• 6/8/2004
  • NEW ORLEANS, LA
  • Matthew Herper
  • Forbes

After helping to develop some of the hottest new biotech drugs, Memorial Sloan-Kettering cancer doctor Leonard Saltz has come down with a bad case of sticker shock. The price tag for treating patients has increased 500-fold in the last decade.

Ten years ago, doctors could extend the life of a patient who had failed to respond to chemotherapy several times by an average 11.5 months using a combination of drugs that cost $500 in today’s dollars. Now, new medicines such as Genentech’s (nyse: DNA ) Avastin and Sanofi-Synthelabo’s (nyse: SNY ) Eloxatin can extend survival to 22.5 months, but at a total cost of $250,000. And that doesn’t include pharmacy markups, salaries for doctors and nurses, and the cost of infusing the drugs into patients in the hospital. That kind of cost is unsustainable. “Sooner or later the bubble is going to pop,” Saltz says.

Fears about the high cost of new drugs and the changing financial environment for treating cancer are major concerns among doctors gathered here at the annual meeting of the American Society for Clinical Oncology. Doctors are beginning to discuss treating cancer as a chronic disease that could be kept in check with a cocktail of pills. But that puts cancer drug firms on a collision course with both the private sector’s crackdown on high healthcare costs in the United States and the new Medicare law, which will go into effect in less than two years. As the government pays for senior citizens’ drug costs, it is likely to wind up footing the bill for a large fraction of cancer drugs. The question is simple: How many $20,000 cancer drugs can society really afford to stack on top of one another? “Absent a thoughtful national discussion, the answer is none,” says Michael A. Friedman, chief executive of City of Hope, a cancer center in Los Angeles. “We will quickly run out of resources, leading to de facto rationing.” The rising costs, he says, are “utterly insupportable.”

One hope has been that genetic diagnostic tests could predict which patients won’t be helped by an expensive drug–saving the system money. For instance, mutations in a particular gene seem to determine whether lung tumors are shrunk by pills such as Tarceva, from Genentech, OSI Pharmaceuticals (nasdaq: OSIP ) and Roche, and Iressa, from AstraZeneca (nyse: AZN ). But scientists revealed yesterday that there are many such mutations, and that patients without them benefit. That means doctors will probably try to give the drugs to everyone. And because Tarceva, which is not yet approved, has been shown to extend survival in last-ditch patients, doctors may favor it. That could make the cost problem worse. Bernstein analyst Geoffrey Porges thinks Genentech will price Tarceva at 20% more than Iressa, which already costs $1,700 a month.

Doctors are also talking about combining drugs, but the cost there is astronomical. Saltz says ImClone Systems’ (nasdaq: IMCL) Erbitux, which he helped develop, is one of the worst offenders on price. “I think they made a real mistake in their pricing,” he says. The drug costs more than even Avastin, Saltz notes; it could add another $100,000 to the cost of treating a single patient. Pills such as Tarceva are at least cheaper for the system than drugs such as Avastin, Eloxatin, and Erbitux, all of which must be infused directly into the patient’s vein in the doctor’s office. It’s possible that new drugs which themselves target cancer in several ways at once may provide some cost advantages. Pfizer (nyse: PFE), GlaxoSmithKline (nyse: GSK) and others are all testing such drugs.

Whatever solutions emerge, it’s likely that drug costs will have to come down and that some patients will be denied medicine because their chances are too slim. Says Saltz: “We’re going to have to stop taking the stance that every patient has to get every last shot at survival. The days of developing drugs and not worrying what they cost are over.”