Rising Oncology Drug Prices: New Evidence From an Analysis of Real-World Data

Why are prices rising for targeted oncology treatments? Some may blame the power of pharmaceutical companies to set their own prices, but a close examination of revenue trends and number of patients being treated indicates a more complicated answer, according to new research published in the June issue of The American Journal of Managed Care^® (AJMC^®).

The retrospective study compared targeted cancer therapies launched in three eras—1997 to 2002, 2003 to 2009, and 2010 to 2015—and included 29 therapies and 33 therapy–tumor pairs. The study focused on patterns over time in three outcomes: average therapy price, average patient count, and average annual revenues.

Consistent with prior analysis, the study documented substantial price growth—the episode treatment cost for drugs going to market between 2010 and 2015 was about $43,000 higher than that for drugs that launched between 1997 and 2002.

However, the size of patient populations using therapies launched in the most recent era was dramatically reduced. The average patient count fell from 48,520 per therapy–tumor pair in the earliest time frame to 4781 per therapy–tumor pair in the latest time frame—a 90 percent drop.

Analysis of revenue data suggest that the growth in average prices over time has not fully offset the decline in average patient counts. Median annual revenue fell from $580.7 million per therapy–tumor pair for drugs launched in the early period to $286.7 million for drugs launched in the late period. This decline was evident across the entire distribution of revenue. For example, at the 90th percentile, adjusted revenue was $870.6 million in the earliest time period, compared with $369.5 million in the latest time period.

The reasons for the decline in average patient count over time are not clear. According to Jesse Sussell, PhD, the lead author of the study, “One possible explanation is increased competition within oncology indications.” However, he pointed out that traditional economic theory says that increased competition should be accompanied by declining prices, and the data are obviously inconsistent with that idea.

“Another possibility for the results is growth over time in personalized therapies, which by design target small subsets of patients. Everything else being equal, this would lead to lower revenue, which could in turn necessitate price increases to allow firms and their investors to earn market returns on their research and development outlays. We find that new targeted oncology drugs seem to treat on average about ten times fewer patients than their predecessors; this is a result that hasn’t previously been documented. And the result of this seems to be lower average revenue, despite significantly higher prices.”

Sussell said researchers still don’t yet have a good understanding of precisely why average patient counts have fallen and that future research should focus on that question.

The study was funded by Genentech.

For the full study, click here.

About The American Journal of Managed Care^®

The American Journal of Managed Care^® (AJMC^®) is a peer-reviewed, Medline-indexed journal that keeps readers on the forefront of health policy by publishing research relevant to industry decision makers as they work to promote the efficient delivery of high-quality care. AJMC.com is the essential website for managed care professionals, distributing industry updates daily to leading stakeholders. Other titles in the AJMC^® family include The American Journal of Accountable Care^® and two evidence-based series, Evidence-Based Oncology^™ and Evidence-Based Diabetes Management^™. These comprehensive offerings bring together stakeholder views from payers, providers, policymakers and other industry leaders in managed care. To order reprints of articles appearing in AJMC^® publications, please contact Gil Hernandez at 609-716-7777, ext. 139.

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