How cost-effective are new cancer drugs in the U.S.?

ABSTRACT

Introduction

More than 8 times as many new cancer drugs were approved during 2005–2015 as were approved during 1975–1985 (66 vs. 8). The average annual 2010–2014 growth rate of U.S. cancer drug expenditure was 7.6%. This has contributed to a lively debate about the value and cost-effectiveness of new cancer drugs.

Areas covered

We assess the average cost-effectiveness in the U.S. in 2014 of new cancer drugs approved by the FDA during 2000–2014, by performing an original econometric investigation (rather than a literature review) of whether there were larger declines in premature mortality and hospitalization, and larger increases in survival, from the cancers that had larger increases in the number of drugs ever approved, controlling for the change in cancer incidence and mean age at time of diagnosis.

Expert opinion

Cancer drugs approved during 2000–2014 are estimated to have reduced the number of potential years of life lost before age 75 in 2014 by 719,133. Cancer drugs approved during 1989–2005 are estimated to have reduced hospital cost in 2013 by $4.8 billion. Our baseline estimate of the cost per life-year gained in 2014 from cancer drugs approved during 2000–2014 is $7853.

KEYWORDS:

• Cancer
• cost-effectiveness
• hospitalization
• innovation
• longevity
• mortality
• survival

Article Highlights

• Cancer sites with larger increases in the number of drugs ever approved tended to have larger declines in the number of potential years of life lost before ages 75 and 65.

• On average, one additional drug approved for a cancer site reduced the number of potential years of life lost before age 75 by 2.3%.

• New cancer drugs reduced the number of potential years of life lost before age 75 at an average annual rate of 0.93% during the period 1999–2014.

• Cancer drugs approved during 2000–2014 are estimated to have reduced the number of potential years of life lost before age 75 in 2014 by 719,133

• Premature mortality in year t is strongly inversely related to the number of drugs approved in years t-3 to t (and earlier years), but unrelated to the number of drugs approved in years t+1 to t+4.

• One additional drug approval increases the odds of surviving at least 5 years after diagnosis by 2.4%.

• New cancer drugs reduced the number of cancer patient hospital days at an average annual rate of 0.83% during the period 1997–2013.

• Cancer drugs approved between 1989 and 2005 are estimated to have reduced the number of hospital days in 2013 by 1.55 million, and hospital cost in 2013 by $4.8 billion.

• Our baseline estimate of the cost per life-year gained in 2014 from cancer drugs approved during 2000–2014 is $7853. If we completely ignore the estimated reductions in old drug and hospital expenditure, the estimated cost per life-year gained is $17,104. Even the higher estimate would imply that, overall, cancer drug innovation has been highly cost-effective, by the standards of the World Health Organization and other authorities.

Declaration of interest

The author has no relevant affiliations or financial involvement with any organization or entity with a financial interest in or financial conflict with the subject matter or materials discussed in the manuscript. This includes employment, consultancies, honoraria, stock ownership or options, expert testimony, grants or patents received or pending, or royalties.

Reviewer Disclosures

Peer reviewers on this manuscript have no relevant financial or other relationships to disclose.

Notes

1. Burnet et al argued that ‘years of life lost (YLL) from cancer is an important measure of population burden – and should be considered when allocating research funds [42].’

2. Many drugs are used to treat more than one type of cancer.

3. New drug approvals can improve outcomes for 2 reasons. First, the quality of newer products may be higher than the quality of older products, as in ‘quality ladder’ models [31]. Second, ‘one of the principal means, if not the principal means, through which countries benefit from international trade is by the expansion of varieties’ [43].

4. A similar model of potential years of life lost before age 65 will also be estimated.

5. 1949 was the first year in which a cancer drug included in the National Cancer Institute’s lists of cancer drugs was approved by the FDA [1].

6. Some studies have found no mortality benefit from more intensive screening. For example, data from the Prostate, Lung, Colorectal and Ovarian randomized screening trial showed that, after 13 years of follow up, men who underwent annual prostate cancer screening with prostate-specific antigen testing and digital rectal examination had a 12 percent higher incidence of prostate cancer than men in the control group but the same rate of death from the disease. No evidence of a mortality benefit was seen in subgroups defined by age, the presence of other illnesses, or pre-trial PSA testing [44].

7. This figure shows the correlation between the residual from the regression of Δln(PYLL75_s) on Δln(CASES_s) and ΔAGE_DIAG_s and the residual from the regression of ΔN_APP_1948_t_s on Δln(CASES_s) and ΔAGE_DIAG_s (see eq. (4)).

