The Unsustainable Economics of Cancer Drugs

In New York magazine, Steve Hall lays out the good, bad, and the ugly of cancer-drug economics. Warning: it is mostly bad and ugly.

The pharmacist e-mailed the numbers, and Saltz stared at the figures on his computer screen. Zaltrap, the drug that was extremely similar to Avastin, cost roughly $11,000 a month. (And because that extra 42 days wouldn’t be possible without taking the drug for, say, seven months before—which was roughly what was happening in clinical trials—the price for that six-week life extension could be as high as $75,000.)

“Wow,” he said to himself, “that’s a deal-changer for me.”

That may not seem like a heretical statement, but the unspoken rule in American health care is that doctors should never consider the cost of a medicine that might be beneficial to patients. When the FDA approves a new cancer drug, it analyzes safety and effectiveness only. Medicare is obliged to reimburse payment for the drug, and private insurers in most states must cover the cost. Any doctor who considers cost—or the value of a costly drug—risks being accused of “rationing” health care.

Saltz felt compelled to consider the cost. He didn’t see any medical advantage to Zaltrap for his patients—or any disadvantage, for that matter—but, as he contemplated its price, he thought, I can’t see why I would use this.

That same day, he sent an e-mail to every physician at the hospital who treated patients with colon cancer. “I said, essentially, ‘You all know the data. You were at the meetings. You know what the situation is. What I just learned is this issue regarding the price. Within this context, I can’t envision a scenario where I would plan to use this drug. Can you?’?”

None of the sixteen colon-cancer physicians at Sloan-Kettering who replied to Saltz’s query said they could see a reason for using the drug.

The hospital’s Pharmacy and Therapeutics Committee met in September 2012 to decide whether to include Zaltrap in their list of medications, and Saltz, who chairs the committee, informed his colleagues of the price and recommended not carrying the drug. The committee agreed. Sloan-Kettering, one of the country’s preeminent cancer hospitals, would not be offering Zaltrap to its patients.

When Saltz called upstairs to inform Peter B. Bach, director of the Center for Health Policy and Outcomes at Sloan-Kettering, of the decision, Bach wanted to know the reason.

“Because of the price,” Saltz told him.

As soon as he heard that, Bach, who has been documenting the dizzying rise of cancer-drug prices since 2009, immediately jumped into an elevator to go to Saltz’s office to learn more about the unprecedented decision. Why the rush? “C’mon!” Bach explained to me recently. “It’s never happened before! Sloan-Kettering isn’t including a drug because of its price?”

Thus began the first physician-initiated revolt in anyone’s memory against the skyrocketing cost of cancer drugs.

“Everybody agrees: The prices are unsustainable,” Saltz said. “And I often try to invite myself or people having these discussions to complete the thought: If it’s unsustainable, what happens when it’s unsustained? Do we have an adjusted, steady correction? Or do we have an implosion and a crash?”

This is a good follow-up to what we wrote in SuperFreakonomics about cancer treatment, and is especially relevant with the onset of ObamaCare:

Most people want to fend off death no matter the cost. More than $40 billion is spent worldwide each year on cancer drugs. In the United States, they constitute the second- largest category of pharmaceutical sales, after heart drugs, and are growing twice as fast as the rest of the market. The bulk of this spending goes to chemotherapy, which is used in a variety of ways and has proven effective on some cancers, including leukemia, lymphoma, Hodgkin’s disease, and testicular cancer, especially if these cancers are detected early.

But in most other cases, chemotherapy is remarkably ineffective. An exhaustive analysis of cancer treatment in the United States and Australia showed that the five-year survival rate for all patients was about 63 percent but that chemotherapy contributed barely 2 percent to this result. There is a long list of cancers for which chemotherapy had zero discernible effect, including multiple myeloma, soft-tissue sarcoma, melanoma of the skin, and cancers of the pancreas, uterus, prostate, bladder, and kidney.

Consider lung cancer, by far the most prevalent fatal cancer, killing more than 150,000 people a year in the United States. A typical chemotherapy regime for non-small-cell lung cancer costs more than $40,000 but helps extend a patient’s life by an average of just two months. Thomas J. Smith, a highly regarded oncology researcher and clinician at Virginia Commonwealth University, examined a promising new chemotherapy treatment for metastasized breast cancer and found that each additional year of healthy life gained from it costs $360,000 — if such a gain could actually be had. Unfortunately, it couldn’t: the new treatment typically extended a patient’s life by less than two months.

Costs like these put a tremendous strain on the entire healthcare system. Smith points out that cancer patients make up 20 percent of Medicare cases but consume 40 percent of the Medicare drug budget. Some oncologists argue that the benefits of chemotherapy aren’t necessarily captured in the mortality data, and that while chemotherapy may not help nine out of ten patients, it may do wonders for the tenth. Still, considering its expense, its frequent lack of efficacy, and its toxicity — nearly 30 percent of the lung-cancer patients on one protocol stopped treatment rather than live with its brutal side effects — why is chemotherapy so widely administered?

