example, there are some excellent cancer drugs.Two that come to mind are imatinib—a revolutionary pill that transformed a highly fatal leukemia into a manageable condition—and rituximab—a monoclonal antibody that has improved survival in several cancers. These drugs are expensive, sure, but no one can say they aren’t terrific. But we can say that Novartis, the maker of Gleevec, has raised the price of the drug from an already high $30,000 in 2001 to $76,000 today  despite the fact that it costs less than $200 dollars to manufacture a year's supply .
But at least Gleevec is a great drug. Most cancer drugs are not close to being great—they have only a tiny positive impact on longevity and often cause many side effects.
The median improvement in survival for 71 drugs approved by the US Food and Drug Administration for treating solid cancers over the last decade is only 2.1 months.  And there are two good reasons to assume that this remarkably short reported extension is in fact an overestimate. First, the average age of cancer patients in the real world is much older than those included in the studies submitted to the FDA  — 60% of cancer patients are over 65, but they account for just 36% of patients in key trials . Older patients—who are frailer and have other medical problems—experience more side effects from cancer drugs and less benefit .
Second, the majority of cancer drugs approved by the FDA are not included in the 2.1 month figure, because their effects on overall survival are unknown . Amazingly, most new drugs (~2/3s) are approved on the basis of improvement of a surrogate endpoint —e.g. a new drug shrinks a tumor on a CT scan. We don't know that this shrinkage actually translates into a longer or a better life.
So, the efficacy of most cancer drugs is minimal and may be even less in the real world. How do we then explain why they are already so ridiculously expensive and increasing in cost at a rate of 10% a year . Cancer drugs now routinely cost more than 100,000 dollars for one year of treatment .
One way doctors measure the value of drugs is to ask how much is the total drug cost to get us 1 year of quality life. Since most drugs just add a few weeks or months, you have to treat many people to get just one year of extra life. By this measure, most cancer drugs are outrageously expensive. A new breast cancer drug costs ~$700,000 for a quality adjusted life year , and a new colon cancer drug costs $900,000 . And these figures apply only if you give the drug the benefit of the doubt, and assume it works as well in the real world as it does in FDA studies.
Not surprisingly, Pharma is our most profitable industry—double digit returns ranging from 10% to 42%  are routine, despite the overall disappointing benefits of their products.
Reasonable people would say it’s fine to make a tidy profit when you make a great drug—a drug like Gleevec. But we might also say it doesn’t seem fair to keep raising its price over time, as the cost to make it is trivial, and the research and development are already done. Steep price increases feel like profiteering.
Reasonable people might also say that it doesn’t seem right to pay so much for drugs that add so little—and only add that little bit under just right conditions. Especially when the costs to make drugs are so low  and profits are so high .
What prevents us from being reasonable people? That is not just a million dollar question, but a tens of billion dollar one. It involves rules that prevent Medicare from negotiating the price of drugs and the intricacies of the patent system. Solutions won’t be simple or easy, but the price of cancer drugs is way too high, and we get far too little for it. The time for reform is now."
Thanks Dr. Prasad for this sobering summary.
I think we are finally reaching the tipping point at which public outrage at Pharma greed exceeds public passivity and politician subservience. And only sustained public outrage will stimulate politicians to buck the powerful and well financed Pharma lobby. As well the fact that out of line Pharma costs are ruining the economy.
The most needed reforms are perfectly obvious and easy to introduce: allowing Medicare to negotiate drug prices; ending direct-to-consumer drug advertising; restricting patent protection for me-too drugs; putting regulatory bite back into the now toothless FDA.
The smart Wall Street money is projecting a further 50% gain in total US drug company sales in the next five years. This is based on the realistic assumption that the drug monopoly will persist and flourish. The major hope for change comes from the overthrow 25 years ago of the Tobacco monopoly—then also seemingly impregnable and similarly outrageous. Sometimes, might does fall to right.
Let's hope Lincoln was right when he said, "You can fool all the people some of the time, and some of the people all of the time, but you can't fool all the people all the time."