Cancer treatment @ $4200 a pop: is it worth it?

Today's NY Times had an article in the Business section on Abraxane -- in the words of the author, "a new version of an old cancer drug has helped make Dr. Patrick Soon-Shiong a billionaire":

The drug, Abraxane, does not help patients live longer than the older treatment, though it does shrink tumors in more patients, according to clinical trials. And the old and new medicines have similar side effects. An independent review of Abraxane published in December in a cancer research journal concluded that the drug was “old wine in a new bottle.”

Still, Dr. Soon-Shiong’s company, Abraxis BioScience, has promoted Abraxane as a major advance in treating late-stage breast cancer — that is, for patients who have not responded to other treatments and are now close to death —and is seeking approval for patients to use it earlier in their treatment. And, in at least one way, Abraxane is a breakthrough: it costs about 25 times as much as a generic version of the older medicine, which is best known by its brand name, Taxol.

Because of the odd economics of the cancer drug market, though, Abraxane’s price does not seem to be hurting its popularity.

About 20,000 people have now been treated with the drug, and Dr. Soon-Shiong expects its sales to approach $200 million this year. By 2010, Abraxane’s annual sales could reach $1 billion, analysts say.

Those rosy forecasts illustrate the pricing power that makers of cancer drugs wield. With patients often facing grim prognoses and desperate for new therapies, and insurers relatively powerless to negotiate prices or deny coverage, the cost of treatments seems to have little impact on demand.

The rise in cancer-drug prices is a microcosm of broader trends pushing up health care costs nationally. Despite decades of efforts by governments and insurers to restrain costs, patients continue to want the newest — and most expensive — drugs and medical devices. And doctors and the health care industry have little reason to keep costs in check, because insurers rarely deny coverage for new treatments on the basis of price.

As a result, health care costs continue to skyrocket. On Tuesday, the Kaiser Family Foundation reported that the cost of employee health insurance coverage rose 8 percent, according to a survey conducted from January to May this year. Businesses now spend about $8,500 a year for health insurance for the average family, the foundation said, with employees adding $3,000, not counting the cost of deductibles and other out-of-pocket payments.]

Abraxane, and cancer drugs generally, are still a tiny part of total medical spending. But their costs are rising even faster than overall health care inflation. Worldwide, spending on cancer drugs is expected to more than double from 2004 to 2009, to $55 billion, with most of that in the United States.

Largely as a result of investor enthusiasm for Abraxane, the stock market value of Abraxis is $4.6 billion. The company, which also makes several generic drugs used in hospitals, had a profit of $86 million last year on sales of $519 million. Dr. Soon-Shiong, the company’s chairman, owns 84 percent of the stock, worth about $3.8 billion.

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