Why are cancer drugs/procedures so expensive?

There are lots of arguments that allow drug companies to recover costs quickly. You will not see me defending them, but at the same time, I do not refuse what is available under my health-care (sic) plan.

There are moral high roads, and economic realities. I live in a world of contrasts between the two that is often a no-win situation. Had I only known to invest in drug companies years ago .....

Last week my scans were billed at $8000, and in the end, after R&C, allowed charges, and $6K deductibles long since satisfied, it will cost me $218 out of pocket. I can't fathom how much or from what avenues money arrives at the hospital's purse, but I'm sure I paid it somewhere along the road. I suspect my salary sucks because I cost the company so much (no raises since I was diagnosed, and this year a demotion that will cost me, as I can't do all the tasks of the job I had before).

Costs suck.

JNF, that's a complex consideration. Hospitals have always had a budget for indigent care. That's one of the great fallacies of the "without insurance people can't get health care" argument. Hospitals won't turn away someone in a serious health situation; for instance if a 60 year old has chest pains the emergency room WILL take them in, period. The finances get sorted out later.

My brother-in-law, who recently passed away from pancreatic cancer, didn't have two nickels to rub together. No insurance, no resources, nothing. When he went to emergency for his first crisis in January, they took him in and went to work. He had surgery, recovery, and even follow-on chemo treatments. He had nothing, but still received care.

I imagine that we do pay for that out of our premiums, it has to come from somewhere. Those who can pay, pay. Those who can't, don't. We still get critical care. It's the present system.

So, the costs of health care have to do with our cultural mores. Should we collectively care for someone like that, or just send them home with an aspirin? Our country seems to be favoring the former, where some countries are more like the latter.
Jerry

OK ... i'll step into this public square a bit. I used to work in Big Pharma, friends of mine are in Pharma, Biotech Venture Capital and Management (including CEO of a name Biotech).

The companies raise money from investors at the venture capital level when they're looking at early drugs and Phase 1 studies. Only a fraction of those work out. And the few winners have to cover the cost of the losers as well.

The drug approval process is onerous and takes another large capital infusion from investors. And again, only a fraction of those work out.

And then marketing and scaling up production ... all of the factory costs are borne by the one drug.

In the end, the investors need to get paid a fair return (and on average it's not usually outstanding) on their money and time. So the few drugs that make it, end up paying for all of the experimentation and failure that got there. That goes whether it's new companies or old Big Pharma.

Once they've gotten a drug through the approvals, they try to make as much as they can from them to seed the next round of expansion into more drugs and before the drugs go generic. But here's the other hitch: all of the costs have to be covered on a small number of patients in the cancer realm. It isn't like ibuprofen or Crestor, there are only a small pool of us with mCRPCa -- and not all will use each drug. And some that do will fail in 4-12 months.

So large costs once the experimentation and failures are counted, spread over a small number of active patients equals high cost drugs. That's the bottom line.

If you think they make too much, buy the stocks of some biotechs or pharma companies and see how hard it really is ... they do well when they do good R&D and strategic partnering. But picking which one is going to turn out ok, that's the rub. And a lot of smarter people than me try to figure that out every day.

imo, it's not the profits that hinder things ... it's a sometimes unrealistically long FDA process and the inability to fund the study of non-patent drugs that cause most of the friction and rent seeking in the business.

fwiw and imho,

Ray

Some sort of price controls are needed on patented drugs on which there is ZERO free market competition..A formula that takes into account development costs and production cost, along with projected sales should be used to determine the wholesale price of the drug. Free enterprise only works when there is competition in the marketplace.

Also, there is a vast network of publicly and charitably supported cancer research institutions. When these research organizations develop a useful drug or treatment, they sell the rights, the patent, to private companies for SERIOUS money. These private companies then exploit the drug or treatment for all it's worth...A more ethical path would be for these non-profit research organizations to release their discoveries without patent into the open market so generic forms of these drugs could be marketed and priced competitively..

Just now I opened my mailbox, had a bill from the cancer center, it was for my husbands first two chemotherapy sessions. $130,000. The quick breakdown is the Taxotere $58,000. and the Neulasta $54,000. The other $18,000. was misc. charges. My husband is priceless to me, so it is just numbers, but I do wonder how people do it, and why does it all have to cost so much. I have no answers, just sharing the numbers from the bill I just opened.

It's an obscene amount of money regardless of who pays it..

The Chemo Lounge is the most profitable floor-space in medicine..

We have just paid( via insurance as opposed to bankruptcy ) for the chemo for our young family member. It did zero, other than nearly killing the patient before the cancer could, but the cost remains the same. At least they did not push the patient to continue.

But the OP's question is why? Well some good answers have been given to a potentially very complex question, but there is a bottom line for it all: because they can. It does not just apply to the drugs, but to the MD fees and scans and hospital bills.

Because we must pay or suffer and die( or maybe both) we pay. Of course we can't really pay, one day of it all would bankrupt most of us quickly. Somehow, insurance manages to pay and make a profit. I guess it is all actuarial, though I do wonder at the numbers needed. Before I went on Mcare, I was paying about $13000-15000 a year counting the deductible. Leaving out the deductible just call it $10000 per year for my insurance. For quite a few years I never met the deductible and cost them nothing.

But then I got PC and wiped out all their profits for all those years in just a few months. Let's say the total cost that year was $100,000(sorry, I don't remember exactly). Minus say 5 years at $10,000 per year/50,000, that would leave them about 50,000 in the hole. But if there were 9 others paying the same price as me, but who never exceeded their deductible, they would collect 10,000X9=$90,000 minus my deficit of $50,000 leaves them a $40,000 profit on the group of 10 I was in.

