The average cancer specialist brought home nearly $300,000 last year. One in 10 earned more than $500,000. Considering cancer’s stubbornly high death rate, say 118 of the nation’s most prominent drug producers, such high compensation doesn’t make sense.
They have jointly called on Congress to step in with salary caps for oncologists.
Sound far-fetched? That’s because it is.
Yet last summer, 118 cancer doctors issued a blistering criticism of high drug costs in The Mayo Clinic Proceedings and called on lawmakers to impose price controls. Weeks later, some of these oncologists took to the pages of JAMA Oncology to suggest a “reasonable price” for treating lung cancer patients with necitumumab, a new drug under development. Based on number crunching of arbitrary and subjective “value” assessments, the doctors determined that $1,309 would be an appropriate price based on the two-month life extension the drug seems, on average, to confer.
Price controls on drugs are every bit as absurd as a nationwide salary cap for cancer physicians, who, by and large, are competent and compassionate and deserve decent pay for the difficult work they perform. Both measures would be harmful for patients.
Yet many on Capitol Hill are prepared to adopt this approach for advanced pharmaceuticals in a misguided effort to lower costs. Lawmakers are savvy enough to dress up their push for price caps by using coded language like “importation” and “negotiations,” of course. But whether price controls are imported by way of Canada or hoisted upon the nation through Medicare, the result is the same: Fewer new therapies.
The reason is that drug prices are sometimes high is that they reflect a huge, private research and development investment required to create a new medication. Since 1950, the R&D cost of each new approved medication has doubled every nine years. It now stands at $2.6 billion, on average. That figure takes into account a grim reality: What it costs to develop and produce any particular drug and that drug’s clinical value bear little relationship to what it takes to sustain drug development in general.
Since over 90 percent of drugs never reach the market because they fail to work or cause dangerous side effects, the prices of the few drugs that succeed must cover the cost of the losers. The only way to keep drug development alive under these circumstances is to maintain sufficient profitability to attract enough investment to overcome the high risk. The “reasonable price” proposed for necitumumab therapy wouldn’t come close to achieving that goal.
Price-control schemes will only make investments into future treatments riskier — and thereby suppress innovation.
That politicians with no medical training or business experience would take a simplistic approach to drug pricing is not surprising. So why do physicians, who rightly suspect attempts to link doctor pay to “performance,” argue that simple value or performance metrics can determine the cost of a breakthrough drug?
It’s because medical schools don’t educate doctors concerning the basic economics of some of the most important tools at their disposal in fighting disease. If anything, they teach that industry simply hijacks academic medical research and profits from it. Such a mistaken belief underlies the American Medical Association’s recommended ban on “direct to consumer” commercials for medicines. Presumably, doctors would feel differently if they were banned from advertising their services to recruit new patients.
Physician reimbursement and drug pricing have some similar features.
Physicians’ pay must account for the high cost of medical training, as well as the lost earnings from years spent in medical school and post-graduate programs. And government or private payers — who benefit from lower drug prices — make every effort to constrain financial returns to doctors and drug companies. A big difference between doctors and drugs, however, is physicians don’t have to subsidize rare medical school dropouts — whereas the drug companies must pay for the much greater drug failure rate.
America is a caring and wealthy society. No one wants the suffering caused by cancer compounded by financial ruin from the cost of treatment. But the solutions being peddled by the political class today would be laughed out of the arena if applied to other areas of medicine, such as doctor pay.
To control treatment costs responsibly, we have to involve all contributors to our health care system. And by all means, let’s make sure that patients in financial need find their way to assistance programs to help pay for treatment.
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