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Should Drug companies charge this much?
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vols fan
Feb 15, 06 10:38
Post #1 of 56 (541 views)
Should Drug companies charge this much?
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A Cancer Drug Shows Promise, at a Price That Many Can't Pay
By ALEX BERENSON
Doctors are excited about the prospect of Avastin, a drug already widely used for colon cancer, as a crucial new treatment for breast and lung cancer, too. But doctors are cringing at the price the maker, Genentech, plans to charge for it: about $100,000 a year.
That price, about double the current level as a colon cancer treatment, would raise Avastin to an annual cost typically found only for medicines used to treat rare diseases that affect small numbers of patients. But Avastin, already a billion-dollar drug, has a potential patient pool of hundreds of thousands of people ? which is why analysts predict its United States sales could grow nearly sevenfold to $7 billion by 2009.
Doctors, though, warn that some cancer patients are already being priced out of the Avastin market. Even some patients with insurance are thinking hard before agreeing to treatment, doctors say, because out-of-pocket co-payments for the drug could easily run $10,000 to $20,000 a year.
Until now, drug makers have typically defended high prices by noting the cost of developing new medicines. But executives at Genentech and its majority owner, Roche, are now using a separate argument -- citing the inherent value of life-sustaining therapies.
If society wants the benefits, they say, it must be ready to spend more for treatments like Avastin and another of the company's cancer drugs, Herceptin, which sells for $40,000 a year.
"As we look at Avastin and Herceptin pricing, right now the health economics hold up, and therefore I don't see any reason to be touching them," said William M. Burns, the chief executive of Roche's pharmaceutical division and a member of Genentech's board. "The pressure on society to use
strong and good products is there."
Studies show that Avastin can prolong the lives of patients with late-stage breast and lung cancer by several months when the drug is combined with existing therapies. Genentech expects to seek federal approval later this year to sell it specifically for those diseases. But even now, doctors, who
are free to prescribe the drug as they see fit, are using Avastin for some breast and lung cancer cases ? and finding its cost beyond the means of some patients.
"Avastin is a superb drug, but its cost is already discouraging patients and doctors from using it," said Dr. David Johnson, who heads the cancer unit at Vanderbilt University and is a former president of the American Society of Clinical Oncology. "I wish it were one-tenth the cost, and if it
were I would be giving it to almost everybody."
With colon cancer, a year of Avastin treatment costs about $50,000. But the drug will be used at higher doses for lung and breast cancer, and Genentech does not plan to reduce the unit price, even though the additional cost of producing a higher dose is minimal. Roche executives described the pricing plans were described in a recent interview.
Because Genentech is a leading developer of cancer therapies, some doctors also fear that the company's pricing plans for Avastin ? around $8,800 a month ? may encourage other companies to charge more for their own oncology drugs. That could potentially drive up the overall cost of cancer treatment to unsustainable levels, they say.
Right now, one of the few cancer drugs with a higher monthly price than the level planned for Avastin is Erbitux. The drug, used for colon cancer, sells for $9,600 monthly, but is not as widely prescribed as Avastin and is typically used only as a last-resort treatment for a few months.
Dr. Susan Desmond-Hellmann, the president of product development of Genentech, which is based in South San Francisco, Calif., said that Genentech had set Avastin's price based on "the value of innovation, and the value of new therapies." Genentech, which had more than $6 billion in
sales last year, has many programs to help patients afford its medicines, and last year contributed $21 million to charities that help patients with their insurance co-payments, she said.
Genentech intends to file an application later this year with the Food and Drug Administration to expand the drug's label to include treatment for breast and lung cancer. While nothing stops doctors now from prescribing Avastin for those diseases, F.D.A. approval would let the company promote and advertise it for such treatments and make insurers more likely to pay for the treatments.
For now, insurers are deciding case by case whether to cover Avastin for breast and lung cancer, and in many instances they are rejecting coverage or at least delaying decisions.
"Insurers may say, 'It's not approved for that indication, so we're not paying for it,' " said Dr. Paul A. Bunn Jr., the director of the University of Colorado cancer center.
