We want drugs to get better yet we don't want them to be just for the rich. Health care, in much of modern America, is a right rather than a luxury so almost half of the country seems to be fine with overpaying for a phone, content with the knowledge that as popularity and production ramps up and competitors close ground, the prices will drop, but are less inclined to have gaps in health care quality.
People want Apple and Samsung to make money so they are motivated to create the next great phone. If Apple is the most highly-valued company in the U.S., they earned it and if you want their new iPhone 6s first, you pay the price, even if the new features are negligible.
Yet when it comes to pharmaceutical companies, our modern culture has looked at the profit lines of companies instead of products and stated they need to charge less, exactly the opposite of the mentality toward Apple or Google or others. Chipotle, Shake Shack, no one insists they should only break even yet pharmaceutical companies are derided for success.
But critics need to recognize an uncomfortable truth - there is no substitute for pharmaceutical companies. If the government takes over drug discovery, we are doomed, and we should recognize that in the same way we recognized we didn't want the government involved in controlling computer pricing when politicians engaging in theatrics said they were too expensive for poor people. The best products won't be provided in an egalitarian way, they cost more at first.
Yet cancer is egalitarian. You may engage in a lifestyle that minimizes your risk, like eating a sensible diet and not smoking, but you could have cancer erupt today just the same, and because cancer is egalitarian there is an argument that pricing should be also. A team of scholars recently attempted to create a framework for "value-based pricing" of oncology drugs by using a model of Eli Lilly's necitumumab, which when added to chemotherapy for patients with metastatic squamous cell lung cancer increased survival in its trials.
It hasn't been approved by the FDA yet but it will be. The question becomes: What should it cost? The free marketer in all of us will likely move on a gradient along predictable responses, from: 'Whatever it takes' to 'whatever the market will bear.'
There is a new wrinkle when we are told it only increased median overall survival by 1.6 months. The question then becomes more practical: What is an extra 1.6 months worth when, in the case of insurance and government, everyone else is footing the bill?
The free market can solve this puzzle, in a sense. Families of people suffering with cancer, or patients themselves, are not always capable of "economic informed consent", especially if someone else is writing a check after the deductible, but no one looks at 1.6 months as being anything fantastic. So they may decide it's not worth it. And insurance companies may decide it's not worth it. It still may be worth it, to science. Cancer research makes progress by seeing what existing treatments can do, and analyzing the data of those people who go far beyond those 1.6 months.
But scientists who want to analyze data retrospectively don't get to tell patients what to pay or companies what to charge either. What does a more objective approach find?
Still not a lot, according to a parameter-based (Monte Carlo) model in JAMA Oncology. The authors fed in life expectancy, management of adverse effects and quality of life with costs to administer and determined that the valuable price range for necitumumab is between $563 and $1,309 per three-week cycle, which means Lilly might make $1,300 in the seven weeks of median added life. That's a lot cheaper than most new cancer drugs - but so cheap that Lilly won't make any money.
In this case the free market might have the answer after all. To Americans, being expensive is okay, but we really dislike getting a bad value. So Lilly may shoot for the Moon in pricing, and push out an aggressive marketing campaign to help, but it might be wiser to get some cash flow and hope that real-world results make it popular enough that the cost works out.
Citation: Goldstein DA, Chen Q, Ayer T, et al. Necitumumab in Metastatic Squamous Cell Lung Cancer: Establishing a Value-Based Cost. JAMA Oncol. Published online August 27, 2015. doi:10.1001/jamaoncol.2015.3316.