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Tuesday, September 12, 2017

Health Care Reform Articles - September 12, 2017

Warren dismisses Dem divisions as lawmakers rally around single-payer

by John Bowden - The Hill - September 9, 2017

Massachusetts Sen. Elizabeth Warren (D) dismissed conflict inside the Democratic Party on Friday in a new interview, noting that Democrats are rallying around health care and other issues.
Warren told the editorial board of The Republican on Friday that the Democratic Party has found agreement on the idea that health care should be a guaranteed right for all citizens.
"One party in America said it was OK to roll back health care coverage for 25 million Americans and one party in America thinks that health care is a basic human right -- I'm ready to go on that one," she said Friday.
She added that the true strength of the Democratic Party doesn't come from the party elites, but rather the grassroots activists who shifted the party left on health care.
"We don't live in a world where a handful of insiders get to run the Democratic Party — we just don't live in that world," Warren insisted. "We live in a world where the heart and soul of the Democratic Party is down at the grassroots — this health care fight has shown the power of the grassroots.
"It's not only that people have shown it to themselves and to each other, they've shown it to the leadership, as well," she added.
Warren on Thursday announced she would join Sens. Kamala Harris (D-Calif.) and Sheldon Whitehouse (D-R.I.) in co-sponsoring legislation from Sen. Bernie Sanders(I-Vt) establishing a single-payer Medicare-for-all health care system.
"I believe it’s time to take a step back and ask: what is the best way to deliver high quality, low-cost health care to all Americans?" Warren said in a statement Thursday.
"Everything should be on the table — and that’s why I’m co-sponsoring Bernie Sanders’ Medicare for All bill that will be introduced later this month."
Warren is considered a top possible contender for the Democratic nomination in 2020.

5 Questions About Single-Payer Health Care

by David Leonhardt - NYT - September 11, 2017

I encourage you to make the Tampa Bay Times part of your Irma reading diet. The Times (formerly known as The St. Petersburg Times) has long been one of the country’s best regional papers, and it’s been doing vital work during the storm.
If you like what you read there, you could even consider buying a digital subscriptionfor a few months. Irma-related news won’t stop after this week. And local journalism needs financial support.
Here in Washington: Welcome to single-payer health care week.
Bernie Sanders plans to introduce his Medicare for all bill this week, and it’s already winning support from some Democrats. Even Max Baucus, the powerful former Montana senator who long opposed single-payer, now supports it.
With Republicans controlling every branch of government, single-payer health care has no chance of becoming law anytime soon. But the attention to it still matters. The odds are rising that Democrats will make a push toward single-payer when they next are in charge.
So here are five questions to consider as you follow the story:
1. What is single-payer, anyway?
Good question! People are too often afraid of asking basic questions about complicated policy debates.
Single-payer health care describes a system in which only one entity — the government — pays medical bills. If all Americans had Medicare rather than insurance through their jobs, it would be a single-payer system.
But single-payer doesn’t necessarily involve the elimination of private insurance, as Larry Levitt points out. In Medicare, for example, private insurers sometimes act as a middleman between the government and hospitals or doctors.
The key difference is that taxes, rather than payroll deductions or disposable income, pay the bills.
2. Does single-payer work well in the countries that have it?
Generally, yes, it works very well. Costs are lower across Europe, Canada and Australia, where government plays a bigger role in medical care than here, and citizens in many of those places live longer than Americans. This is the single best argument for single-payer.
“In America, we should join every industrialized country and guarantee health care to all Americans as a right,” Sanders told Stephen Colbert last week.
3. Could the United States keep its distinctive advantages under single-payer?
The American system is expensive and inefficient. It also produces many of the world’s most important medical innovations — new drugs, devices, treatments and the like — and is home to many of the best hospitals and researchers. That’s why wealthy people from other countries often come here for treatment.
It’s certainly conceivable that a single-payer system could retain these advantages while making American health care less wasteful. But I’d like to hear a fuller explanation from advocates about how it all would work.
4. How will single-payer overcome its political obstacles?
Even if single-payer reduces costs and lifts quality, the transition would be very tricky. Many people would be forced to change insurance plans even if they liked their current coverage. (Ask Barack Obama how popular that would be.) And money that Americans are now spending on private health care would instead have to be funneled into higher taxes.
Sanders deserves credit for both the passion and detail he is bringing to the subject. Yet his plan from the 2016 campaign was not realistic about the necessary tax increase, as an analysis by the Urban Institute, a left-leaning think tank, showed. The recent failure of single-payer in left-leaning Vermont, which helped end the governor’s political career, shows how brutal the politics are.
5. Is this a yes-or-no subject, or is there a middle ground?
Ah, my favorite question. There is indeed a middle ground.
It’s entirely possible for the country to move toward single-payer without going all the way. This approach would involve expanding Medicare and Medicaid over time.
The Republican Party’s radicalism on health care over the past decade has made this sort of transition all the more likely. The conservative alternative to creeping single-payer is an expansion of the private markets. But the Trump administration and many (though not all) Republican governors have been actively undermining Obamacare’s private markets.
Ron Pollack, a longtime advocate for expanding health coverage, has a nice breakdown of the gradualist approach in Vox.
I recommend reading Paul Krugman’s argument that progressives should now focus their energies on issues other than health care, and The Times’s Editorial Board on why single-payer may yet be a bridge too far. Clio Chang of The New Republic has written a piece asking why more progressive wonks don’t favor a single-payer push.
And anyone interested in this issue should go to the source and read Sanders’s proposals here. It’s also worth watching the more gradual approach of Senator Chris Murphy, which Elana Schor of Politico explains.