The profit motive is certainly a factor. Doctors are, after all, human beings who respond to incentives. Oncologists are among the highest paid doctors, their salaries increasing faster than any other specialists’, and they typically derive more than half of their income from selling and administering chemotherapy drugs. Chemotherapy can also help oncologists inflate their survival-rate data. It may not seem all that valuable to give a late-stage victim of lung cancer an extra two months to live, but perhaps the patient was only expected to live four months anyway. On paper, this will look like an impressive feat: the doctor extended the patient’s remaining life by 50 percent.

Tom Smith doesn’t discount either of these reasons, but he provides two more.

It is tempting, he says, for oncologists to overstate— or perhaps overbelieve in— the efficacy of chemotherapy. “If your slogan is ‘We’re winning the war on cancer,’ that gets you press and charitable donations and money from Congress,” he says. “If your slogan is ‘We’re still getting our butts kicked by cancer but not as bad as we used to,’ that’s a different sell. The reality is that for most people with solid tumors — brain, breast, prostate, lung — we aren’t getting our butts kicked as badly, but we haven’t made much progress.”

There’s also the fact that oncologists are, once again, human beings who have to tell other human beings they are dying and that, sadly,there isn’t much to be done about it. “Doctors like me find it incredibly hard to te
ll people the very bad news,” Smith says, “and how ineffective our medicines sometimes are.”

If this task is so hard for doctors, surely it must also be hard for the politicians and insurance executives who subsidize the widespread use of chemotherapy. Despite the mountain of negative evidence, chemotherapy seems to afford cancer patients their last, best hope to nurse what Smith calls “the deep and abiding desire not to be dead.” Still, it is easy to envision a point in the future, perhaps fifty years from now, when we collectively look back at the early twenty-first century’s cutting-edge cancer treatments and say: We were giving our patients what?

The age-adjusted mortality rate for cancer is essentially unchanged over the past half-century, at about 200 deaths per 100,000 people. This is despite President Nixon’s declaration of a “war on cancer” more than thirty years ago, which led to a dramatic increase in funding and public awareness.

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 beneath 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. Indeed, nearly 90 percent of newly diagnosed lung-cancer victims are fifty-five or older; the median age is seventy-one.

The flat cancer death rate obscures another hopeful trend. For people twenty and younger, mortality has fallen by more than 50 percent, while people aged twenty to forty have seen a decline of 20 percent. These gains are real and heartening — all the more so because the incidence of cancer among those age groups has been increasing. (The reasons for this increase aren’t yet clear, but among the suspects are diet, behaviors, and environmental factors.)


Of course, when insurance companies deny a treatment because it would cost an order of magnitude more than the statistical value of the life extended, they're "just putting money before patients." At least Obamacare is giving them some incentive to make these decisions to get their medical loss ratio up.

The bit at the end reminds me of something I saw on how Alzheimer's advocates thought it was a travesty that death rates due to that disease were going up while deaths due to other major causes of death were all going down. It's a shame, to be sure, but it was primarily driven by people who would have died of heart attacks and cancer living long enough to die of Alzheimer's instead.

Giles Verwey

Over in the UK drug approval on the NHS has been based on price per Quality of Life Adjusted Year for some while. It means that you target a pot of money to greatest effect.

Oliver H

@Giles Verwey

The system is still highly problematic. For example, no one doubts that Sprycel works, and works very well, to save people from CML. So do Tasigna and Gleevec. But Sprycel works well in some cases where the other two do not work so well. But because NICE decided against recommending Sprycel because the manufacturer was not willing to strike a deal on the price, whereas the manufacturer of Tasigna and Gleevec was, the people with mutations that are chiefly sensitive to Sprycel are pretty much screwed. Likewise people who cannot take the other two for other reasons (e.g. adverse effect profile etc.)

When you could turn a lethal into a low-level chronic disease but don't do so because you deem the live of someone who COULD likely live for decades on the drug (they don't exist long enough to truly say that but there is no reason why that should not be the case), that's pretty harsh. It's hardly unsustainable economics when I can return someone to the active workforce who would otherwise be dead.


David D

I am an extremely lucky and rare beneficiary of very successful chemotherapy against pancreatic cancer. To be brutally honest, chemotherapy treatments on most pancreatic cancer patients is completely wasted. Today, the best most of us can hope for is an extension of life, not a cure.

But wasn't it that way for all cancers at one time? Trial and error to find the most effective treatments does cost money... and lives. Once effective treatments are found, the cost-effectiveness of chemotherapy becomes more attractive. Effective treatments lead to more effective and less costly treatments.

In the case of pancreatic cancer, over 90% of all patients DO NOT participate in clinical trials. The success and failures of their treatments are largely forgotten - known by their personal oncologist but not shared the greater community. Why a treatment worked or did not work is not usually known.

