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  • Brendan Shaw

Be careful what you wish for: cancer innovation and drug pricing


The world spends around US$ 133 billion a year on cancer medicines.

This means that the world spends about the same amount of money each year on cancer medicines as it does on skincare beauty products and computer games.

And right now there’s a debate in the global health community about whether this spending on cancer medicines each year is worth it.

Source: IQVIA. 2018. “Global oncology trends 2018: innovation, expansion and disruption”, https://www.iqvia.com/institute/reports/global-oncology-trends-2018?sf94007004=1&sf94007004=1, accessed 27/1/2019.

There has been a suite of cancer therapies that has come on the market over the last 30 years or so, earning significant revenue.

Source: Tay-Teo, Kay; Ilbawi, A & Hill, S. 2019. “Comparison of Sales Income and Research and Development Costs for FDA-Approved Cancer Drugs Sold by Originator Drug Companies” JAMA, 2(1), January, https://jamanetwork.com/journals/jamanetworkopen/fullarticle/2720075, accessed 30/1/2019.

What is it spent on?

The bulk of the spending on cancer drugs tends to be concentrated in a minority of drugs.

Around 80% of spending on cancer medicines goes to only the top 35 medicines.

The median list price of new cancer medicines has risen from US$79,000 in 2013 to over US$150,000 in 2017, although this figure is increasingly meaningless these days, as it doesn’t take into account the increasing discounts and rebates that companies offer to payers in many markets – in both high-income and low-income countries.

There have also been more and more cancer therapies coming on the market. There are almost 2,000 drugs for cancer treatment in development, and in the last five years there were 63 cancer medicines launched, an average of just over 12 new cancer drugs each year.

The fact is that overall survival rates for cancer have improved since the 1970s when then US President Richard Nixon declared war on cancer.

In some cases dramatically.

Source: Roser, M. & Ritchie, H. “Cancer”, Our World in Data, March 2018, https://ourworldindata.org/cancer, accessed 2/2/2019.

Based on US data, the five-year survival rate for all cancers – the proportion of patients still alive five years after diagnosis – has increased from half to two-thirds over almost four decades.

And the story in some types of cancer is particularly encouraging.

In prostate cancer it’s increased from 68% in the 1970s to almost 99% today – the highest five-year survival rate of any cancer.

Other big improvements have been seen in kidney cancer, non-Hodgkin lymphoma, leukaemia and myeloma.

At the other end of the spectrum, pancreatic cancer, although improved, still has a five-year survival rate of just 8.2%.

This improvement has been partly due to a range of other factors, including more and better diagnosis, changes in lifestyle like diet and smoking, and surgery.

But over the last four decades, depending on the type of cancer and the drug, the greater availability of new treatments for cancer has been a contributing factor to increased patient survival.

Value of cancer therapies being questioned

But a question being raised by some in global health right now is whether this spending on cancer medicines is worth it and whether medicines have contributed enough given their cost.

A recent paper prepared for the World Health Organization tries to argue several points, including that

  • Growth in cancer spending has been too high

  • Questioned whether many of the cancer medicines developed over the last 20 years have provided any significant clinical benefit or improvement

  • Companies earn too much money from developing new cancer drugs, and

  • The public sector funds the early development of drugs and, therefore, companies should get less money from new cancer drugs.

None of these arguments are new and some of the agitators on the WHO’s advisory groups have been campaigning on these issues for years.

There are at least a few areas where this approach fails to appreciate the complexity of the issues or ignores the economics of how innovation works in the real world.

For example, this approach risks ignoring the important role that price signalling plays in technological development.

The monthly price of cancer treatment in the US at least has been steadily growing since the 1970s with the development of new cancer medicines.

This trend has been criticised because the incremental therapeutic benefit of each individual cancer drug has supposedly been small.

Such claims often trigger heated arguments about what type of innovation is relevant and often lack an assessment of how many lives have been saved by cancer therapies to date and what sort of payoff for society this has.

Even when compared to spending on things like skincare beauty products or computer games.

Don’t throw the baby out with the bathwater

Incremental innovation is not something to be trashed.

It’s a normal and valuable part of scientific and technological development and not every technological improvement is a breakthrough.

This is normal for many industries including aircraft production, car manufacturing, the tech sector, software or vacuum cleaners.

Much innovation typically is incremental, punctured occasionally by major scientific breakthroughs.

Moreover, the complementary role of public and private R&D is a feature common in many industries, such as defence and tech.

The criticism of the price of incremental improvement in medicine ignores its incentive creating effect for breakthrough innovation.

The long-term game is showing significant improvements in human survival, noting that this is not only due to cancer drugs.

But the range of breakthroughs in cancer therapy over the years, such as imatinib for leukaemia, immunotherapies for a range of cancers, the new CAR-T therapies for some types of leukaemia and so on, have been created due to the preparedness of payers to pay for incremental innovation.

This stands in stark contrast to areas like antibiotics, where no new antibiotics have been developed for decades, in part because payers weren’t prepared to pay for innovation in this area.

A big question is: Would the breakthroughs in cancer have happened over the last 40 years since the days of Nixon if it had not been for the funding of incremental improvements in cancer therapy as well?

I’m not so sure.

And, finally, just because society spends a more money on something does not necessarily mean it’s a bad thing.

We spend a lot more today on internet services and smartphones than we did 40 years ago, but that’s not a bad thing given the technological benefits they bring.

While certainly one can debate the efficiency of health spending and there are issues to discuss in the economic dynamics of the cancer market, we need to be careful we don’t throw the baby out with the bath water in a cost-cutting exercise.

There’s a lot of good science and technological development in future cancer care at risk if we’re not careful with how we handle this debate.


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