Editor's Note:

It looks as though the New York Times and others in the MSM are beginning to take the idea of single payer seriously - finally.  

About time!!

-SPC


Senate leaders honing bill to rein in state’s health care costs

by Priyanka Dayal McCluskey - The Boston Globe - September 6, 2017

Massachusetts Senate leaders say they are developing an extensive bill aimed at curbing health care costs in the state budget and for consumers, in what could shape up to be the biggest state health care legislation in five years.
Senators expect to finish drafting the bill in coming weeks and file it in October, after several months of research, including meetings with health officials in other states.
In interviews this week, they offered few details about the legislation. But the lawmakers indicated it would cover a broad range of policies aimed at slashing medical spending and providing more coordinated care to patients in need.
“We’re looking at everything, with the intent of driving costs down but not sacrificing our commitment to universal coverage,” said Senator Karen E. Spilka, the Senate budget chief, who is among a half-dozen senators developing the bill.
“I think it will be a very significant piece of legislation,” said Spilka, an Ashland Democrat.
Senators are pushing ahead with their bill even as uncertainty lingers about health care nationally. President Trump and the Republican-led Congress have been trying to scrap the Affordable Care Act. A repeal would have big implications for how states cover and pay for health care for low-income residents, and the move is widely opposed in Massachusetts.
With repeal efforts stalled, some members of Congress are working on legislation to stabilize health care markets.
“We can’t wait for Washington,” state Senate President Stanley C. Rosenberg said.
Senators didn’t say whether their bill will include proposals from Governor Charlie Baker to curb costs in the state Medicaid program, called MassHealth. In late June, Baker proposed slashing expenses, in part, by changing eligibility rules and moving 140,000 people from MassHealth to subsidized commercial health plans.
The House and Senate so far have declined to approve Baker’s ideas, but they agreed to increase fees on employers to help fund the rising costs of MassHealth.
Rosenberg said Baker’s proposals are “all still on the table” but that any eligibility changes must be done very carefully.
MassHealth covers 1.9 million low-income families and individuals. Its costs, which are shared with the federal government, represent about 40 percent of the state budget.
Senators said they also want to address spending in the commercial health care market, which includes the majority of Massachusetts residents.
Health costs in the state are generally considered among the highest in the country. In 2012, the Legislature and then-governor Deval Patrick approved a bill to tackle those costs. The law, known as Chapter 224, created two state agencies, the Health Policy Commission and the Center for Health Information and Analysis, to collect data and monitor health spending.
It also set a target of limiting growth in overall health care spending to 3.6 percent a year. The state exceeded that benchmark in 2015 and 2014.
“Health care is such a big part of our economy and such a big part of the state budget. We have to continually look for ways to improve the system and try and save money,” said Senator James T. Welch, cochairman of the Joint Committee on Health Care Financing.
