How much should new drugs cost to worth the benefit?

Shobha Shukla and Bobby Ramakant, CNS (Citizen News Service)
Dr Gilberto Lopez, Brazil
Decreasing prices of cancer drugs will increase their accessibility. One of the most pressing problems in oncology today is the rising costs of cancer treatment. Cancer medication costs in the US have doubled during the last decade from $5000 a month to about $10000-$12000 per month.

One of the reasons for this could be the high costs and time period involved in developing new drugs - it can take more than 15 years and over $2.8 billion to develop a new drug, said Dr Gilberto Lopez, a medical oncologist in Brazil and Chief Medical Officer for the Oncoclinicas Group - the largest oncologists’ group in Latin America with over 300 physicians. Dr Lopez is also the Associate Editor of Journal of Global Oncology.

He spoke to CNS (Citizen News Service) in lead up to IASLC Asia Pacific Lung Cancer Conference (APLCC 2016) in Chiang Mai, Thailand.

In most markets, interdependence between demand and supply and free market forces sets prices of a product/ service. The healthcare market, however is not an independently working market — there is concentration of power either in the national buyers or in the pharmaceutical industry, which has a monopoly over its patented drugs.

How can we improve access to cancer medication?

Dr Lopez shared different strategies that low and middle income countries can take to improve access to cancer medication.

1) Price control for cancer medicines can be imposed by governments. But price controls usually do not work, feared Dr Lopez. “We have many examples where price controls have led to the disappearance of the product from the market, leaving the customers with no option but to buy the product in the black market where prices are even higher than what they were initially supposed to be. So negotiations with the pharmaceutical industry and use of reference pricing could perhaps be of more help”.

2) Compulsory licensing (CL) is an effective strategy used by governments to drastically reduce drug prices. During the HIV/AIDS crisis in the 1990s, it was only through use of compulsory licensing provisions by countries like Brazil, India and South Africa that led the industry to lower prices for ARV drugs in low and lower-middle income countries, reminded Dr Lopez.

Although CL has not been used often for cancer, Dr Lopez shared the few existing examples where this intervention has worked. “Thailand has used CL for a number of drugs, including taxol - an anti-cancer chemotherapy drug. This has resulted in huge savings for the government and made it easier for the Thai people to access cancer medication. Thailand, however did face some economic losses when the US government retaliated by deleting some of the Thai products from their exports’ list. But, CL resulted in overall savings for Thailand’s economy. More recently in 2012, India imposed compulsory licensing for anticancer drug Sorafenib tosylate sold under the brand name Nexavar. This resulted in reducing the cost to US $175 per month - a 97% price reduction”.

However Dr Lopez warned that the new free trade agreements (FTAs) have been including clauses that do not allow the signatory countries to use CL. This is a disturbing development that will deprive many countries from using CL to rein in prices.

3) Price discrimination or market-based differential pricing is a relatively new concept in healthcare. Price discrimination is the concept of charging different prices for the same product/service from different consumers, based on consumers’ ability to pay.

“Price discrimination in the form of discounts and rebates is commonplace in industries outside of healthcare, as it allows companies to expand their customer base. It is something like movie theatres selling cheaper tickets for the same movie on a Wednesday than on a Saturday evening”, explained Dr Lopez.

According to him, price discrimination should work for pharmaceutical companies also as their major expenses lie in drug development and not in the marginal cost of producing one extra tablet. “So we can easily have high prices in high income regions to recover the drug development costs and very low prices in small and middle income countries. Thus differential pricing can help expand the use of new and expensive medications in low- and middle-income countries while improving a company’s bottom line”.

There are companies today that have a pricing policy of charging lower rates from lower income countries. There are many instances of price discrimination working to advantage. Dr Lopez gave the example of Brazil where, recently, several companies decreased the cost of Hepatitis-C medication by more than 80%, making it accessible to all those with Hepatitis-C infection. There are some examples of price discrimination for cancer medicines as well.

Dr Lopez listed the problems that beset price discrimination strategy: 

* Companies may worry that somebody might buy the medications in a cheaper jurisdiction and then resource (export) them back to more expensive jurisdictions. But there can be international control mechanisms to prevent this
* There could be political backlash - citizens of rich countries might resent paying higher prices in order to subsidise costs in developing countries. But people will have to realise that access to medicines is a matter of right for all, and not just a matter of trade
* Some medications are so expensive that even after massive price decreases of 80% they still might not be affordable in some low income countries.

4) Generic medicines are another very valuable way to access affordable medication, once the patents expire. “Generics are used all over the world, including the US, where several prescriptive medicines come from generics and they only cost 15% of all drugs costing in US”, said Dr Lopez.

5) Biosimilars are now being developed in the field of oncology for the more expensive monoclonal antibodies such as Rituximab and Cetuximab. “It is expected that biosimilars will be able to decrease medication costs by 30% - 40%. We are now seeing companies that hope to make them for prices as low as $3 a day. We hope that in 5-10 years this would prove to be a boon for access to monoclonal antibodies in low and lower-middle income countries”.

Undoubtedly, there is an urgent need to find and adopt means to regulate the prices of the expensive cancer drugs.

Shobha Shukla and Bobby Ramakant, CNS (Citizen News Service) 
15 May 2016