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Feb 17, 2006

Double Drug Jeopardy

I’ll be honest with you: I really don’t know what to think about drug companies. I’ll give them some credit, since unlike many of their peers they produce a product that is useful to society and has important humanitarian implications. I want to like them—I really do—but when I read about things like this, it becomes pretty difficult.

On 15 February, The New York Times published a detailed account in its business section on the exorbitant prices some pharmaceutical companies are willing to charge for their therapies. The report focused on Avastin, a drug produced by Genentech for treatment of colon cancer. The drug is now being prescribed for breast and lung cancer, but a year of Avastin treatment for these conditions can cost $100,000. Ouch.

Surely this steep price tag must mean that Avastin is just a really expensive drug to produce, or maybe Genentech just wants to recoup the money it spent to develop it. Right?

Wrong.
Until now, drug makers have typically defended high prices by noting the cost of developing new medicines. But executives at Genentech and its majority owner, Roche, are now using a separate argument — citing the inherent value of life-sustaining therapies.

If society wants the benefits, they say, it must be ready to spend more for treatments like Avastin and another of the company's cancer drugs, Herceptin, which sells for $40,000 a year.

"As we look at Avastin and Herceptin pricing, right now the health economics hold up, and therefore I don't see any reason to be touching them," said William M. Burns, the chief executive of Roche's pharmaceutical division and a member of Genentech's board. "The pressure on society to use strong and good products is there."

In other words, “If you don’t want to die, you’d better pay up… bitch.”

The New York Times elaborates extensively on Genentech’s “aggressive” pricing schemes. At one point, the article mentions the specific example of a patient named Ellis Minrath, who has decided not to take Genentech’s drug Tarceva for his pancreatic cancer because it would cost him $1,000 a month (even after Medicare has paid the rest of the bill). In its bid for my Most Absurd Quote of the Week Award, the drugmaker responds:
But Dr. Desmond-Hellmann, the Genentech product development chief, said she would recommend that Mr. Minrath be treated with Tarceva. "I don't think any patient should go without a Genentech drug for an inability to pay," she said. "If this is about money, that would disturb me."

Yes, and it should also disturb anyone else reading this, but we’re not the ones charging the exorbitant fees!

Adding another layer to the debacle is the fact that Genentech has only tested Avastin for breast cancer or lung cancer treatment at a dose double that prescribed for colon cancer. Despite calls from physicians to test lower amounts, Genentech has resisted:
The higher cost of using Avastin in breast and lung cancer, compared with colon cancer, is a result of cancer drugs' being priced on the basis of weight. In colon cancer, Genentech tested Avastin at a dose of 5 milligrams of the drug per kilogram — or 2.2 pounds — of the patient's body weight. But in lung and breast cancer, the company tested the drug at a dose of 10 milligrams per kilogram of body weight.

Because the actual cost of producing Avastin is a fraction of what Genentech charges for it, some analysts and doctors had expected the company to lower Avastin's price per milligram for use in lung and breast cancer.

Dr. Leonard Saltz, an oncologist at Memorial Sloan-Kettering Cancer Center in New York, noted that Genentech had not tested the Avastin at the dose level for colon cancer in large-scale trials of lung and breast cancer. As a result, no one really knows whether the lower dose might turn out to be equally effective in lung and breast cancer, he said. Besides costing less, he said, a lower dose might have fewer side effects.

"There are no meaningful data to allow us to address that question," he said.

The whole point of medical science is to improve the quality of people’s lives, but I don’t think anyone considers financial ruin to be such a desirable outcome. Genentech is in a real position to address this by either charging less for Avastin or testing lower doses of the drug (regardless, still making a healthy profit). Especially since this second option could have the added bonus of reducing side effects, the lack of tests at a lower dose is upsetting. In science, all knowledge is good knowledge, so it’s time for Genentech to get on the ball here.

