Image source: National Cancer Institute.
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I've got a newsflash for you, and you're probably not going to be shocked in the least: prescription drugs are getting downright expensive.
According to Truveris, a health-data company that tracks prescription drug prices, the average prescription drug rose by more than 10% in 2015. Truveris' data found that branded therapies increased by an average of 14.8%, specialty therapeutics jumped 9.2%, and even generic drugs, which are copycats of branded therapies and are known for their substantially cheaper prices, increased by 2.9%. Comparatively, the rate of wage growth for the average American is far, far less than this, meaning the burden of paying for prescription drugs is probably growing.
Now this is some serious inflation!
Yet a new study released last week by Stacie Dusetzina, Ph.D., an assistant professor at the University of North Carolina's Eshelman School of Pharmacy and a member of the UNC Lineberger Comprehensive Cancer Center, shows that price increases are far from equal even within the prescription drug gambit.
Dusetzina's study, which was published in the journal JAMA Oncology, examined the pricing trends for orally administered cancer products beginning in 2000 and running through 2014 using the TruvenHealth MarketScan Commercial Claims and Encounters database. Oral anticancer drugs have grown in precedence and importance over the past decade-and-a-half due to more precise tumor targeting, as well as convenience. Without having to administer intravenous chemotherapy, patients can, in nearly all cases, take an oral cancer therapy in the comfort of their own home.
Image source: Flickr user StockMonkeys.com.
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After reviewing the price of 32 oral cancer therapies, 17 of which were newly launched between 2011 and 2013, Dusetzina's report showed that oral cancer therapies have increased in price by a mammoth 506% since 2000. A new oral cancer drug introduced in 2000 cost an average of $1,869 per month, or around $22,400 a year. Comparatively, the average price of an oral cancer drug approved in 2014 was $11,325 per month, or $135,900 a year! The increases were particularly pronounced between 2011 and 2014, where the average monthly price for orally administered cancer drugs rose by more than $1,000 from the preceding year.
Additionally, UNC's study showed that patients aren't merely experiencing sticker shock from new drugs hitting the market. They're also contending with substantial price hikes from existing drugs, some of which have been on pharmacy shelves for longer than a decade.
An example cited in the report is Novartis' Gleevec, a drug approved to treat various types of blood cancers. In 2001, when the Food and Drug Administration first approved it to treat chronic myeloid leukemia, Gleevec priced out at $3,346 per month, or just over $40,000 per year. By 2014, the price of Gleevec had ballooned to $8,479 per month according to Dusetzina, or nearly $102,000 for the year. This works out to an annual inflation rate of 7.5%. If there's any consolation for the consumer, a generic version of Gleevec was approved in Dec. 2015, so its precipitous incline in price should be ending to the chagrin of Novartis.
Three likely reasons why oral cancer drug prices are skyrocketing
Dusetzina's report was eye-opening, if not stunning, but it didn't touch on the facets of why oral cancer drug prices are skyrocketing -- it merely affirmed that we weren't going crazy, and that prescription drug pricing really is becoming burdensome. I'd suggest there are three likely reasons why oral cancer drug prices have accelerated so dramatically since 2000.
1. Quality of life improvements
Firstly, we've seen pretty substantive quality of life improvements as new oral cancer products become more precise and more effective with potentially fewer side effects. A good example would be metastatic castration-resistant prostate cancer (mCRPC) drug Xtandi, developed by Medivation and Astellas Pharma .
Image source: Medivation.
Medivation's and Astellas' key drug Xtandi was already an impressive advanced mCRPC drug when first approved in 2012, but it really turned heads when it was awarded a label expansion for treatment-nave mCRPC patients. Median time to chemotherapy treatment in the placebo group was 10.8 months in clinical trials. For the Xtandi group, it was 28 months -- a 17.2-month improvement. That's a meaningful difference for treatment-nave mCRPC patients that makes Xtandi's $89,400 wholesale cost in 2012 not seem so unjustified. One can only presume that it's probably crested $100,000 annually in 2016 based on inflation.
2. Patent cliff
Secondly, persistent oral cancer drug inflation since 2011 just happens to coincide with the beginning of the patent cliff for the vast majority of Big Pharma. I'd suggest that as big pharmaceutical companies were dealing with declining sales in a number of mature blockbusters that targeted chronic conditions, they looked to other therapeutic areas with unmet needs that could help counteract the aforementioned sales decline. Ultimately, oncology drugs, specifically convenient oral oncology drugs, were one answer.
For instance, in 2011 Pfizer was scrambling for growth with cholesterol-fighting drug Lipitor, still the best-selling drug in history, set to lose its patent protection. Drugs exposed to generic competition can quickly lose about 80% of their total sales, and for Pfizer this meant seeing perhaps $10 billion in sales disappear within perhaps two years.
Image source: National Cancer Institute.
However, in 2011 Pfizer also received FDA approval for Xalkori, an oral cancer drug designed to treat late-stage non-small cell lung cancer patients with the ALK+ mutation. This gene abnormality tends to occur in between 1% and 7% of all NSCLC cases. With strong objective response rates of 50% and 61% in both late-stage studies (as well as median response durations of 42- and 48-weeks, respectively), and a clear niche product, Pfizer priced Xalkori at $9,600 per month, or $115,000 a year. Though tackling only a small niche, Xalkori's high price, along with a bevy of other oncology products, helps Pfizer partially make a dent in its patent-based revenue decline.
3. The U.S. healthcare system supports it
Lastly, the U.S. healthcare system supports accelerating prices for branded therapeutics.
The U.S. is one of just a small handful of developed countries without a universal health plan; we have extensive patent protection periods of 20 years that begin when human clinical trials are OK'd by the FDA; and Americans are more demanding of pharmaceutical products than people in any other country. Adding fuel to the fire, insurers typically don't fight back against expensive drugs as it could alienate members and send them to a competing network. Even the high standard of living in the U.S. relative to other countries around the world encourages drug developers to inflate prices in the United States. There's a veritable laundry list of reasons why prescription drug prices are so high.
Prescription drug reforms that would cap new drug prices or year-over-year inflation, or incentives that focus on quality-of-life improvements rather than reimbursing just for providing a medical service or product, could potentially help control prescription drug inflation, especially when it comes to oral cancer drugs. Unfortunately for the consumer, there's zero guarantee any reform is in the offing. Drugmaker pushback against reforms is a real possibility, as is the potential that they could curtail innovation or move their operations overseas if regulations in the U.S. are perceived to be too restrictive to profitability.
For the time being, it doesn't appear as if oral cancer drug inflation is going to slow anytime soon.
The article This Prescription Drug Class Has Increased in Price By 506% Since 2000, Study Shows originally appeared on Fool.com.
Sean Williamshas no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen nameTMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle@TMFUltraLong.The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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