Peter Back, MD: "Rising Drug Prices with Diminishing Returns"

1. Peter Bach, MD
Director, Center for Health Policy and Outcomes
Memorial Sloan Kettering Cancer Center

2. RISING DRUG PRICES
DIMINISHING RETURNS
… and a way forward
Peter B. Bach, MD
Center for Health Policy and Outcomes
Memorial Sloan Kettering Cancer Center
bachp@mskcc.org
@peterbachmd
May 15, 2015

3. Oncology leads total specialty drug
spending

4. Rising prices of cancer drugs

5. 100-foldpriceincrease

6. Are rising prices logical?
• Maybe:
– Of course, we’re willing to pay more to get more
• But maybe not
– We’re probably not willing to pay more each time for
benefits that are smaller each time
– When prices rise faster than gains:
• “Diminishing Returns”
– Each additional $ from patient/insurer buys less health than
the one before it.

7. Gains falling while prices rise:
second line metastatic colon cancer
(Peter’s very rough numbers)
Treatment Cost for
treatment
Delta (mean
survival)
Cost/delta
Avastin
+chemo
(2005)
$25,000 (for
Avastin)
0.16 years $156,250
Cyramza
+chemo
(2015)
$50,000 (for
cyramza)
0.19 years $263,157
Increment $25,000 0.03 years $833,000
*These numbers are approximate

8. Cost for an additional year of life goes up
each year in cancer

9. Yield of additional spending compared to
other countries
Cost per additional life
year: $1,477,003
Cost per additional
QALY: $1,978,542

10. Prices are at the level
needed to drive any
innovation!

11. The Market for ALK Inhibitors:
Appropriately Priced? Or frothy?
4 ALK Inhibitors are
currently in preclinical
development
7/2014: Latest
Alectinib trial
begins
6/2014: Latest
NMS-E628 trial
begins
3/2014: Latest
AP26113 trial begins
1/2014: Latest PF-
06463922 trial begins
7/2013: Latest CEP-37440
trial begins
10/2012:
Latest TSR-011
trial begins
6/2012:
Latest X-396
trial begins
4/2014: Zykadia
approved by the FDA
8/2011: Xalkori
approved by the FDA
Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013
Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014

12. Okay, prices are high.
But at least they make
sense!

13. Two drugs (peter’s crude assessment)
Farydak (Feb 2015 approval) Ibrance (Feb 2015 approval)
Price: $10,035 per month
•FDA path: Squeaked through (voted
down by ODAC advisors 5 to 2).
• Use: 3rd line multiple myeloma
•(11,000 deaths per year)
• Benefit: Increased PFS by 5 months,
but not overall survival
• Tolerability: Severe side effects with a
“Black Box”
Price: $9,978 per month
•FDA path: Accelerated approval
from impressive Phase 2 data
•Use: 1st line metastatic breast cancer
(larger health problem, 40K deaths/yr)
•Benefit: Increased PFS by 10 months,
survival data pending
• Tolerability: Moderate side effects

14. They actually CAN‘T make sense

15. Sure Prices are High, but the
market still works

16. Price of Gleevec
Year
2004 2006 2008 2010 2012 2014
Priceper100mgpill($2014)
0
50
100
150
200
250
Nilotinib approved Dasatinib approved
India patent case decided
Pediatric Ph+ CML indication
5 add'l indications, including Ph+ ALL
Product prices rise even as:
a) competitors enter the market
b) new indications are added

17. Sure prices are high, but
they’re what the market will
bear

20. Who suffers?
• Taxpayers
• State Medicaid programs
• TheVA health system
• And . .. Patients

22. Patients driven into bankruptcy

23. Where are the
opportunities?

24. Where to from here- solutions
• Unconstrained pricing power – the mess we
have now
• Value based pricing – how do we assign value?
– Should we have a RUC for drugs?
• Bargaining, which means saying ‘no’
– Has to be done with care . . . .This is why
‘comparative effectiveness research’ is so
intriguing
• Price drugs to sustain pharma industry
• What? Who is this guy? Is he a communist?
• Do we need an MLR for pharma?
• Lock in the 10% of healthcare spend number
– Yikes, do we need an SGR for pharma?

25. Bargaining and saying ‘no’

27. Why the oped
• We were the least logical player in the
system (one hospital) to do this
– but we were the only one that could
• Transparency at the highest level
– NYTimes reaches most stakeholders
– If we say two things are interchangeable, that
should hold up to public scrutiny
– Very different from back-room deals that are
opaque and have different economics for
different parties

28. How Comparative effectiveness changes policy

29. Bargaining chances in oncology
• Where there are multiple competing
regimens
• The question of equal efficacy is a hard one
• Major guidelines suggest there are chances
though

32. What needs to change
• Need indication specific pricing
• Have to get the profit-loss potential out of
the hands of prescribing doctors AND
HOSPITALS
– Bundles and ACO’s – encourage using less
expensive drugs
– Buy and bill encourages more expensive drugs
• Have to deal with dosing

34. Get doctors/hospitals out of the drug
business and deal with dose
• Story of Merck’s drug Keytruda – a true
breakthrough in immuno-oncology
• Appears to be substantively better than
another breakthrough drug,Yervoy –
– Increased survival by what looks like more
than a year at the mean (not enough follow-
up yet to be sure just how big)
• But the math is a little frightening

35. But what dose was used and how does
that affect incentives?
• On label – 2mg/kg every 3 weeks
• In study – 10mg/kg every 2 or 3 weeks
– That’s 5x and 7.5x the labeled dose
• Medicare reimbursement is $46/mg,
typically 8-10 doses in study, 80kg patient
– At labeled dose: $45K
– At 10mg/kg every 3 wks: $224K
– At 10mg/kg every 2 wks: $352K

36. What are the incentives – profit for a
treatment course by type (Peter’s guess)
0
100000
200000
300000
400000
500000
600000
700000
Medicare +6% Commercial MD +20% Commerical hosp +140% 340B hosp + 200%
10mg/kg q3
10mg/kg q2
2mg/kg q3

37. So which dose of Keytruda? It matters
for costs, and incentives
• Head of late stage oncology told me:
– “The lower dose is as effective as the higher
one”
• But the next week Merck wrote to NCCN
(the major cancer guidelines organization)
and asked for “Level 1” supporting the
study that used the higher doses

38. Two stories about the dose
Head of late stage
oncology rsrch to me, 4/28
• “As we discussed, our company
has strived to consistently
communicate that no
significant differences have
been demonstrated between
the pembrolizumab doses
studied in our clinical program
and that 2 mg/kgQ3W is the
approved dose in advanced
melanoma”
Communication with
NCCN – May 5
• Specific changes
requested: In section ME-
E we respectfully request
that KEYTRUDA be
upgraded from category
2a to category 1. . ..
• Rationale: Robert et al . .
(10 mg/kg every 2
weeks or every 3
weeks)
Head of late stage oncology to me on 5/11 after I asked about this
apparent contradiction:
“We do not see a conflict between the letter submitted to the
NCCN guidelines committee which requested consideration as level 1
evidence and our public statements regarding the dose of Keytruda.
The letter factually described the randomized trial published in the
NEJM. We believe it is appropriate to include dosing information as part
of any high level statement regarding trial design.”

39. Thank You