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R.O.I. on Cancer Spending: Better Than We Think?

In SuperFreakonomics, we write about how chemotherapy is ineffective for treating many forms of cancer, and that it is almost always very expensive. (We also write about the potential conflict of interest when clinical oncologists profit from the administering of these drugs, but that’s another topic for another day.)
Furthermore, it is commonly thought that the nearly-40-year “war on cancer” has largely been a failure, since the age-adjusted mortality rate for cancer is essentially unchanged over that time.
But that’s a deceptive metric. Consider this:

Believe it or not, this flat mortality rate actually hides some good news. Over the same period, age-adjusted mortality from cardiovascular disease has plummeted, from nearly 600 people per 100,000 to well below 300. What does this mean? Many people who in previous generations would have died from heart disease are now living long enough to die from cancer instead.

So how are we to think about the tremendous cost associated with fighting cancer these days?

In a fascinating and important paper new working paper called “An Economic Evaluation of the War on Cancer” (abstract here; pdf here), Eric C. Sun and five co-authors try to measure the degree to which spending on cancer R&D has proved efficient and worthwhile:

For decades, the U.S. public and private sectors have committed substantial resources towards cancer research, but the societal payoff has not been well-understood. We quantify the value of recent gains in cancer survival, and analyze the distribution of value among various stakeholders. Between 1988 and 2000, life expectancy for cancer patients increased by roughly four years, and the average willingness-to-pay for these survival gains was roughly $322,000. Improvements in cancer survival during this period created 23 million additional life-years and roughly $1.9 trillion of additional social value, implying that the average life-year was worth approximately $82,000 to its recipient.

Perhaps even more interesting:

Health care providers and pharmaceutical companies appropriated 5-19% of this total, with the rest accruing to patients. The share of value flowing to patients has been rising over time. These calculations suggest that from the patient’s point of view, the rate of return to R&D investments against cancer has been substantial.

This is good news, of course. It is also a reminder that if you hear a debate about health-care costs and it doesn’t heavily single out cancer costs, then the debate is radically incomplete.