Welch, a West Springfield Democrat, and his colleagues held meetings with local health care executives and experts last month. They have talked to experts from other states, including Minnesota and Maryland, and have planned meetings in Vermont, in an effort funded by the Milbank Memorial Fund, a private foundation that focuses on health care.
Health care executives in Massachusetts, already under pressure to control costs, are hoping legislators don’t try to implement a slate of onerous new rules.
The Baker administration is already in the midst of restructuring the way it pays for and delivers care under MassHealth, noted Lora M. Pellegrini, president of the Massachusetts Association of Health Plans. “The system’s going through a ton of change right now. I don’t think we need to be adding a lot of new regulations.”
Lynn Nicholas, president of the Massachusetts Health & Hospital Association, said legislation should give health care providers flexibility to deliver care more efficiently — not just target costs.
“This should be a bill about improving the quality of care and access to care in the right setting,” Nicholas said. “If that is done, then cost containment will follow.”
A trade group for biotech companies cautioned against “gimmicky ideas,” such as requiring companies to publicly break down the costs of their drugs.
“We are continuing to talk with senators about the value that innovative medicines bring to the health care system, especially in costs avoided,” Robert K. Coughlin, president of the Massachusetts Biotechnology Council, said in a statement.
Business groups, meanwhile, want the bill to focus on MassHealth’s growing costs. Employers say it’s unfair for them to pay more for MassHealth unless the state curbs the program’s spending.
Any Senate legislation would need approval from the House and governor to become law.
A spokesman for Speaker Robert A. DeLeo said House members are “considering a number of different ideas regarding health care cost containment.”

Overtreatment Is Common, Doctors Say

by Nicholas Bacalar - NYT - September 6, 2017

Most physicians in the United States believe that overtreatment is harmful, wasteful and common.
Researchers surveyed 2,106 physicians in various specialties regarding their beliefs about unnecessary medical care. On average, the doctors believed that 20.6 percent of all medical care was unnecessary, including 22 percent of prescriptions, 24.9 percent of tests and 11.1 percent of procedures. The study is in PLOS One.
Nearly 85 percent said the reason for overtreatment was fear of malpractice suits, but that fear is probably exaggerated, the authors say. Only 2 to 3 percent of patients pursue litigation, and paid claims have declined sharply in recent decades.
Nearly 60 percent of doctors said patients demand unnecessary treatment. A smaller number thought that limited access to medical records led to the problem.
More than 70 percent of doctors conceded that physicians are more likely to perform unnecessary procedures when they profit from them, while only 9.2 percent said that their own financial security was a factor.
“This study is essentially the voice of physicians about the problem,” said the senior author, Dr. Martin A. Makary, a professor of surgery at Johns Hopkins. “We’re told that there are too many operations done for narrowed blood vessels in the legs. Spine surgeons say that a quarter of all spine surgery may not be necessary. Half of stents placed may be unnecessary. These are significant opportunities to improve quality and lower costs.”