The pharmaceutical industry is one of the most heavily subsidized sectors of the American economy, supported by taxpayers through billions of dollars of federally funded biomedical research in universities and research centers across the nation. People overwhelmingly support this cause, though, for good reason. They believe in the promise of modern medicine to improve people’s lives, and they are willing to pay for it. In return for their initial financial support, though, these people should expect to enjoy fair access to the treatments that they have in part funded. Charging inflated fees for these drugs is equivalent to making patients pay for them twice and is neither fair nor honest.

12 Comments:

  • "Adding another layer to the debacle is the fact that Genentech has only tested Avastin for breast cancer or lung cancer treatment at a dose double that prescribed for colon cancer."

    I believe you meant 'than' instead of 'that'. Just answering your call for copyediting. ;)

    By Blogger Epikorean, at Fri Feb 17, 07:44:00 PM  

  • And, of course, by this reasoning, if you're not already rich, your life isn't worth much.

    By Blogger Julie, at Fri Feb 17, 08:09:00 PM  

  • Now this isn't my strenth, but I think my grammar is correct there. I'm using "that" as a replacement for "the dose," so the sentence could also read, "Adding another layer to the debacle is the fact that Genentech has only tested Avastin for breast cancer or lung cancer treatment at a dose double the dose prescribed for colon cancer." Thanks for watching out for me, though!

    By Blogger Nick Anthis, at Fri Feb 17, 08:24:00 PM  

  • All sysytems go to kill the poor tonight. --DK

    Seriously, its what they want. We're inconvenient. But they'll miss us when they need to valet their cars.

    By Blogger NicFitKid, at Fri Feb 17, 10:47:00 PM  

  • You are right! I misread the statement initially. My bad (grammar)!

    By Blogger Epikorean, at Fri Feb 17, 11:09:00 PM  

  • As far as I can tell it's the big pharmaceutical companies that use the R&D justification. Biotech companies are pure venture capital fodder and their value depends entirely on how much they can squeeze out of their products.

    By Anonymous RS, at Sat Feb 18, 06:56:00 PM  

  • Pharmaceuticals is a very capital-intensive industry, which requires vast amounts of investment to produce these new drugs. And all businesses are going to try to maximize their profits, even when, as in this case, they enjoy monopoly pricing power, which naturally stems from the need to protect their intellectual property, the absence of which would cripple the industry.

    There's just not much that can really do. In a lot of other countries, they heavily regulate the pharmaceutical industry, set price controls, and so forth, to the point that pharmaceutical firms have been flocking to the United States. The vast majority of all this research is now done in the United States.

    So we really do face a trade-off between innovation and equity. I do believe that Congress should do more to disrupt this monopoly pricing power, but the pharmaceutical lobby is probably one of the strongest in Washington, so neither side is really going to be willing to do so any time soon.

    By Blogger Jackson, at Sun Feb 19, 02:36:00 PM  

  • I gotta disagree with you on this one, Nick. I think the NYT article is a bit unfair.

    I couldn't find out how much Avastin actually cost Genentech to develop or to make per dose. Unless you can, how can you claim to know what Genentech "should" charge? Note that to be worthwhile, Genentech had to convince stockholders that when they started working on Avastin in 1989 (when you were what...7 years old?) that investing in Genentech would be better than just buying an index fund (disclaimer - I'm a stockholder, but sadly not since 1989).

    And regarding the claim that pharma is one of the most heavily subsidized sectors (Dem talking point)...
    1) I doubt it on raw numbers - otherwise your profs would not be complaining about the NIH budget so much
    2) It's an odd kind of subsidy that is that indirect (pharma may be heavily subsidized in other ways...I just don't buy the research argument).
    3) Read Derek Lowe regularly...you can start with this post

    BTW, if you want to increase your page rank, you might want to link more to other bloggers to get reciprocity...and get Haloscan so you can receive trackback pings so they can let you know that there's something to respond to.

    By Anonymous Jim Hu, at Mon Feb 20, 09:55:00 AM  

  • Hi Jim,

    In regards to your three points:

    1 and 2: You are correct that these subsidies are indirect, but they are still subsidies. Just think of where the pharmaceutical companies would be without the a base of research to draw from, which comes from the large amount of money the government spends on funding basic biomedical research. Don't get me wrong, though, I'm not saying that there's anything wrong with this. We just need to recognize that this industry receives an enormous amount of government support, so the public has a legitimate interest in seeing affordable drugs come from this investment. As far as that being a Democratic talking point, it's certainly not one I've heard often, at least not from this angle. The Democratic Party in particular is very gung-ho about funding biomedical research, and I think they should be.

