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American-Style Capitalism Drives Drug Development: Cancer Therapies Targeting Small Subpopulations Dictate Prices

February 2015 Vol 8, Special Issue: Payers' Perspectives in Oncology

San Francisco, CA—There is no way around the fact that American-style capitalism is at the root of drug development, and the costs associated with that endeavor, according to Alex W. Bastian, MBA, Vice President of Market Access, GfK Bridgehead, San Francisco, CA. GfK provides consulting services to pharmaceutical, biotechnology, medical device, and diagnostics industries.

Speaking at the special session on drug pricing during ASH 2014, Mr Bastian asked the audience to “open its mind” to some concepts that are “real-world, practical, and deal with actual considerations that take place.”

“Unfortunately, this is American style capitalism,” he said. “Alternative pricing models are very difficult to implement.”
Discussions about the cost of drugs have been a “constant theme” over the past century, and the problem is not unique to America, Mr Bastian said. “This is a global problem. The problems facing the United States in terms of cost are seen around the globe. It is not isolated to our cost of drugs alone.”

Mr Bastian acknowledged, how­ever, that in cancer drugs, “costs are increasing, especially as we are going after smaller niche populations.” The investment community must aim for a robust return on its money, and this gets trickier as tumors become more molecularly classified, he said. Potential markets for cancer drugs become smaller, as ever-more targeted treatments are required.

“For a population with very low prevalence rates, and high mortality, to justify investment by tumor types and subtumor types, we are talking fractions and subfractions,” Mr Bastian said. “Developing drugs is difficult for these populations.”
Investors must justify their investments, he said, and they face “grave unintended consequences” if they advocate for “hypertension-like drug prices” in the oncology arena.

Mr Bastian acknowledged that patent protections are an important means of assuring the manufacturer a continuing profit for its efforts, but he pointed out that patents on a number of common agents will soon expire, and biosimilars will also begin appearing in the marketplace. “The days when Gleevec will cost cents on the dollar are close,” Mr Bastian said.

Value-Based Pricing Is Needed
He suggests that the focus be on “value” rather than on cost. In hematology, value has clearly been proved by the doubling and even tripling of survival times in lymphoma, multiple myeloma, and some leukemia, as a result of novel agents.

Nevertheless, Mr Bastian added that the treatment armamentarium is much weaker for hematologic cancers than for solid tumors, which highlights the difficulties in developing drugs in this setting.

Since 1998, some 249 drugs in the hematology pipeline have failed to make it to market. “I don’t know at what price, but it is a lot,” Mr Bastian said. “The number of approvals is much less in comparison to other cancers.”

The need for new agents keeps the pipeline flowing, he said. The point is not that current treatments must be priced high to justify past investments, but that high prices and healthy margins justify the continued investment in future therapeutics, Mr Bastian said.

Meanwhile, he acknowledged, “We are front-loading cost, and the question is whether that is right. I can’t answer that. A healthy discussion is important.”

This discussion should examine total benefits, as well as costs, Mr Bastian emphasized, and must include “a rounded point of view.”

Last modified: August 30, 2021