In those cases, patients must sign a waiver agreeing to reimburse the hospital for the price of treatment if the insurer will not agree to do so. And some patients are afraid to sign the waivers, Dr. Bunn said. "A couple of patients have refused to sign or take treatment."
So far, insurers are generally covering Avastin's use in colon cancer, and they say they will probably cover its F.D.A.-approved use with other cancers.
Other medicines as expensive as Avastin are typically prescribed only for rare conditions affecting small numbers of patients, and their makers justify the costs as necessary for getting a return on their up-front investments in the drugs. A few medicines, like Ceredase, a treatment for
Gaucher disease (pronounced go-SHAY) from the biotechnology company Genzyme, can cost as much as $500,000 a year for some patients. Gaucher disease is a rare metabolic disorder whose symptoms include anemia.
Avastin is currently used mainly in cases of late-stage colon cancer, a disease that affects about 50,000 Americans annually. On average, those patients take the drug for 11 months and it extends their lives an average of 5 months, compared with other treatments.
Genentech and Roche are also testing Avastin for use in earlier stages of colon cancer, lung and breast and cancer, which collectively are diagnosed in almost 500,000 Americans a year. Genentech and doctors hope that if the drug is used earlier in treatment it can extend lives much longer - although that would require patients' finding the means to pay for it longer, too.
Earlier this week Roche stopped recruiting patients for one clinical trial that included Avastin, while researchers try to explain the deaths of several patients. But doctors generally view Avastin as one of the safest cancer treatments. About 200 clinical trials including Avastin are taking place worldwide.
With Avastin's expanded use, analysts expect the drug's sales to soar to $7 billion in the United States alone by 2009, compared with $1.1 billion last year. Over the same period, Genentech's overall profits are forecast to triple, to $4 billion in 2009, as sales ? $6.6 billion last year ? climb to
$18 billion.
"They are certainly blazing new ground with the price of the drug," said Geoffrey C. Porges, an industry analyst at Sanford C. Bernstein & Company. "They're saying, we think this is fair value, at least on a relative basis."
Genentech has always been aggressive in pricing its therapies, Mr. Porges said. But insurers and government agencies have eventually accepted Genentech's terms, because its treatments, which include Herceptin, its current breast cancer treatment, have been shown to prolong life.
When they were originally discovered, drugs like Avastin, which aim at the blood vessels that tumors use to grow, were expected to replace traditional chemotherapy, which directly fight tumor cells. Instead, the drugs have been found to work best when used in conjunction with chemotherapy. That has caused the overall cost of cancer treatment to soar, said Dr. Len
Lichtenfeld, deputy chief medical officer of the American Cancer Society.
"The financial resources are not limitless," he said. "There are tremendous pressures on the cost of cancer therapies today."
_______________________
"I really don't think life is about the I-could-have-beens. Life is only about the I-tried-to-do. I don't mind the failure but I can't imagine that I'd forgive myself if I didn't try."
Nikki Giovanni-Poet (1943-)
AlanShearer
Feb 15, 06 11:40
Post #2 of 56 (523 views)
Re: Should Drug companies charge this much? [vols fan]
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Drug companies should charge market prices, with the goal of maximizing profits.
jhc
Feb 15, 06 11:42
Post #3 of 56 (521 views)
Re: Should Drug companies charge this much? [AlanShearer]
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Studies show that Avastin can prolong the lives of patients with late-stage breast and lung cancer by several months when the drug is combined with existing therapies
Pretty ridiculous. It's not like it's some miracle drug now, is it?
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I love sushi, but I'd rather not have it served next to a "fish taco". - KEJ
vols fan
Feb 15, 06 11:52
Post #4 of 56 (507 views)
Re: Should Drug companies charge this much? [AlanShearer]
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But what is "market prices?" It seems to me that they can turn a "reasonable" profit" without charging exhorbitant prices, particularly when people are at there most vulnerable.
It seems to me that there is enough money to go around, at some point you just look greedy.
_______________________
"I really don't think life is about the I-could-have-beens. Life is only about the I-tried-to-do. I don't mind the failure but I can't imagine that I'd forgive myself if I didn't try."
