The poor cannot afford to get sick – and certainly, not cancer.

The soaring prices of cancer drugs have become a controversial topic in the healthcare industry – even in countries that provide universal healthcare coverage to their citizens. Policymakers are struggling to provide access to life-saving oncology drugs while battling against the mounting pressure from pharmaceutical companies to increase prices further to preserve innovation and continuous development in the area.

Stringent regulations on drug safety and efficacy were frequently quoted as the main driver that pushed up costs of drug development. Although the industrial estimates vary widely, a report published by the Tufts Centre for the Study of Drug Development puts the figure at just under USD2.6 billion.

The controversy

Tuft’s report looked at 100 new drugs; not just those used to treat cancer. However, critics pointed out the report is opaque as the study received industry funding and the details of drug development – the list of drugs the analysis uses and the costs of clinical trials – were not available for external scrutiny.

A call for more transparency in the calculation of these figures was made, as current drug prices should be justified to healthcare payers. These details are also critical for policymakers to evaluate the controversial claim that high prices are justifiable due to the expensive costs of development.

A separate study published in JAMA Internal Medicine disputed the industrial consensus of USD2.6 billion and put the cost to develop a cancer drug at a much lower USD648 million.

The soaring prices of cancer drugs are limiting patient access to life-saving drugs.
The soaring prices of cancer drugs are limiting patient access to life-saving drugs.

Using data from the US Securities and Exchange Commission filings for ten pharmaceutical companies, the research group – from Oregon Health and Science University and Memorial Sloan Kettering Cancer Centre – estimated the cumulative research and development (R&D) costs from the initiation of the drug development until the date of regulatory approval.

They discovered the total sales revenue pocketed by these companies after approval was USD67.0 billion compared to USD7.2 billion spent on R&D.

“In a short period, development cost is more than recouped, and some companies boast more than a 10-fold higher revenue than R&D spending – a sum not seen in other sectors of the economy,” the authors wrote.

Dr Vinay Prasad, one of the two authors of the paper, said, "The current system of drug pricing is not a free market, but a rigged market, where years of pharmaceutical lobbying has allowed Pharma to charge CMS [Centers for Medicare & Medicaid Services] whatever it wants and CMS cannot negotiate or say no – at least to cancer drugs."

The limitations of the study

Since its publication, the research paper has been widely covered by healthcare news portals, and expectantly, drew criticism due to its limitations.

For one, the sample size is small, as admitted by the study authors themselves as the "critical limitation" of their study. The dataset only contained approximately 15% of new cancer molecular entities during the time of study. Additionally, the authors utilised secondary data (SEC filings) which may contain some inconsistencies or omissions, possibly jeopardising the accuracy and precision of their calculation.

The pharmaceutical industry is also critical of the study’s findings. PhRMA, an American pharmaceutical industry group, said the results did not reflect the high costs of failure in drug development, where the majority of cancer drugs did not make it to the final stage of FDA approval.

However, the authors remarked that these differences could easily be resolved if pharmaceutical companies would allow public access to the data, allowing analysts to work from common ground.

As of now, Dr Prasad said “…one of the major barriers to moving forward with any of them [strategies to reduce drug prices] has been this persistent argument that innovation will be stifled because R&D spending is so great. And what we are finding is: R&D spending, while considerable and substantial, it's not nearly as high as what has been offered in one non-transparent estimate by the Tufts group, and thus there may be considerable room to lower the price of drugs without compromising innovation." MIMS

Read More:
Soaring drug prices: Why does it cost so much?
What is the US doing to bring drug prices down?
What the pharmaceutical industry needs: Transparency and rigorous monitoring