How to Protect a Drug Patent? Sell it to a Native American Tribe

by Katie Thomas - NYT - September 8, 2017

The drugmaker Allergan announced Friday that it had transferred its patents on a best-selling eye drug to the Saint Regis Mohawk Tribe in upstate New York — an unusual gambit to protect the drug from a patent dispute.
Under the deal, which involves the dry-eye drug Restasis, Allergan will pay the tribe $13.75 million. In exchange, the tribe will claim sovereign immunity as grounds to dismiss a patent challenge through a unit of the United States Patent and Trademark Office. The tribe will lease the patents back to Allergan, and will receive $15 million in annual royalties as long as the patents remain valid.
The surprising legal move rippled quickly through the pharmaceutical world on Friday, setting off speculation about whether other drug companies would soon follow suit in order to protect their patents from challenges through a patent-review process that the industry despises.
If Allergan succeeds in holding onto its patents, “we will probably see multiple branded companies housing their patents with Indian tribes,” Ronny Gal, an analyst for Bernstein, said in a video message to investors on Friday.
For the Mohawk tribe, a community of 13,000 who live in a rural region on the border of New York State and Canada, the deal offers the promise of a new revenue stream that would bring in income beyond that of a casino the tribe runs near the reservation.
“The tribe has many unmet needs,” Dale White, the tribe’s general counsel, said in an interview. “We want to be self-reliant.”
Mr. White said the tribe was approached in April by a Dallas law firm, Shore Chan DePumpo, which proposed the idea. The tribe has already taken ownership of patents owned by a technology company that Mr. White declined to name, but said the Allergan arrangement is the tribe’s first pharmaceutical deal.
The payments from Allergan — not to mention potential deals with other companies, he said — will give a much-needed boost to the tribe’s approximately $50 million annual budget.
Denise Bradley, a spokeswoman for Teva Pharmceuticals, one of the generic companies that is challenging the Restasis patents, described the deal as “a new and unusual way for a company to try to delay access to high-quality and affordable generic alternatives.” She added that Teva “will be interested to see what comments are made about this tactic by regulatory agencies.”
The announcement Friday is perhaps the most novel attempt to avoid a patent-review process that the brand-name drug industry has railed against in recent years. The process was created in 2011 as a way to streamline patent challenges by allowing them to be decided by an administrative panel, the Patent Trial and Appeal Board. But many patent holders have argued that the process is unfair and unnecessary because patents are already challenged in the federal courts. The Supreme Court will take up the issue next year in the case Oil States vs. Greene’s Energy Group.
In the case of Restasis, the validity of the drug’s six patents — which the company says expire in 2024 — are being heard by the review panel, even as a similar battle is also moving through the federal courts. A trial over the issue recently concluded in U.S. District Court in Texas and a decision in that case has not yet been reached. The deal announced with the Mohawk tribe will not have any bearing on the federal court case. If the company loses that case, its patents would be invalidated regardless of the deal with the tribe.
Brent Saunders, the chief executive of Allergan, said in an interview Friday that the company made the move to avoid what he described as the “double jeopardy” of having the same issue heard in two venues. “We did this to really make sure that we can defend these patents in only one forum,” he said.
A. Robert D. Bailey, the chief legal officer at Allergan, said that though the Supreme Court may ultimately invalidate the review process, the company couldn’t risk losing its patent on Restasis, which brought in $336.4 million in revenues in the second quarter of 2017, its second-biggest selling product behind the wrinkle treatment Botox. “It’s one of our most valuable products, so we can’t wait,” he said.
Mr. Bailey and others said the legal theory behind the Mohawk deal stemmed from a decision by the patent-review panel earlier this year involving the University of Florida, which owned a patent being challenged by the medical-device maker Covidien. The university, which was also represented by the Shore Chan DePumpo firm, successfully argued that the challenges should be dismissed because, as an arm of the state of Florida, the university should be granted sovereign immunity.
Mr. White said the tribe has entered into an agreement with Shore Chan DePumpo, which will vet companies and their patents before referring them to the Saint Regis tribe. “Indian tribes have sovereignty that is stronger than states,” Mr. White said, pointing to recent Supreme Court cases that have ruled in favor of tribes. “We feel that we have an extremely strong case.”
Michael Carrier, a professor at Rutgers Law School who studies patent law, called the announcement Friday a “concerning” development, in part because the Mohawk tribe played no role in developing the drug. And he said the administrative-review panel served a worthy purpose. “Challenges at the patent office play a crucial role in overturning invalid patents, and that role could be undermined by agreements like this,” Mr. Carrier said.

