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Peter Bach, MD
Director, Center for Health Policy and Outcomes
Memorial Sloan Kettering Cancer Center
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
Oncology leads total specialty drug
spending
Rising prices of cancer drugs
100-foldpriceincrease
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.
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
Cost for an additional year of life goes up
each year in cancer
Yield of additional spending compared to
other countries
Cost per additional life
year: $1,477,003
Cost per additional
QALY: $1,978,542
Prices are at the level
needed to drive any
innovation!
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
Okay, prices are high.
But at least they make
sense!
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
They actually CAN‘T make sense
Sure Prices are High, but the
market still works
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
Sure prices are high, but
they’re what the market will
bear
Rising Drug Prices with Diminishing Returns
Rising Drug Prices with Diminishing Returns
Who suffers?
• Taxpayers
• State Medicaid programs
• TheVA health system
• And . .. Patients
Rising Drug Prices with Diminishing Returns
Patients driven into bankruptcy
Where are the
opportunities?
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?
Bargaining and saying ‘no’
Rising Drug Prices with Diminishing Returns
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
How Comparative effectiveness changes policy
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
Rising Drug Prices with Diminishing Returns
Rising Drug Prices with Diminishing Returns
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
Rising Drug Prices with Diminishing Returns
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
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
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
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
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.”
Thank You

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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
  • 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
  • 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?
  • 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
  • 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.”