Nikki Giovanni-Poet (1943-)
AlanShearer
Feb 15, 06 12:03
Post #5 of 56 (500 views)
Re: Should Drug companies charge this much? [vols fan]
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Without going into too much explanation, market price is, simply put, the price that will maximize profits. If the price is too high, the quantity demanded will decrease to the point where profits drop. Profits will also drop if the price is too low.
I'm not sure what a "reasonable" profit is. If I'm a shareholder in a drug company, I want the company to maximize profits, not accept a lower profit out of some altruistic motive. Indeed, I think directors have a fiduciary duty to shareholders to maximize profits. Now, there can be some trade off between short term and long term profitability, but I'd argue that directors and officers that foregoe profits in order to be generous, without the generosity being part of some strategic plan to maximize profits in the long run, should be liable to the shareholders.
The health care system may be broke, and drug companies may be part of the problem (as well as the source of other problems), but their profit motive is not the problem.
Ti T'war
Feb 15, 06 16:42
Post #6 of 56 (464 views)
Re: Should Drug companies charge this much? [vols fan]
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I'm not sure how many people you have seen in 'Late stage colan, or lung cancer', but it is not a state of life that I would liek to spend any more time in than I would have to.
If this were a cure, you could argue some sort of moral imperative to make sure that all insurance covered it, but for a couple of months, it is for those who won't let go.
I am a selfish unfeeling person.
BTW my grandmother is currently in near end stage liver cancer. I don't thinks that she woudl wnat to be on this drug.
__________________________________________________
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EWH
Feb 15, 06 17:20
Post #7 of 56 (454 views)
Re: Should Drug companies charge this much? [vols fan]
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"But what is "market prices?"" (sic)
Market price is the price that purchasers are willing to pay for something on offer. It is determined by understanding the value received vs. items currently on offer. Profit maximizing price is simply that which maximizes profit.
Questions for you -
How do you think drug companies actually determine price? i.e. the actual process that they go through.
How do you think the list price compares to the net price received?
How many levels of price discrimination exist (in the economic sense, not the connotational sense)?
Would a company put it out there if the health economic analysis didn't hold?
vols fan
Feb 15, 06 21:49
Post #8 of 56 (433 views)
Re: Should Drug companies charge this much? [EWH]
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I don't know what the answer is, really. I know that businesses are in the business of making money. I own stock, I get it. But something doesn't seem quick right with pricing a drug so far out of the range when people are at their most vulnerable.
I don't know what I would do if I were in the situation where I needed a drug that cost 100k a year, particularly when I know that inevitably I would die. I'm not for unnecessary suffering.
I just think somehow health care has gotten out of control. It just seems like greed. I know a little about accounting and finance and I believe that whatever the drug companies say they spend on reseacrh is probably a little bit of truth with a little bit of smoke and mirrors.
My own limited experience with the health care/insurance experience, suggest that the real price is not the price. I had surgery last year and the price the hospital charged was not the amount that they got once the "insurance discount" kicked in. The bill went from 20k to 7k with the insurance discount.
_______________________
"I really don't think life is about the I-could-have-beens. Life is only about the I-tried-to-do. I don't mind the failure but I can't imagine that I'd forgive myself if I didn't try."
Nikki Giovanni-Poet (1943-)
jhc
Feb 16, 06 11:05
Post #9 of 56 (399 views)
Re: Should Drug companies charge this much? [vols fan]
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I don't know what I would do if I were in the situation where I needed a drug that cost 100k a year, particularly when I know that inevitably I would die. I'm not for unnecessary suffering.
I know what I would do: hospice. Affordable for most, covered by Medicaid if not. And I'd find a way to make Casey change my beadpan.
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I love sushi, but I'd rather not have it served next to a "fish taco". - KEJ
Sid
Feb 16, 06 11:12
Post #10 of 56 (394 views)
Re: Should Drug companies charge this much? [vols fan]
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Define "reasonable profit", and why is your definition of "reasonable" more valid than the drug manufacturer's?
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vitus979
Feb 16, 06 11:20
Post #11 of 56 (386 views)
Re: Should Drug companies charge this much? [Sid]
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Alternatively, why is it reasonable to consider maximum profit as the sole good to be achieved when talking about cancer drugs?
"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."