New Gene-Therapy Treatments Will Carry Whopping Price Tags

by Gina Kolata - NYT - September 11, 2017

The first gene therapy treatment in the United States was approved recently by the Food and Drug Administration, heralding a new era in medicine that is coming faster than most realize — and that perhaps few can afford.
The treatment, Kymriah, made by Novartis, is spectacularly effective against a rare form of leukemia, bringing remissions when all conventional options have failed. It will cost $475,000.
With gene therapy, scientists seek to treat or prevent disease by modifying cellular DNA. Many such treatments are in the wings: There are 34 in the final stages of testing necessary for F.D.A. approval, and another 470 in initial clinical trials, according to the Alliance for Regenerative Medicine, an advocacy group.
The therapies are aimed at extremely rare diseases with few patients; most are meant to cure with a single injection or procedure. But the costs, like that of Kymriah, are expected to be astronomical, alarming medical researchers and economists.
One drug, to prevent blindness in those with a rare genetic disease, for example, is expected to cost between $700,000 and $900,000 per patient on average, noted Dr. Aaron Kesselheim, director of the program on regulation, therapeutics and law at Brigham and Women’s Hospital.
Drug makers argue that the prices ought to reflect the value of a curative treatment to the patient. Dr. Kesselheim and other experts are far from convinced.
“We don’t pay the fire department that way,” he said. “When the fire department shows up at a burning house, they don’t ask, ‘How much is it worth to you to put out the fire?’ ”
Executives at drug companies declined to say what they plan to charge for the gene therapies they are developing. But they said a variety of factors justified setting unprecedented prices.
By definition, there are very few patients with the rare diseases that the treatments target. Companies thus will have comparatively fewer opportunities to make enough money to pay for their investment, to turn a profit and to fund future research.
“The reason why it’s a peculiar situation is not only because a lot of these gene therapy products are targeting small populations,” said Matt Kapusta, chief executive of UniQure, which is developing hemophilia treatments. “It is a one-time administration with potentially curative impact for the patient.”
Mr. Kapusta also noted that one injection of UniQure’s drug could be expected to replace regular infusions of blood products that can cost $5 million over 10 years.
“When you are spending a lot of money to develop therapies for a rare disease, you need to enable a larger price umbrella,” Mr. Kapusta said. “If you are saving $5 million per patient, that gives you a sense of value to the payer.”
Jeffrey D. Marrazzo, chief executive of Spark Therapeutics, which is developing the drug to prevent a form of blindness, said it should be worth a lot to keep your eyesight. “We should be compensated for generating that value,” he said.
Elizabeth Pingpank, a spokeswoman for Bluebird Bio, which is developing several gene therapies, said the company realizes its prices will be a challenge.
Bluebird and several other companies have set up a consortium with academics to try to figure out novel ways to enable insurers to pay the expected high prices.
“We recognize that most payers in the U.S. are not currently set up to support one-time therapies that generate long-term transformative benefits,” Ms. Pingpank said.
Indeed, health care executives already are rushing to develop new payment models.
When Kymriah was approved, officials at Novartis said they would take the unusual step of taking into account how well it worked in a particular patient.