Of course, I have no idea what the #s would actually work out to. Maybe 9 out of 10 in any given year never actually cost them anything or never exceed the deductible, or maybe only 5, or maybe 95 out of a hundred. Apparently it works out so that the Ins. companies can pay the exorbitant fees and still make a reasonable profit. If they couldn't pay, these prices would tumble because obviously most of us could not pay even if we were willing to. Like the above mentioned $25,000 PER MONTH for an extra no doubt miserable extra 4 months of life. only a very few of us could or would pay that. But you can count on it that services would still be available if prices dropped. For example, a surgeon might charge from $4000 to $20000 for an RP, and do several in a day. Do you think there would still not be plenty of surgeons if the max they could get was $3000? For those fast surgeons that would still work out to over $2000/hr, and does not count all of their vast non OR related fees. Just as their are plenty willing to take care of MCare and especially MCaid. Most medical/surgical services are available, but reduced in price sometime 90%. Every one I knew *****ed endlessly about these low ball prices, but most still accepted it. In fact, I know some who even make a good living with nothing but Mcaid or MCare only.

For example, the last couple of years before I retired I would travel to a little hospital that did a large amount of what is called Full Mouth Restoration or Dental Rehab. On children from age 2 years to 18, or even since Obama care up to 26 I think but still on their childhood Mcaide, I would put them to sleep, put a nasal ET tube through their nose down into their trachea, and give them gas while the dental surgeon pulled all their teeth and gave them some shiny new metal ones. The patients and parents called it "getting a rack". Some days we would do most of a family on the same day!

Now if you or I had to have this done for ourselves or our kids, the cost would be into the many thousands. ( Purgatory, didn't you just have something similar done, related to your PC treatments? Can you tell us the cost?) What with going into the OR getting general anesthesia, the dental rehab, recovery room, etc, big bucks. And most likely we would have to pay cash because probably most of us don't have insurance that will pay if we let out teeth rot out, which is all most of this was. (dental trauma or teeth pulled for cancer treatment would be different for insurance purposes)

But 100% of these patients were MCaid. Never once did I see one of these patients have private insurance or be self pay. Like I said, private insurance is usually not going to pay for careless dental hygiene which is what these were. The hospital would pay me $100 per hour, and then bill MCaid something above that. Probably if you had this done just the dentist fee would be astronomical. For example, there is this: www.yourdentistryguide.com/fmr/ "The approximate cost (at a minimum) could be about $800 to $1,500 per tooth. That figure does not include any charges for oral surgery, crown lengthening, periodontal treatments, etc. It is not unreasonable to expect a full mouth reconstruction to cost approximately $30,000 to $45,000 or more.". Yep! It's good work if you can get it! Probably $500-1000+ just for the anesthesia.

But MCaid would pay for us to do from 5 to 15 a day of these, on average. MCaid patients do not have deductibles or pay for the insurance or pay into the insurance fund for a lifetime like many of us have done for MCare. (anyone here on MCaid correct me if I'm wrong please) We simply take what MCaid will pay and that's the end of it. And they pay a greatly reduced price. For example, looking at the above charges, you can guess that the dental surgeons fee would be a good hunk of that total cost, right? So at least thousands of dollars per case. But the dental surgeon told me MCaid paid him a straight fee of $400 per case. He would drive up from 2+ hours away. We might average 1/2 hour a case. So maybe we would do 10 by noon. He has a guaranteed $4000 for 4 or 5 hours work, or maybe $6000 if we did 15. He would do this most days. Lets say only 3 days a week and only 10 per day. So a guaranteed $4000 a day X 3 days a week x 50 weeks a year = $600,000 a year. More($900,000) if you are doing 15 per day. And a measly $300,000 if you are only doing 5 a day for 2.5 hours work per day.

Would you work hard 4 or 5 hours a day, 3 days a week, plus a few hours driving thrown in, for $600,000 a year? So maybe you see my point. Mcaid is paying $400 for the Dental surgeon plus maybe $100 for me and who knows what for the hospital, so maybe $1000 or $2000 total for what is priced above at $30-45,000! If insurance was not there to pay these outrageous fees, or people did not have the money to pay it themselves, there would still be plenty of people to do at least a lot of the work. Unless folks won't lower themselves to pull teeth for hundreds of thousands of $ per year. ( I know none of that is PCa, but the principle is universal in med/surg)

Post Edited (BillyBob@388) : 10/24/2014 9:39:24 PM (GMT-6)

My husbands first monthly Xgeva shot was billed (from hospital) at $12,000, give or take. If you go online and search for retail price, it's $1800. So the hospital is marking up fiercely - to cover the cost of their palatial infusion center, and to cover uninsured as others have explained, and to make money.

We have a BCBS insurance plan, which knocks the cost down hugely via bargaining, and passes along some to us as a percentage of cost etc.

Now here's where things get interesting. The mfg has a plan open only to those on private insurance (ie NOT Medicare or Medicaid, and not for uninsured) that pays a very substantial amount of our out of pocket expenses for this. It's not based on need.

Now I am very grateful for the drug and its development, our local excellent hospital, and the mfg's discount plan. (I'm also very grateful for Medicare which my mom depends on, and Medicaid which my intellectually disabled son depends on.) At the same time, this whole thing seems like a way for the drug companies to get the maximum money out of the government.

My bottom line? This is capitalism. It works great for most things. But not, in my opinion, for health care. As somebody else said, the companies charge this much because they can, and because they're supposed to get a maximum profit (since they are for profit businesses), using whatever means are legal. You can't blame them for that. That's the way capitalism works. It's about money, not about anything else, like human rights.

Sorry if that's too political.

cspivak....that seems awfully high for Xgeva.....my clinic charges my insurance just 3000 dollars a shot and they get around 1800. 12,000 seems like some ripping off going on there.