So I would argue for collecting health metrics and treatment information about ALL these patients and putting our new crop of data scientists to work. I say we can increase the value in these chemotherapy treatments NOW by collecting and putting their information towards finding and isolating more effective treatments.


Oliver H

The problem with pancreatic cancer is that the life expectancy at diagnosis is all too often shorter than the time needed for a clinical trial. But there is no reason why their fate should be forgotten - they still can form the body of a retrospective analysis. Not a randomized, double-blind drug trial, but still valuable data.


The last sentence is telling. Diet and behaviors are reasons for an increase in cancer for people 20 to 40? What has definitely changed are the chemical signatures in the foods available for purchase. Further, the farm land our food is grown on has been saturated with chemicals for multiple generations. Could it be that the chemical exposures our grandparents experienced was significantly less? Anyone who gets cancer is subject to our culture of blame the victim.


You are reading a meaning into that sentence that is completely opposite to what was intended, and the facts. Cancer rates for people younger than 40 have DECREASED, not increased. I would expect that this is largely due to the decrease in smoking rates & exposure to 2nd-hand smoke.

If in fact there is any increase in cancer rates due to chemicals in food (and I know of no actual evidence that there is), it's far outweighed by the decrease.

Joe D

Thank you for playing. The *mortality* rate among those under 40 has decreased, but "the incidence of cancer among those age groups has been increasing."

Eric M. Jones

A quarter million bucks,
So my dad could be depressed,
For two more years.

steve cebalt

Divorcing cost from care is ludicrous, of course. It is very bad medicine and ethics to ignore money when making healthcare decisions. It's how we got into the mess we're in; but it is the natural course with third-party payors --and physicians with no regard for a patient's financial well-being. Dentistry is very different. Why? The first thing my dentist does is discuss the cost and make sure I can pay -- because we both have skin in the game. And I therefore ration my own dental care to align it with my funds. I balance my needs and priorities, both financial and dental, to achieve my best overall well-being. Expand that to a macro level, and we'd have a much healthier society.

steve cebalt

Why do we treat health and money as separate things? No money, no healthcare. Everything has a price, especially an extra month of misery for a terminally ill patient undergoing fruitless treatment that brings only suffering and doesn't prolong life so much as it expands the dying process.

Of course it is because of incentives: Third-party payors mean patients have no financial skin in the game; and as noted here, physicians want to avoid telling people that the god-figure Doctor is unable to help them. Also, they get paid more to extend suffering. That's bad medicine. We wouldn't treat our beloved pets that why do we do it to Mom or Dad?

Money IS medicine, on a macro level.


"The profit motive is certainly a factor"

Yes. It's the reason the drugs we treat ourselves with exist.

Oliver H

There are some profound problems in both parts. First, talking about "cancer drugs" is already throwing so many kinds of different therapies into one basket that the validity of any conclusion is highly questionable. We're talking small molecules, biologics and potentially even oncolytic viruses here. All of which have widely divergent characteristics.

Secondly, let's look at the data presented:

"Indeed, nearly 90 percent of newly diagnosed lung-cancer victims are fifty-five or older; the median age is seventy-one."

The median age is seventy-one. Ok. SEVENTY-ONE. And in this context, we discuss NAKED mortality rates?

Questioning the drugs themselves simply because people who have been critically ill die within five years (note: That's a median seventy-six) is highly questionable.

But I am betting that the authors would like much less to discuss the economics of treating the elderly, period - cancer or not.



There's something seriously wrong when doctors are paid more by drug companies than their patients! If this isn't a case of misaligned incentives I don't know what it is! This type of 'comissioning' should be out-lawed and oncologists paid more based on patient outcomes. Maybe one day in the future we will look back and shudder at how our current oncologists are financially compensated..

Richard Karpinski

Nobody has yet noticed but most cancers can be cured quite inexpensively, at home, now. Just use google Scholar to search for GcMAF oleic acid and read the papers. The average is a 25% reduction in tumor size in the first week, and you don't feel sick and you don't lose your hair. Or just read the GcMAF.EU web site.

It's expensive, 450 Euros plus shipping for eight doses, but since we make it in our own bodies, it is a mere supplement. And with the oleic acid you can use it under the tongue, or as a suppository, or with a nebulizer, or as a very small injection. And you're supposed to do an extreme Atkins diet at the same time, with very minimal carbs.

What fascinates me is that almost all of the cancers that oncologists treat produce elevated levels of nagalase, which prevents our production of GcMAF from vitamin D binding protein. That implies that almost all of the cancers we make are cured by our own immune systems before they can be noticed by doctors. Activated macrophages are amazingly powerful and are even enhanced more by adding a bit of oleic acid found in olive oil.

Of course, oncologists will say it's not approved by the FDA but then it can't be since no one will invest the $800 million or so with no patented drug to guarantee monopoly profits. So you just have to do it at home by yourself or go to one of their treatment centers in Germany or Switzerland for 6,000 Euros per week, which still beats the cost of conventional treatment. Hands down.