The company said it was collaborating with the federal Centers for Medicare and Medicaid Services on an approach in which, for children and young adults, there would be no charge if the patient did not respond to the treatment within a month.
If, as expected, Kymriah is approved for other blood cancers, its price may vary depending on how effective it is for those diseases.
Express Scripts, a pharmacy benefit manager that contracts with insurance companies to provide medications to patients, has taken up the cost question with gene therapy companies, insurers and the federal government.
“It’s amazing how many think this is in the future,” said Dr. Steve Miller, chief medical officer at Express Scripts, said of the looming payment problem. “This is right now.”
The idea favored by Dr. Miller and others is to pay for these novel drugs as you might a mortgage on a house.
An insurer would pay a large fraction up front, when the patient is treated, and then make regular payments until the entire bill is paid — or the disease returns.
That would require an unprecedented type of cooperation among insurers. Patients often change insurers, and there is no benefit to a new insurer in continuing payments for an injection that a patient had long ago — even if it was curative.
Bluebird Bio has a market capitalization of $4 billion, although it has no product yet, noted Dr. Peter B. Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center.
Investors “are confident that when they get one of these cures approved, they will get a magnificent price,” he said.
Drug makers have long argued that rising prices are necessary to support the costs of research and development. Yet a study published on Monday estimated the cost of developing a new cancer drug to be far less than many experts had believed, even as revenues have soared.
The industry’s warnings that without high reimbursements, the field of gene therapy will wither is “the classic story of the boy who cried wolf,” Dr. Bach said.
Development costs are already mitigated by special economic incentives for orphan drugs, he noted, including a 50 percent tax credit on the costs of research and development, among others.
And once a company creates a delivery system — say, a modified virus to deliver a gene into a cell — it can be used over and over again to create a variety of treatments, said Dr. James Wilson, director of the gene therapy program at the Perelman School of Medicine at the University of Pennsylvania.
That should reduce development costs, Dr. Wilson said. And because the diseases in question are so rare, the F.D.A. is allowing gene therapy companies to conduct very small clinical trials — with as few as a dozen or so patients, and without control groups for comparison.
That costs much less than a typical drug trial, which can involve tens of thousands of patients.
Dr. Wilson has his own nightmare about gene therapy, a cautionary tale that nags at him. It involves Glybera, the first such drug approved in the West.
Glybera was approved in Europe for treatment of a very rare disease, lipoprotein lipase deficiency. In some ways, it was a poor start for gene therapy.
What evidence there was to support it came from studies in just 27 people, with no control group. The drug was not lifesaving; the disease is not fatal. Mostly, Glybera was supposed to reduce the frequency of hospitalizations.
But the price was stunning: more than $1 million per treatment. It was used just once, by a patient in Germany. Then it was abandoned in the face of low demand.
“We are at a real crossroads,” Dr. Wilson said. One more debacle like Glybera, he fears, and investors will give up on the field.
Then patients with rare diseases “will be left in the dust.”

