The High Cost of Cancer Care: Your Money or Your Life?

In the battle against cancer, the high cost of drugs can lead to life and death choices. Andrew Brookes/AB Still LTD/Gallery Stock

In 2008, Hans Christensen received his death sentence.

He had a recurrence of melanoma, a sometimes deadly skin cancer he thought he had licked a decade before. It had spread to his lungs, invaded his intestines and eaten up much of the bone in his left humerus, the long bone that runs from the shoulder to the elbow. Surgery and six debilitating rounds of chemo helped, but the treatments were only a temporary reprieve, and his chances of surviving more than a year were poor—until the Newhall, California, resident entered a clinical trial for an experimental treatment that rallies the immune system to vanquish cancers. After two years of infusions of the drug every three weeks, his cancer disappeared. "I've cheated death," says the now-50-year-old electrician.

Great news for him, but the medicine that saved Christensen's life, ipilimumab (brand name Yervoy), which came on the market in 2011, is probably out of reach for many Americans. The price for one injection is $30,000 (or $120,000 for a full course of treatment), and two other recently approved immunotherapies, pembrolizumab (Keytruda)‎ and nivolumab (Opdivo)‎, carry similarly hefty price tags. While the new therapies work for only about 1 in 5 patients, for a lucky few like Christensen, they are lifesavers. Who wouldn't jump at the chance to live long enough to walk a daughter down the aisle, attend a grandson's college graduation or celebrate a 60th birthday—no matter how slim the odds or how high the cost? But that's precisely the point, according to Dr. Hagop Kantarjian, chair of the leukemia department at the University of Texas MD Anderson Cancer Center. "The prices today are essentially extortion, and people are being taken hostage," he says. "They'll pay any price because life is precious."

Oncologists like Kantarjian have become increasingly vocal about the financial strains for patients and the profits drug companies are making. This week, more than 100 of the nation's leading cancer doctors, including several past presidents of the American Society of Clinical Oncology and James Allison, the scientist whose basic research led to the development of Yervoy, released a statement in the Mayo Clinic Proceedings that called for reforms to rein in costs, including changing laws they believe have allowed prices to balloon.

Over the past decade, cancer drug prices have skyrocketed—going from $5,000 to $10,000 for a year's treatment before 2000 to more than $100,000 by 2012, according to another Mayo Clinic study. (Average household income in the U.S. dropped by about 8 percent during the same period.) While some patients are insulated from these price hikes by their insurers, many others, including those on Medicare, are on the hook for 20 percent copays for prescription drugs, which can translate to upward of $20,000 in yearly out-of-pocket costs. "Hardly anyone in this country can afford that," says Dr. Peter Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center in New York. "People are putting themselves into bankruptcy or trading the wealth they would pass on to their heirs for a few more months of life."

Little wonder that those diagnosed with cancer are more than 2.5 times more likely to declare bankruptcy than those without cancer, according to a 2013 study from the Fred Hutchinson Cancer Research Center in Seattle. And a 2014 survey conducted by the Cancer Support Community, a national nonprofit network, revealed that almost half of the 7,000 patients they polled were riddled with anxiety because of financial concerns, while about a third drained savings or tapped retirement accounts to pay for care. Jackie Farry, a 48-year-old former tour manager for rock bands, is a case in point. After being diagnosed with multiple myeloma 12 years ago, she depleted all her assets, including selling her co-op in Brooklyn, New York, and now lives on disability with her partner in Takoma Park, Maryland. She takes an arsenal of drugs to keep the incurable blood cancer in check, including Pomalyst, which costs $10,500 for a month's supply of 21 pills. "But they're keeping me alive," says Farry, who gets help with expenses though payment assistance programs.

Despite the growing backlash, prices continue to climb an average of 10 percent a year. What's fueling this trend, says Dr. S. Vincent Rajkumar, an oncologist at the Mayo Clinic Cancer Center in Rochester, Minnesota, "is a perfect storm of laws and regulations." For starters, the U.S. Food and Drug Administration greenlights drugs if they're proved safe and effective. But new isn't necessarily better. Zaltrap, which was approved in 2012 for metastatic colon cancers, is a notable example. Large clinical trials demonstrated it was no more beneficial than a drug already in use, but its $11,000 monthly price tag was more than double the cost—a fact that prompted oncologists at Memorial Sloan Kettering to refuse to stock it. Yet Medicare, the nation's largest insurer, with 54 million enrollees, is required to cover every cancer drug the FDA approves, and it is not allowed to negotiate drug prices. Essentially, these two provisions robbed Medicare of any cost-cutting leverage, because it can't bargain or threaten to drop a costly but only marginally effective medication.

Compounding this is the problem of treatment resistance. Conventional therapies—whether chemo or the newer biologics that target genetic mutations that prompt unchecked cell growth—eventually stop working once the cancer cells learn to outwit them. At which point, desperate patients move on to the next drug in the therapeutic arsenal, until they've exhausted all their options. Yet even if those treatments add only a few weeks of life, oncologists feel morally obligated to prescribe them to dying patients, which means that drugs with minimal benefits can become a bonanza for their makers. "Most patients are eternal optimists and are convinced they'll be the ones who are helped," says Dr. Deborah Schrag, a colon cancer specialist at Dana-Farber Cancer Institute in Boston.

