Cost of developing cancer drugs is unclear

The variability in costs to develop drugs is astonishing. A report from the Tufts Center for the Study of Drug Development puts the total cost of developing a new drug and taking it to market at about $2.6 billion (the study looked at companies developing a variety of drugs, not exclusively oncology treatments). Yet a new study published in September, 2017 in JAMA Internal Medicine has reported a far lower figure for oncology R&D—just $757 million per drug, on average. So, how do two studies come to such wildly different numbers, and why does it matter in the context of 340B?

It matters because the savings that hospitals receive from participation in the 340B program can be used to provide vulnerable populations access to those oncology drugs at lower prices that they can afford, and can also be invested into more advanced diagnostics equipment and facilities for oncology treatment. Without these 340B savings, whether oncology drugs cost $2.6 billion or $757 million to develop becomes a moot point if the out-of-pocket cost to patients is just too high to afford. Drug development costs also matter because that $2.7 billion figure is often cited as a reason to justify the end price of the drugs once they reach the market; pharmaceutical companies claim that the end price must be high in order to turn a profit after such astronomical development costs.

And while much lower R&D costs sound good in theory, The New York Times has reported that various critics of the new JAMA study are saying that the numbers just don’t hold up. Critics’ problems with the study, the NYT says, include the fact that it doesn’t factor in the R&D costs of all the failed oncology drugs that weren’t ultimately approved, and it only looked at relatively small companies that have had only one drug approved, which doesn’t reflect the reality of R&D costs at larger pharma companies or of the industry as a whole.

And so, the debate about the true cost of bringing cancer drugs to market rages on. Yet, we do know for certain that in 2011, Ipilimumab was approved at a cost of $120,000 for four doses and resulted in only about 3.7 months longer survival time. We also know that a recently approved leukemia treatment will cost $475,000 for a single treatment. Finally, the National Cancer Institute tells us that “approximately 39.6% of men and women will be diagnosed with cancer at some point during their lifetimes” and that “national expenditures for cancer care in the United States totaled nearly $125 billion in 2010 and could reach $156 billion in 2020.” Which means that, regardless of which studies from which organizations crunch the numbers, oncology is an expensive problem that’s not going away, and 340B discounts remain essential to making cancer care affordable.

Oncologists divided on benefits of 340B

Despite these facts, not all oncologists are on the same side when it comes to the merits and downfalls of CMS’ July 2017 proposed ruling to cut reimbursement rates for drugs that fall under the 340B program. On September 8, 2017, the Community Oncology Alliance (COA), a “non-profit organization dedicated to advocating for community oncology practices,” penned a letter to CMS Administrator Seema Verma. The letter claims that “cancer patients in need are being denied care at 340B hospitals,” that “hospitals are consolidating the nation’s cancer care system, reducing patient choice and access,” and that “cancer care is being shifted away from the private, physician-owned community oncology clinics and into the much more expensive 340B hospital setting.”

Yet while the COA claims that hospitals are “reducing patient choice and access,” we know that the 340B program—particularly in rural communities—is actually essential to patient choice and access. A 2015 article posted on the Cancer Network website notes, “Rural cancer patients face many challenges in receiving care, including limited availability of cancer treatments and cancer support providers (oncologists, social workers, mental healthcare providers, palliative care specialists, etc.), transportation barriers, financial issues, and limited access to clinical trials.” The article also points out, “According to the American Society of Clinical Oncology’s (ASCO) recent workforce analysis, only 3% of medical oncologists practice in rural areas, whereas 20% of the US population resides in rural areas, and over 70% of counties in the United States do not have medical oncologists.”

Could it be, then, that the COA’s critique of 340B has less to do with the benefits of the program and more with its stated belief that “cancer care is being shifted away from the private, physician-owned community oncology clinics”?

Oncologists affiliated with 340B hospitals paint a much different picture than those at the COA. A September, 2017 article from Business Insider includes several quotes from oncologists opposing CMS’ proposed ruling. In the article, Dr. Robert Chapman, head of the Division of Hematology and Medical Oncology for the Henry Ford Health System in Detroit, Michigan, says the rule would “diminish our ability to serve our most vulnerable patient populations.”  Dr. Scott Wegner, Medical Director for Cancer Services at Genesis Healthcare in Zanesville, Ohio, says it would “directly jeopardize our ability to deliver cancer care to the more than two-thirds of our patients who are covered by Medicare or Medicaid.” And Dr. John Sweetenham, Senior Director of Clinical Affairs and Executive Medical Director of Huntsman Cancer Institute in Salt Lake City, Utah, says, “We simply couldn’t provide the same scope or level of care to those who need it if HHS follows through with this proposed cut.”

Bipartisan support for 340B

Tellingly, however, while oncologists are drawing battle lines over the merits of the 340B program, politicians are crossing party lines in unified support of it. On September 27 of this year, 228 members of the US House of Representatives signed a letter addressed to CMS Administrator Verma urging CMS to abandon the ruling. “We are deeply concerned that this misguided policy will directly limit the ability of hospitals to offer necessary services to vulnerable patients and their communities,” the letter reads in part. “We strongly urge CMS to abandon this proposal and redirect its efforts towards actions to address the cost of drugs via other policies that would not harm our constituents.”

Sentry Data Systems takes the position that, regardless of the debate around the exact cost of cancer R&D, and regardless of any divide between oncologists who serve in small practices versus those in safety net hospitals, CMS’ proposed cuts to the 340B program are not the solution. We recommend the industry take a page from the book of the House of Representatives in putting aside its differences and acting in a manner that will allow the continued delivery of life-saving cancer treatments to patients across the nation. And, Sentry remains committed to continuing to provide the compliance tools and expert insights necessary for hospitals to make the most of their 340B participation, come what may.

CMS accepted comments on the rule through September 11 and is expected to release the final rule on or about November 1, 2017.