In the past 50 years, the introductory cost of cancer drugs has risen over a hundred percent (adjusted for inflation), but Dr. Peter B. Bach wonders, “Are these drugs a hundred times better?”

To answer that question more definitively, Dr. Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center, New York, and his colleagues have developed a proof of principal tool, the “Drug Abacus” .

The online tool uses a calculus of interactive algorithms that can be set by the individual to determine what a drug’s “true” price should be. Among the values possible to include are a drug’s risks, benefits, cost to develop and manufacture, and the life extension and quality of that extension that it offers. Also considered is how rare a disease is that a specific drug treats and how likely a drug will be able to help lift a public health burden. Although the drug abacus was developed to evaluate the cost of 54 cancer drugs, Dr. Bach believes the tool could be developed for use in evaluating the cost of any drug.

The drug abacus was designed for patients and policymakers alike, which Dr. Bach thinks could help bring about “value-generated prices and a transparent [pharmaceutical] marketplace.”

In a webinar sponsored by the University of Southern California’s Annenberg School for Journalism and the California Endowment for Health Journalism, Dr. Bach presented data from the past 20 years on the benefit of cancer drugs in terms of the survival gains between their time of introduction and their price per year of life gained. The data show that the inflation-adjusted cost for an additional life year earned by a cancer drug goes up by about $8,500. Speaking plainly, Dr. Bach said that means by 1995, buying a year of life cost about $50,000, whereas to do so in 2014 cost $250,000, adjusted for inflation.

“Maybe the drugs are somewhat better, but not enough to justify such a rise in cost,” Dr. Bach said.

In the case of the drug Blincyto (Amgen) approved by the FDA earlier this year to treat Philadelphia chromosome–negative precursor B-cell acute lymphoblastic leukemia (B-cell ALL), an uncommon form of ALL, the drug abacus cost is calculated as $7,946 when using the following variables: $12,000 for the cost per year added; a toxicity level of 30%; a novelty level of two out of three (it is the second-line FDA-approved therapy); a two out of three for cost of development; and a three out of three for rarity of disease treated. The actual cost of the treatment when it launched in the U.S. market in early 2015 was $64,260.

Were normal market conditions such as competition and demand driving the cost of drugs, Dr. Bach thinks drugs like the immunomodulator Gleevec (Novartis) would not be enjoying the exponential trajectory in revenues it has had since the FDA approved its new formulation in 2003: It has gone from costing an inflation-adjusted less than $100 per day for treatment to over $200. This, despite two other similar treatments (Tasigna, Novartis and Sprycel, Bristol-Myers Squibb) having entered the marketplace, and Gleevec having received multiple indications beyond its original use in leukemia.

“No one can look at this and say the market is working – either that the competition is lowering prices or that this is about recouping the cost of research and investment, Dr. Bach said.

A broken market means that people whose lives could be saved instead go without treatment, particularly if the cost to them is more than their insurance plan will cover, he said. Speaking about Gleevec, “nothing could be more frustrating than to have a drug that is essentially a cure be unavailable to patients because of a broken market.”

And yet, when the pharmaceutical industry does get pushed, interesting things can occur. In 2011, when Sanofi introduced the metastatic colon cancer drug Zaltrap, Dr. Bach and his colleagues at Sloan-Kettering refused to include it in their formulary citing comparative effectiveness data that did not justify its $11,000 per month price tag, double that of Avastin (Genentech) but with no clear additional benefit: Both drugs improved survival by about 6 weeks.

Sanofi immediately cut the cost of the drug in half nationwide.

“This told us two things,” says Dr. Bach. The first is that the market is indeed busted and the second is that there is immense power in comparative effectiveness research.

Thus was the genesis of the drug abacus, based largely on comparative effectiveness data. Dr. Bach said he thinks such “transparency of data” will help push back on pharmaceutical companies, empowering purchasers to outright refuse to pay arbitrary prices and bring about value-based prices and “rationalize this market.”

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