Doctors told my wife there was “very little chance” her breast cancer would return.
But five years later, three months after Paula’s 51st birthday, I typed “prognosis of metastatic breast cancer” into my browser and through tears read the search results: “dismal prognosis,” “incurable,” “median survival of three years.” Paula’s doctors urged us not to despair — there were great new medicines available they hoped could slow down the tumor. And now, three years later, her cancer has not progressed.
As a husband, I’m obviously ecstatic.
As a physician who studies health economics, I find myself wondering: Can we, as a society, afford to pay for the kind of medicines that have kept my wife’s cancer at bay?
To put this question into perspective, consider the price of Paula’s chemotherapy medications. She takes a pill called Ibrance that costs $10,000 a month. She also receives two monthly injections: Faslodex, at $5,000 a month, and Xgeva, a veritable bargain at $2,200 a month. Add it all up, and the annual cost of Paula’s chemotherapy is more than $200,000.
Almost all of this is covered by our insurance, which is great for us but raises a critical question for the country as a whole: How much should society be willing to pay to stave off death in people with terminal illnesses?
One way to answer that question is to explore whether, at these prices, Paula’s chemotherapy medicines bring good value. Healthcare experts define value as the amount of benefit brought per dollar spent. In the jargon of health economics, value reflects how much you have to spend on, say, a medicine to produce one year of high-quality life.
Using this version of value, Paula’s medicines don’t measure up. While Paula’s medicines cost about $200,000 per year, the amount her insurance company spends on those medicines to bring people like her an extra year of life is more like hundreds of thousands of dollars per year. That’s because each of her chemotherapies slightly increases the chance her cancer will stay under control for at least a while longer. Is it worthwhile to spend hundreds of thousands of dollars in hopes of extending Paula’s life by a year?
In the United Kingdom, the answer would be no. That nation’s government-run healthcare system has established limits on how much companies can charge for drugs or other treatments based on the benefits they offer; treatments exceeding those thresholds don’t qualify for reimbursement. For drugs like Paula’s, that threshold is the equivalent of about $62,000. If Paula and I lived in the U.K., and the drug companies refused to lower the price of her chemotherapies, we would be on our own to pay for many such medications.
Many people may recoil at the seemingly cold indifference of the U.K. system, with bureaucrats deciding death-panel style on what the price of my wife’s life should be. But there’s another way to view the situation.
By demanding value from healthcare interventions, the U.K. forces businesses such as pharmaceutical companies to make effective products — and price their products based on those benefits. Right now, the U.S. Medicare program can’t legally negotiate medication prices. Private insurers in the U.S., hesitant to appear stingier than Medicare, rarely push back at the high cost of chemotherapy either.
The result is runaway costs. Medication costs are often two or three times higher in the U.S. than in most other developed countries. That’s because drug companies lower the price of their products in those markets to meet value-based reimbursement thresholds. In fact, after the U.K. rejected Ibrance for not returning a good value, the company lowered the price for the U.K. market.
How can we demand fairer prices — prices that reflect a medication’s actual value? Currently, when new drugs, devices or procedures come to market, Medicare coverage is based solely on a determination of benefit — does the new intervention help patients more than it harms them — without any regard to whether those benefits accrue at a reasonable price.
Medicare should switch to value-based reimbursement, with coverage decisions based on both benefits and costs. Such a change in reimbursement would have broader effects on our healthcare economy because when Medicare takes the lead in revising reimbursement, private insurers typically follow.
Alternatively, we could adopt what policy experts call “external reference pricing,” whereby our reimbursement rates are pegged to the average price in other developed countries. Under such a system, we wouldn’t have to create a politically tenuous commission to decide on healthcare value. We could just leverage the negotiating tactics of other countries to combat high prices in the U.S. By one estimate, we could pay three times the price of drugs in the U.K. and still save 40% on the cost of medications.
I view my wife’s life as priceless. But her chemotherapy drugs are too expensive. Congress or private insurers should pursue legislation that requires healthcare prices to reflect health benefits. It’s the only way our loved ones can get the healthcare they deserve at a price we can afford.
Peter Ubel is a physician and behavioral scientist at Duke University and author of “Sick to Debt.”