How much is an extra month of life worth? Drug makers face pressure to calculate
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Time is priceless. That’s a theme the drug industry is pushing in an emotional new ad campaign touting the power of pharmaceuticals to prolong lives.

It’s a heartwarming message. But a growing number of health economists say it’s also disingenuous.

They say it’s high time to start putting a price on the time patients gain from taking a costly medication. And they’re calling for a national conversation about whether that extra time is worth the cost, not just for the patient, but for society at large, which often bears part of the expense through government programs.

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“The country … needs to be able to make these types of decisions with some type of input as to costs,” said Dr. Howard Forman, a Yale University economist and practicing radiologist. “It’s all well and good to just say life is priceless, but the reality is we are paying for it.”

In practice, there’s often little correlation between how much a drug costs and how well it works. The Food and Drug Administration has approved some pricey drugs based on clinical trials showing they extend life for just a matter of days. More than 70 new drugs targeting solid tumors were approved between 2002 and 2014 — with median improvement in survival of just 2.1 months.

And the price of postponing death is growing. In 2013, one extra year of life for cancer patients cost $207,000, on average, nearly quadruple what it did in 1995, according to a study published in the Journal of Economic Perspectives.

Drug makers typically justify the high prices by pointing to their enormous expenditures on research and development, and by explaining that their medications are often the only option for patients facing terrible diseases. They also factor in the size of the market; drugs for rare conditions often cost far more because the manufacturers can’t make up their research costs with a high volume of sales.

 

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Most drug companies have so far shied away from linking drug prices to the amount or quality of time the medications buy patients.

But they’re under increasing pressure to change course.

A team at Memorial Sloan Kettering Cancer Center this month got a $4.7 million grant from the Laura and John Arnold Foundation to study payment structures that link a drug’s price to its effectiveness. They’ll build off their previous work, such as an interactive calculator launched online last summer to spur conversation about the “right price” for cancer drugs. (Users can assign different weights to factors like how long the drug is expected to prolong life, or what side effects it might cause.)

And some drug makers are quietly starting to experiment with novel payment methods.

Novartis, for instance, recently reached an agreement with the insurer Cigna over the cost of its heart drug Entresto. The more time patients have at home, rather than in the hospital, the more money Novartis gets for the medication.

Other companies are negotiating with the big pharmacy benefits manager Express Scripts over a system — to be rolled out this spring — that will adjust the price paid for a drug based on how well it treats different types of cancer. If a drug is more effective for prostate than for lung cancer, for instance, the company will get more money when it’s given to prostate cancer patients.

The Biotechnology Innovation Organization, which represents biotech and pharmaceutical companies, this month issued a set of “principles” affirming its support for exploring such “pay for performance” models.

But on the very same day, BIO launched an online video that showed emotional footage of patients such as a baby strapped with medical devices, as a narrator asks what could be “more … priceless” than time.

Ken Lisaius, BIO’s senior vice president of communications, said he sees no contradiction between the two messages, noting that discussions about drug pricing take place between companies and insurers, not patients.

“From the patient perspective, time is precious, and it’s often priceless,” Lisaius said.

He later added in an email: “If there was a group of economists that wanted to band together and put out an ad that notes that what they feel is most important is putting a dollar amount on life — well, that would be their right … but I am not sure who outside of insurers would agree with them.”

Experts agree that Americans tend to have a cultural aversion to putting a price tag on a human life. The Affordable Care Act explicitly prohibits the use of a common economic measure to value a healthy year of life in some analyses.

“There’s a resistance to using those figures in this country because it seems like it’s unseemly to put a price on life,” said Kenneth Kaitin, director of the Tufts Center for the Study of Drug Development.

There are practical concerns, too: How effective a drug is depends in part on how faithfully patients take it. So pegging price to effectiveness requires drug makers to effectively gamble their profits on patients’ ability to follow doctors’ instructions. And it’s well-known that even patients facing serious illnesses don’t always take their pills consistently.

There’s also a more technical challenge: How do you quantify the quality of life a patient gets from staving off disease for weeks or months or years?

Some might place a premium on the ability to return to work, while others might value full mobility. Still others might deem it priceless simply to have a few more days in the company of family.

“Measures of survival and progression-free disease are certainly very, very important,” said Tom Hubbard, vice president of policy research at the Network for Excellence in Health Innovation, which counts pharma companies among its members. “But do we have a full set of measures relative to patient quality of life that can be applied right now? I’m not so sure about that.”

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