    3: I didn't see anything in the Derek Lowe post to contradict anythign I've said. It looks like a decent blog, though, so I'll plan on reading more of it.

    As far as increasing my PageRank goes, I think it's pretty strange that I still have a PageRank of zero (which from what I have read means that my page basically isn't ranked, as opposed to it being ranked very low). This is particularly weird since my PageRank shot up to 5 and then suddenly went back to zero.

    By Blogger Nick Anthis, at Mon Feb 20, 10:25:00 AM  

  • Nick,

    What I objected to was your statement that pharma was one of the most heavily subsidized sectors based on research funding. This clearly fails on absolute numbers, but one might make the argument based on the fraction of the costs that come from taxpayers. Of course, to do that we'd have to eliminate things that are funded primarily by the government, such as the military. Subsidized isn't quite the right term there, IMHO. But I'd argue that as a fraction of their costs, pharma isn't that heavily subsidized either...at least via grants to academics.

    I've heard this as a Dem talking point in the form of something to the effect of: drug companies don't deserve to charge as much as they do because their R&D costs are born by the taxpayers via NIH grants. Hence, price controls on drugs are appropriate, and the talk of cutting off the pipeline is just scaremongering. After all, there's all this low-hanging fruit produced at taxpayer expense. I view the Dems as supportive of NIH funding (both parties are; the only ones who have come out for cuts are the Libertarians, AFAIK), but many are also in favor of strong regulation of pharma prices. Your statement suggests the idea that if taxpayers subsidize something, even indirectly, then the government/society has the right to set the price. Do I misread you there?

    The point Derek often makes is that while basic research investment is important, there's a tendency in academia to overvalue academic research and undervalue what's added by pharma. Very few things go straight from an academic lab to clinical trials. One of the things we like to say in our grants is that our investigations will identify novel targets for pharmaceuticals. In fact, what's limiting in pharma is not the number of promising targets from academia...its the ability to figure out which tiny fraction of these will actually become real drug targets. This was a real eye-opener for me the first and only time I was asked to give a talk at a drug company (and it's been confirmed by everyone I know who has gone to drug companies to work).

    Where pharma is subsidized is in the new prescription drug benefit, and in the way we tax health benefits provided by employers. People are willing to pay more for drugs if someone else is paying for most of the cost, so the price goes up. This may or may not be a bad thing, depending on your POV.

    By Anonymous Jim Hu, at Mon Feb 20, 06:21:00 PM  

  • I don't mean to undervalue the contribution from pharmaceutical companies--they produce a very different type of information that academia doesn't seem too great at producing itself. However, they would have to start from scratch if it weren't for university research, which would strongly affect their ability to produce drugs. The most important thing that needs to happen is for the public to understand the extent of their contribution to the products produced by pharmaceutical companies, which in my opinion is a pretty large contribution. If people understand this, then they are in a much better position to engage in a national dialogue about how we as a country should approach the issue at hand. I definitely don't have all of the answers, but I think a more informed debate can lead to these solutions. In the meantime, I don't know if the government should set prices (although that should be an option we consider), but I do know the government should have more power in negotiating drug prices for government health care programs.

    In regards to your first point, I do believe I'm justified in saying that the pharmaceutical industry is one of the most heavily subsidized industries, but you are correct in pointing out that it is not the most heavily subsidized. That honor would go to the military-sector, which is virtually 100% funded through taxpayer money. Drug companies, at least, raise a very large amount of capital privately (although they still benefit heavily from federal research funding).

    By Blogger Nick Anthis, at Mon Feb 20, 08:03:00 PM  

  • Bartkid sez,
    I'm so old, I remember when government and universities did R&D.

    By Anonymous Anonymous, at Thu Mar 02, 09:45:00 PM  

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