JasoninHalifax
Feb 16, 06 11:25
Post #12 of 56 (379 views)
Re: Should Drug companies charge this much? [vitus979]
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the big pharmaceuticals have always set pricing according to profit motivations. Just that Roche is being honest about it.
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"Cats like Ham" - Tom D.
vitus979
Feb 16, 06 11:28
Post #13 of 56 (376 views)
Re: Should Drug companies charge this much? [jasonk]
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the big pharmaceuticals have always set pricing according to profit motivations.
Newsflash!
Of course they have, and do. The question, I think vols is asking, is should they, when it leads to exhorbinant prices?
"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."
vols fan
Feb 16, 06 11:35
Post #14 of 56 (371 views)
Re: Should Drug companies charge this much? [vitus979]
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yeah, Vitus, that's kinda along the lines I was thinking. I don't exactly know what "reasonable" is, but I was thinking is there a line where reasonable crosses over into just plain greedy. Don't get me wrong, I think they should make a profit, after all they are funding the research, providing jobs, etc., etc....
Feeling a little philanthropic these days...
_______________________
"I really don't think life is about the I-could-have-beens. Life is only about the I-tried-to-do. I don't mind the failure but I can't imagine that I'd forgive myself if I didn't try."
Nikki Giovanni-Poet (1943-)
Sid
Feb 16, 06 11:47
Post #15 of 56 (363 views)
Re: Should Drug companies charge this much? [vitus979]
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What's wrong with maximizing profit? Any company's, drug manufacturers included, reason for existing is to maximize profit and and deliver value to it's owners (ie shareholders). Philanthropy is the place of charitable organizations. If a non profit charity wants to subsidize the price of this drug, I salute them. That is their reason for existence. Let corporations do what they do best and let charity do what it does best
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vitus979
Feb 16, 06 12:25
Post #16 of 56 (352 views)
Re: Should Drug companies charge this much? [Sid]
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What's wrong with maximizing profit?
What's wrong with the approach is the impact it likely has on all those sick people who can't afford the drugs because the drug company is only concerned with maximizing it's profit.
I forget what the actual figures were for the drug treatment in the original post were. Let's say that a drug company develops a really effective treatment for some type of cancer. They decide that they can maximize their profit by charging $25,000 a month for it.
Does it not seem probable that there are a lot of people who have a need for that drug, and who simply cannot afford it? Isn't it quite possible that the drug company could still make a healthy profit from the drug even while pricing it much lower, and therefore making it available to many more people?
If a non profit charity wants to subsidize the price of this drug, I salute them.
I am unaware of any non-profit charities that have the resources to make up the difference.
"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."
Casey
Feb 16, 06 12:36
Post #17 of 56 (346 views)
Re: Should Drug companies charge this much? [jhc]
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I know what I would do: hospice.
Good answer.
And I'd find a way to make Casey change my beadpan.
Hey, you're dying, how would you know the difference?
It is an interesting argument for drug companies. I think the market would eventually determine the price of these drugs. I have to wonder how many people would, or could, pay $100,000 to prolong their life a few months, given they would likely not suddenly get out of bed and have a productive and healthy 3 months. It's more likely, that they get 3 more months of me changing their bed pans (or not). I would certainly not pay it.
If the demand is not there, the drug companies are left with stopping the drug, doing more research to improve the "miracle" component, or drop the prices. I would not like to see more government regulation on drugs. As it stands now, there may be drugs out there with "miracle" capabilities that have to go through a long FDA approval process and we don't need more red tape in our disease care system.
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You sir, are my new hero! - Trifan 11/13/2008
Casey, you are a wise man - blueraider_mike 11/13/2008
Casey, This is an astute observation. - Slowbern 11/17/2008
jhc
Feb 16, 06 12:45
Post #18 of 56 (340 views)
Re: Should Drug companies charge this much? [Casey]
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As it stands now, there may be drugs out there with "miracle" capabilities that have to go through a long FDA approval process and we don't need more red tape in our disease care system.
Then again, it seems like Vioxx and Celebrex were fast-tracked though the system with soem very harmful results.