What Does It Cost to Create a Cancer Drug? Less Than You’d Think

by Gina Kolata - NYT - September 11, 2017

What does it really cost to bring a drug to market?
The question is central to the debate over rising health care costs and appropriate drug pricing. President Trump campaigned on promises to lower the costs of drugs.
But numbers have been hard to come by. For years, the standard figure has been supplied by researchers at the Tufts Center for the Study of Drug Development: $2.7 billion each, in 2017 dollars.
Yet a new study looking at 10 cancer medications, among the most expensive of new drugs, has arrived at a much lower figure: a median cost of $757 million per drug. (Half cost less, and half more.)
Following approval, the 10 drugs together brought in $67 billion, the researchers also concluded — a more than sevenfold return on investment. Nine out of 10 companies made money, but revenues varied enormously. One drug had not yet earned back its development costs.
The study, published Monday in JAMA Internal Medicine, relied on company filings with the Securities and Exchange Commission to determine research and development costs.
“It seems like they have done a thoughtful and rigorous job,” said Dr. Aaron Kesselheim, director of the program on regulation, therapeutics and the law at Brigham and Women’s Hospital.
“It provides at least something of a reality check,” he added.
The figures were met with swift criticism, however, by other experts and by representatives of the biotech industry, who said that the research did not adequately take into account the costs of the many experimental drugs that fail.
“It’s a bit like saying it’s a good business to go out and buy winning lottery tickets,” Daniel Seaton, a spokesman for the Biotechnology Innovation Organization, said in an email.
Dr. Jerry Avorn, chief of the division of pharmacoepidemiology and pharmacoeconomics at Brigham and Women’s Hospital, predicted that the paper would help fuel the debate over the prices of cancer drugs, which have soared so high “that we are getting into areas that are almost unimaginable economically,” he said.
A leukemia treatment approved recently by the Food and Drug Administration, for example, will cost $475,000 for a single treatment. It is the first of a wave of gene therapy treatments likely to carry staggering price tags.
“This is an important brick in the wall of this developing concern,” he said.
Dr. Vinay Prasad, an oncologist at Oregon Health and Science University, and Dr. Sham Mailankody, of Memorial Sloan Kettering Cancer Center, arrived at their figures after reviewing data on 10 companies that brought a cancer drug to market in the past decade.
Since the companies also were developing other drugs that did not receive approval from the F.D.A., the researchers were able to include the companies’ total spending on research and development, not just what they spent on the drugs that succeeded.
One striking example was ibrutinib, made by Pharmacyclics. It was approved in 2013 for patients with certain blood cancers who did not respond to conventional therapy.
Ibrutinib was the only drug out of four the company was developing to receive F.D.A. approval. The company’s research and development costs for their four drugs were $388 million, the company’s S.E.C. filings indicated.
After it was approved, Janssen Biotech acquired the drug for $21 billion. “That is a 50-fold difference between revenue post-approval and cost to develop,” Dr. Prasad said.
Accurate figures on drug development are difficult to find and often disputed. Although it is widely cited, the Tufts study also was fiercely criticized.
One objection was that the researchers, led by Joseph A. DiMasi, did not disclose the companies’ data on development costs. The study involved ten large companies, which were not named, and 106 investigational drugs, also not named.
But Dr. DiMasi found the new study “irredeemably flawed at a fundamental level.”
“The sample consists of relatively small companies that have gotten only one drug approved, with few other drugs of any type in development,” he said. The result is “substantial selection bias,” meaning that the estimates do not accurately reflect the industry as a whole.
Ninety-five percent of cancer drugs that enter clinical trials fail, said Mr. Seaton, of the biotech industry group. “The small handful of successful drugs — those looked at by this paper — must be profitable enough to finance all of the many failures this analysis leaves unexamined.”
“When the rare event occurs that a company does win approval,” he added, “the reward must be commensurate with taking on the multiple levels of risk not seen in any other industry if drug development is to remain economically viable for prospective investors.”
Cancer drugs remain among the most expensive medications, with prices reaching the hundreds of thousands of dollars per patient.
Although the new study was small, its estimates are so much lower than previous figures, and the return on investment so great, that experts say they raise questions about whether soaring drug prices really are needed to encourage investment.
”That seems hard to swallow when they make seven times what they invested in the first four years,” Dr. Prasad said.
The new study has limitations, noted Patricia Danzon, an economist at the University of Pennsylvania’s Wharton School.
It involved just ten small biotech companies whose cancer drugs were aimed at limited groups of patients with less common diseases.
For such drugs, the F.D.A. often permits clinical trials to be very small and sometimes without control groups. Therefore development costs may have been lower for this group than for drugs that require longer and larger studies.
But, Dr. Danzon said, most new cancer drugs today are developed this way: by small companies and for small groups of patients. The companies often license or sell successful drugs to the larger companies.
The new study, she said, “is shining a light on a sector of the industry that is becoming important now.” The evidence, she added, is “irrefutable” that the cost of research and development “is small relative to the revenues.”
When it comes to drug prices, it does not matter what companies spend on research and development, Dr. Kesselheim said.
“They are based on what the market will bear.”




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