Some cancer drugs can run into the six-figure range for a full treatment, putting a financial strain on patients and their families. Gallery Stock

In other industrialized nations, state-run health systems have the latitude to decide what drugs will be covered under their health plans, which enables them to negotiate deep discounts on pricey medications. But in the U.S., because the pharmaceutical industry is insulated from the natural price controls of a competitive free market, Americans pay 50 to 100 percent more for the same drugs than patients in other countries. "Essentially, we're subsidizing their use in other parts of the world," says Schrag, even though most of these medications were developed here.

Drugmakers justify the high price tags because development costs are staggering. Companies shell out more than $2.5 billion over the course of the decade it normally takes to shepherd a new treatment through the testing pipeline before it wins FDA approval, according to a 2014 study by the Tufts Center for the Study of Drug Development. "We're trying to develop medications for really complex, life-threatening diseases," says Robert Zirkelbach, senior vice president of communications with Pharmaceutical Research and Manufacturers of America, the industry trade group. "Many of today's drugs were the stuff of science fiction 15 years ago."

However, critics counter that those development costs are artificially inflated because they factor in losses for dry holes. Only 11.8 percent of experimental therapies entering clinical tests eventually cross the finish line. For every potential blockbuster like Yervoy, there are dozens of costly disappointments. In the past 15 years, 10 new lung cancer drugs came on the market, but 167 promising compounds foundered in the development pipeline. Similarly, seven new melanoma treatments were approved, while 96 experimental therapies fell by the wayside. And drugmakers can burn through millions concocting these mind-bogglingly complicated meds.

Then there are the opportunity costs—in other words, the 10.6 percent in annual returns investors forgo during the lengthy gestation process, which amounts to nearly half, or $1.163 billion, of the total figure. Plus, more than half of the breakthrough drugs devised in recent decades—like Gleevec, a drug for leukemia, and the breast cancer treatment Herceptin, as well as Yervoy—were largely developed by taxpayer-supported researchers at academic institutions. "These figures incorporate a lot of hidden costs," says MD Anderson's Kantarjian, who calculates actual development expenses at about 10 percent of the oft-cited figure, or about $250 million per drug.

In a way, drugmakers are victims of their own success: The number of cancer survivors has risen steadily in the past decade. Today, there are nearly 14 million American cancer survivors, up from less than 3 million in 1971, the year President Richard Nixon declared war on cancer and signed the National Cancer Act. That's attributable in large part to earlier detection and better treatments. And companies do have a right to recover their investment—if prices tumble once meds have been on the market for a while. But that's not what happens with these miracle drugs. Gleevec, the much-heralded leukemia cure, is a prime example.

Introduced in 2001, the drug was a miracle pill that transformed a lethal disease, chronic myeloid leukemia, into a manageable illness. Virtually overnight, five-year survival rates jumped from about 30 percent to nearly 90 percent—as long as patients took their daily doses. When Gleevec was introduced, its annual cost was $30,000, which even its maker, Novartis, acknowledged was steep. Yet 14 highly profitable years later, by which time the company presumably should have long since recouped costs, Gleevec now fetches an eye-popping $132,000 annually. Not surprisingly, about 1 in 5 CML patients who participated in the Cancer Support Community's registry reported missing a dose of medication at least once a month, 14 percent postponed filling their prescriptions, and 10 percent skipped doses.

"An accident in biology leads to a terrible illness and economic disaster—that's not the way a wealthy society should act," says Memorial Sloan Kettering's Bach. "We have to find a way to get out of the rat trap we've gotten ourselves into." To this end, oncologists, in their call to action in the upcoming Mayo Clinic Proceedings, propose removing bans on importing drugs for personal use from places such as Canada, where the meds are up to 50 percent cheaper; giving Medicare the clout to negotiate with Big Pharma; and setting costs based on how much benefit a patient will actually derive from the treatment—a trend called value pricing—rather than paying standard rates across the board. They suggest creating a follow-up mechanism for drugs that have received FDA approval to establish prices based on performance.

Not all meds work equally well for different types of cancer. Tarceva, for instance, a targeted biologic that thwarts growth factors that feed tumors, extends life for lung cancer patients by an average of five and a half months, but those with pancreatic cancer will be lucky to gain an additional two weeks. Yet monthly costs for both types of cancer are identical: about $7,000. "Should you pay the same price for a drug that works only one-tenth as well?" wonders Dr. Steve Miller, chief medical officer of Express Scripts, a prescription benefits manager for U.S. employers and insurers that represents 85 million Americans. "Right now, we're paying a premium price regardless of the response." Express Scripts is now in talks with drug companies about rolling back prices, using the substantial leverage of its large patient base as a bargaining tool. It's also working with the Institute for Clinical and Economic Review, a Boston nonprofit that examines cost benefits, to set prices based on effectiveness—similar to an approach proposed by oncology doctors in a 2014 JAMA article—and hopes to have some deals in place within the next year.

Because of the growing push for price cuts, industry observers are cautiously optimistic, and some drugmakers, like Eli Lilly and Co., have indicated a willingness to price drugs in ways that "better reflect treatment value" for different cancers. "There is a huge sense of frustration in the oncology community," says Richard Evans, an analyst at SSR Health LLC. "Companies now realize it's better to be part of the solution, and they're beginning to make concessions. But it's a game of inches, not of yards."

This article is one in a series from Newsweek 's 2015 Cancer issue, exploring challenges and innovations in cancer treatment and research. The complete issue is available online and at newsstands.