_______________________________________________
I love sushi, but I'd rather not have it served next to a "fish taco". - KEJ
Sid
Feb 16, 06 12:49
Post #19 of 56 (335 views)
Re: Should Drug companies charge this much? [Casey]
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Casey is right. The market will eventually sort out the proper price. Don't forget that charging a higher price will not always maximize profit. It is possible that a lower price will reach more people and generate more profit for the corporation, but only the market can determine where that price is, not a goverment beaurocrat.
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Old and Haggard
Feb 16, 06 12:55
Post #20 of 56 (330 views)
Re: Should Drug companies charge this much? [vitus979]
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If a non profit charity wants to subsidize the price of this drug, I salute them.
I am unaware of any non-profit charities that have the resources to make up the difference.
I suspect that Bill & Melinda Gates might suggest one that has the requisite resources.
We live in a free market society. Unless and until government regulation or societal pressure, through stockholders of drug companies, say otherwise, the drug manufacturers have the duty to maximize profits (short or long term). Not to get "healthy" profits (and who defines that?), but to maximize profits.
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vitus979
Feb 16, 06 12:59
Post #21 of 56 (324 views)
Re: Should Drug companies charge this much? [Sid]
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Don't forget that charging a higher price will not always maximize profit. It is possible that a lower price will reach more people and generate more profit for the corporation
Yes, that's true. If they charge 8 million dollars a month, they aren't likely to have many customers. But that's not really on point.
The question is, should maximum profit be the sole driver for drug companies, especially in the case of drugs that are critical to a person's survival? It seems pretty clear to me that this system of maximizing profits leads to prices that are well beyond the ability of a LOT of people to afford. It also seems clear to me that the drug companies could make a
healthy
profit while charging much less for these drugs.
I don't understand what's so wrong with the latter, except that it puts the well being of sick people ahead of the sheer greed of drug companies.
but only the market can determine where that price is, not a goverment beaurocrat.
I did not say anything about government bureaucrats. But if the drug industry persists in this type of pricing, based solely on how to extract the greatest amount of money possible, government intervention is inevitable. You heard it hear first.
"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."
vitus979
Feb 16, 06 13:12
Post #22 of 56 (318 views)
Re: Should Drug companies charge this much? [klehner]
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I suspect that Bill & Melinda Gates might suggest one that has the requisite resources.
The drug industry spends twice the amount of Gates' net worth just on advertising in a year. Somehow I don't think the Bill and Melinda Gates Charitable Health Plan is a truly viable solution.
But if I get sick, I'll be sure to call them and ask.
Unless and until government regulation or societal pressure, through stockholders of drug companies, say otherwise, the drug manufacturers have the duty to maximize profits
Really? A duty? What happens if they don't?
"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."
Sid
Feb 16, 06 13:20
Post #23 of 56 (314 views)
Re: Should Drug companies charge this much? [vitus979]
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Really? A duty? What happens if they don't?
If drug companies don't maximize profit they will cease to exist. Then where will we be? I will restate my earlier point. It is not a corporation's job to worry about sick people. A corporations sole reason for existense is to maximize profit. I understand that it sounds cold and heartless, but that is just the way it is.
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vitus979
Feb 16, 06 13:22
Post #24 of 56 (313 views)
Re: Should Drug companies charge this much? [Sid]
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If drug companies don't maximize profit they will cease to exist.
That's ridiculous. You might just as well say that if a defense contractor doesn't engage in war profiteering, it'll go bankrupt.
"People think it must be fun to be a super genius, but they don't realize how hard it is to put up with all the idiots in the world."
Sid
Feb 16, 06 13:35
Post #25 of 56 (309 views)
Re: Should Drug companies charge this much? [vitus979]
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That's ridiculous. You might just as well say that if a defense contractor doesn't engage in war profiteering, it'll go bankrupt.
It's not ridiculous. It's plain fact. Drug companies are publicly traded, meaning that they are owned by investors looking to make the most return on their investment. If drug companies fail to return value to their shareholders those shareholders will put their money elsewhere. Once enough shareholders reinvest their money that drug company will cease to exist. Why do you think that all the large successful drug companies like Merk and Phizer are American? It's because our capitalistic system allows them to make the profits necessary to survive.
By the way, your use of the word "profiteering" betrays your prejudice.
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