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What price to save a life?


When it was reported last week that a California drugmaker planned to charge as much as $100,000 per year for an experimental cancer treatment simply because it could, policymakers and medical ethicists suddenly came down with a severe case of sticker shock.

Informal debates ensued in Washington, health professors doubted the nature of capitalism, and patients wondered whether their insurance companies would cover such costs.

The overarching question at which they all seemed to arrive, however, was this: How much is too much for a life?

During the past decade, U.S. prescription drug prices have grown by more than 40 percent as businesses try to boost their profits and research budgets, as well as make up for losses incurred from failed projects and a practice of discounting medications for developing countries.

But some of the recent figures coming out of the biotechnology industry, which typically makes drugs from living tissue - called "biologics" - rather than from less-expensive chemical compounds, have taken pricing to a new extreme.

On Wednesday, The New York Times reported that Genentech Inc. plans to charge six figures for "Avastin" when it is used as a treatment for breast or lung cancer.

The company already charges about $70,000 for a year's supply of a human growth hormone called Nutropin. A competitor, Genzyme Corp. of Massachusetts, charges an average of $300,000 per year to treat a genetic disorder called Gaucher disease, which can lead to bone fractures, anemia and fatigue.

The Food and Drug Administration estimates that it can take more than a dozen years and up to $1 billion to bring a new drug to market on average. The theoretical promise of personalized medicine - drugs tailored to individuals - could increase costs even more.

Those price tags have re-energized discussions about who should pay what for medications and how much companies should be able to charge, particularly for a so-called breakthrough treatment that could extend, if not save, lives.

"This is the subject of a great deal of attention on Capitol Hill," said Karen Ignagni, president and chief executive of American Health Insurance Plans, a trade association whose members insure more than 200 million Americans.

She spent Wednesday in Washington, where politicians tried to make sense of the Avastin fee. "What I've heard," she said, "is that maybe for these kinds of very expensive [drugs], there ought to be a public approach to it."

Washington has resisted the idea of regulating the trillion-dollar drug industry, preferring instead to let the market dictate costs. But economic philosophies get murky when the product being evaluated could affect the quality and length of life. The plans for Avastin, in particular, have led some to decry a hands-off policy.

The drug, an antibody that inhibits the development of cancerous tumors by starving them of a blood supply, is currently approved as a treatment for colon cancer when used in conjunction with chemotherapy. As such, it has been shown to extend lives by an average of about five months and costs about $50,000 per year of therapy.

Patients with lung and breast cancers would need to take double the amount of the drug, but the cost to make it would rise only minimally, the Times reported. That has raised skepticism among people who believe the price should be driven down by greater volume.

"I think that's what so many are going 'whoa' about," said Linda Simoni-Wastila, an associate research professor at the University of Maryland School of Pharmacy

"A lot of people point at the industry as a bad guy, but they're just doing business. They're trying to recoup their cost, trying to make a profit."

In setting costs, three economic models typically come into play for public companies such as Genentech, considered a pioneer in the half-century-old biotech industry, said Marc J. Roberts, a professor of political economy and health policy at the Harvard School of Public Health who is writing a book about drug pricing.

One argument is that executives have a legal and moral responsibility to maximize shareholder value by charging what the market will bear regardless of the effect on others. Another approach suggests that outside interests be weighed, out of social responsibility or a desire to avoid conflicts, such as those that arose when protesters publicly condemned sweatshop-style work environments.

A third example, and the one Roberts subscribes to, takes an egalitarian approach that puts some of the responsibility on government and provides a certain level of care for all by creating a sort of universal risk fund for sick people to draw from.

"This [pricing] is much more evidence of a political failure than a failure on the part of the drug companies," Roberts said. "I'm sympathetic to free marketers who say, 'Look, you define the rules of the game, we just play the game. If you don't want us to do this, change the rules."

Executives also need to fine-tune their professional consciences, said Roberts, who believes drug profit margins are often higher than they need to be to stimulate research and development. The revelation by Genentech may have some effect on future pricing, though, drawing congressional attention to what could be considered greed, he said.

"A smart company in a highly regulated business plays the game 'Don't wake the sleeping committee chairman,'" Roberts said. "These guys made the mistake of waking the sleeping committee chairman."

Still, the U.S. patent process, which provides exclusive protections on inventions, also gives companies the ability to charge "exorbitant rates," said David Magnus, director of the Stanford Center for Biomedical Ethics in California. That's "not an unreasonable thing," Magnus said, if profits are reinvested in the business and development of new cures.

But a report last July from the Center for Public Integrity, a nonprofit investigative research organization in Washington, suggests that most drugmakers spend twice as much marketing their products as they do developing new ones. In 2004, for example, Pfizer Inc. spent $7.7 billion on research and development - and about $17 billion on marketing. The New York company had sales that year of about $52 billion, 88 percent of that from its drug division.

Even if a drug's price is fueled by high development costs, insurance companies are not likely to cover the cost unless the substance has been approved for a particular use. Avastin, for example, has been shown to be promising as a treatment for breast and lung cancer, but not yet deemed safe and effective by the FDA. A trial test of the drug in combination with another treatment for colon cancer was halted last week after four participants died.

"I would not blame insurance companies for drawing a line," Magnus said, adding that society, too, may soon draw lines if costs continue to rise, shelving some types of more expensive ventures.

"Is there a point where society is going to say 'yes' or 'no' to going in that direction?," he said. "So far we haven't done that. We haven't said we're willing to draw any lines ... but we're probably only a few years away from that."

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