8. We would prefer to measure cost per quality-adjusted life-year (QALY) gained, but systematic data on the average quality of life of cancer patients, by cancer site and year, are not available. The cost per QALY could be either greater than or less than the cost per life-year, because the number of QALYs gained could be either less than or greater than the number of life-years gained. Although patients’ quality of life in the marginal years (the additional life-years gained) is undoubtedly less than perfect, pharmaceutical innovation may also increase quality of life in the infra-marginal years.

9. This figure is 11% higher than the estimate given in Table A1. To be conservative, we will use the higher figure.

10. Herper quotes a principal at a pharmaceutical marketing consultancy, who said that ‘the size of the rebate average[s] about 30% of a medicine’s sales [12].’

11. To calculate that estimate, Lichtenberg used data from the Medical Expenditure Panel Survey on average utilization of new and old drugs by medical condition (disease) and year [13]. Unfortunately, data on average utilization of new and old drugs by cancer site and year are not available. As discussed above, although data are available on the total use of new cancer drugs, many cancer drugs are used for several types of cancer, and data on the use of cancer drugs for each type of cancer are not available.

12. The aggregate cost of cancer patient hospitalization was $27.9 billion, and the aggregate number of hospital days was 9.1 million [9]. Costs tend to reflect the actual costs of production, while charges represent what the hospital billed for the case. Total charges were converted to costs using cost-to-charge ratios based on hospital accounting reports from the Centers for Medicare and Medicaid Services (CMS). Hospital charges is the amount the hospital charged for the entire hospital stay. It does not include professional (MD) fees. Charges are not necessarily how much was reimbursed.

13. The assumption that a reduction in hospital costs is proportional to a reduction in hospital days might not hold. Typically the last days in hospital are cheaper.

14. The true fraction of expenditure could be higher or lower. Treatments given to younger patients could be more expensive; on the other hand, people diagnosed before age 75 may continue to receive treatments after age 75.

15. This relative price was calculated by estimating the following model by weighted least squares, weighting by the number of standard units, using 2014 data on 107 molecules: ln(P_mr) = δ_r + α_m + ε_mr, where P_mr = manufacturer revenue per standard unit of molecule m in region r (r = USA, ROW (rest of the world)).

Table

16. The FDA uses real world data and real world evidence (RWE) to monitor postmarket safety and adverse events and to make regulatory decisions. The 21st Century Cures Act, passed in 2016, places additional focus on the use of these types of data to support regulatory decision making, including approval of new indications for approved drugs. Congress defined RWE as data regarding the usage, or the potential benefits or risks, of a drug derived from sources other than traditional clinical trials [45].

17. Moreover, the medical substances and devices sector was the most R&D-intensive major industrial sector: almost twice as R&D-intensive as the next-highest sector (information and electronics), and three times as R&D-intensive as the average for all major sectors [46]. R&D intensity is the ratio of R&D to sales.

18. Dorsey ER (2010). Financial Anatomy of Biomedical Research, 2003-2008.  Journal of the American Medical Association 303(2): 137-143, January 13.

19. 63% of the cancer drugs approved during 1949–2015 were given priority review designation. Since the FDA’s classification of a drug (priority vs. standard review) occurs at the beginning of the review process, it may be subject to considerable uncertainty; the fact that some drugs are withdrawn after marketing indicates that even the safety of a drug may not be well understood at the time of approval.

20. First-in-class drugs are much more likely to receive priority-review status than follow-on drugs, so distinguishing between priority-review and standard-review drugs is similar to distinguishing between first-in-class and follow-on drugs.

21. Since the dependent variable of Equation (A1)(A1) $ln\left(\mathrm{P}\mathrm{Y}\mathrm{L}\mathrm{L}{75}_{\mathrm{s},1999}\right)=\beta \mathrm{N}\mathrm{\_}\mathrm{A}\mathrm{P}\mathrm{P}\mathrm{\_}1948\mathrm{\_}{\mathrm{t}}_{\mathrm{s},1999}+\gamma ln\left(\mathrm{C}\mathrm{A}\mathrm{S}\mathrm{E}{\mathrm{S}}_{\mathrm{s},1999}\right)+\pi \mathrm{A}\mathrm{G}\mathrm{E}\mathrm{\_}\mathrm{D}\mathrm{I}\mathrm{A}{\mathrm{G}}_{\mathrm{s},1999}+{\alpha }_{\mathrm{s}}+{\delta }_{1999}+{\epsilon }_{\mathrm{s},1999}$(A1) is logarithmic, observations for which N_SU_mn = 0 had to be excluded.

Additional information

Funding

Financial support for this research was provided by Incyte Corporation.