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The Cost of Living

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The centerpiece of the 2009 article was a chart tracking the price of every cancer drug approved by the FDA since 1965 (now regularly updated by Bach and his colleague Geoffrey Schnorr). In preparing it, Bach discovered several dirty secrets about drug pricing. The first is that there is no fixed price. The “sticker price” of a cancer drug is listed in a compendium called the Red Book, but no one pays that price, according to experts. Drug companies can, and do, offer undisclosed discounts to health-insurance companies, hospitals, and middlemen in the health-care market. So prices vary widely. The Sloan-Kettering compendium pegs its cancer-drug prices to Medicare reimbursements, which give an indication of the real marketplace price (and the cost to taxpayers). These prices are lower than those in the Red Book, but still, according to Bach, are “astronomical.”

Second, the chart documents a recent sea change in pricing. It shows a very slight uptick in prices until the mid-­eighties, when the rise becomes more substantial, and then bends sharply upward around 2000. Beginning about twenty years ago, the graph also shows a series of dots way above the curve of average prices, indicating drugs that, in effect, have broken the sound barrier on price since the nineties.

“Then one day I looked at the whole landscape,” Bach recalled, “and thought, Huh, I now know why cancer-drug prices are so high. Because the entire regulatory environment is structured in a way where there are no downward pressures and there are no standards. Medicare—and most private insurers, who want to do business in most states—have to include every drug in coverage. And they have to pay the producer’s price. It’s kind of that simple.”

Bach, incidentally, doesn’t fault the pharmaceutical companies for continuing to push the envelope on pricing. They have a responsibility to shareholders to maximize their profits, he says, and “are responding in a logical way” to an illogical system that, in terms of prices, has “no upper limits. They’re just going to creep up as fast as they can get away with.”

He also realized that one of the few downward-market pressures on pharmaceutical prices was what he calls “headline risk”—an economist’s way of saying “negative publicity.” And that’s why he raced down to the tenth floor when Saltz called him about the Zaltrap decision. It was an opportunity to make some public noise in the drug-price debate.

Saltz proposed writing a joint commentary about Sloan-Kettering’s Zaltrap decision for the Journal of Clinical Oncology, where cancer doctors have been venting about high prices for years. (In a 2009 JCO editorial, Hillner and his colleague Thomas J. Smith criticized the rise in cancer-drug prices with this statement: “Profiteering, the act of making a profit by methods considered unethical, such as raising prices after a natural disaster, is a pejorative term that we believe can be applied to this recent trend where a life-threatening disease is the natural disaster.”)

Despite this rising discontent in the medical literature, Bach knew that no one besides doctors would read a medical journal, so he argued instead for approaching the Times with the idea of announcing Sloan-Kettering’s Zaltrap decision as an op-ed piece signed by Saltz, Bach, and Robert Wittes, then physician-in-chief of the hospital. In the piece, which appeared last October, they wrote, “When choosing treatments for a patient, we have to consider the financial strains they may cause alongside the benefits they might deliver.”

Several weeks later, citing “market resistance,” Sanofi cut the price by 50 percent—an unprecedented discount for a cancer drug. Sloan-Kettering still does not carry Zaltrap.

When Hagop Kantarjian, who heads the Department of Leukemia at the University of Texas’s MD Anderson, saw the op-ed, and the effect it had on the drug’s price, he was both surprised and heartened. “Before that,” he says, “all the previous efforts by doctors had been halfhearted and not successful.” As several health-care economists pointed out in the wake of the Zaltrap episode, hospitals could use their pharmacies as a way to hold the line on drug prices, and physicians could take the lead in highlighting the problem. So Kantarjian said to himself, “What if you took one disease, and all of the experts in the field advocated against high drug prices? If they could do it, why not us?” Us was an international group of experts on leukemia. But these doctors picked an entirely different fight with the pharmaceutical industry: They wanted to highlight the problem of high prices for really effective drugs.

Over the past decade, Kantarjian watched in disbelief as the cost of a successful leukemia drug called Gleevec rose. “I was shocked that it had tripled since 2001,” he says, “and there was no reason for the increase in price, except that the companies could do it and nobody could do anything about it.” Kantarjian, as established a figure as there is in American oncology, suddenly became radicalized.


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