1. Expensive New Drugs: Are They Worth It? David Orentlicher, MD, JD Indiana University Schools of Law and Medicine Indiana House of Representatives October 29, 2008 (With thanks to Paul R. Helft, MD Indiana University School of Medicine)

2. Cancer drugs as an area of concern Cancer treatment in the US cost $72.1 billion in 2004 Cancer treatment in the US cost $72.1 billion in 2004 Just under 5% of the total US spending on medical care Just under 5% of the total US spending on medical care 1995-2004, overall costs of treating cancer rose by 75% 1995-2004, overall costs of treating cancer rose by 75% These costs are expected to rise faster than the rate of overall medical expenditures in the future These costs are expected to rise faster than the rate of overall medical expenditures in the future NCI, The Nation’s Progress in Cancer Research: An annual report for 2004

3. Cost of treatment for metastatic colon cancer (Schrag D. NEJM. 2004;351:317-319)

4. Can we afford these drugs? Avastin (monoclonal antibody to block blood vessel growth) = $4,000-$9,000/month Avastin (monoclonal antibody to block blood vessel growth) = $4,000-$9,000/month For treating metastatic colon cancer; also lung and breast cancer For treating metastatic colon cancer; also lung and breast cancer Erbitux (monoclonal antibody to block cell growth) = $17,000/month Erbitux (monoclonal antibody to block cell growth) = $17,000/month For treating metastatic colon cancer; also head and neck cancer For treating metastatic colon cancer; also head and neck cancer Zevalin (monoclonal antibody that binds a radioactive isotope) = $24,000/month Zevalin (monoclonal antibody that binds a radioactive isotope) = $24,000/month For treating non-Hodgkin’s lymphoma For treating non-Hodgkin’s lymphoma SIR-Spheres (radioactive microspheres) = $14,000/dose, with an overall cost = $150,000? SIR-Spheres (radioactive microspheres) = $14,000/dose, with an overall cost = $150,000? For treating liver metastases from colon cancer For treating liver metastases from colon cancer Depends on their benefit—commonly measured in QALYs Depends on their benefit—commonly measured in QALYs

5. What is a QALY? 01 Dead Perfect health Major stroke Recurrent stroke Writing a grant proposal

6. What’s a “good” buy? “Expensive” more than $100,000/QALY “Reasonable” $50,000/QALY “Very Efficient” less than $25,000/QALY Most writers use $50-100,000 as upper limit of good value, but public preferences suggest upper limit over $200,000. Hirth RA, et al., Medical Decision Making. 2000;20:332-342

7. Some sample QALYs (2002 dollars) Harvard Public Health Review (Fall 2004) < $0 (If the cost per QALY is less than zero, the intervention actually saves money) Flu vaccine for the elderly < $0 (If the cost per QALY is less than zero, the intervention actually saves money) Flu vaccine for the elderly Under $10,000 Beta-blocker drugs post-heart attack in high-risk patients Under $10,000 Beta-blocker drugs post-heart attack in high-risk patients $10,000 to $20,000 Combination antiretroviral therapy for certain patients infected with the AIDS virus $10,000 to $20,000 Combination antiretroviral therapy for certain patients infected with the AIDS virus $15,000 to $20,000 $15,000 to $20,000 Colonoscopy every five to 10 years for women age 50 and up $20,000 to $50,000 Antihypertensive medications in adults age 35-64 with high blood pressure but no coronary heart disease $20,000 to $50,000 Antihypertensive medications in adults age 35-64 with high blood pressure but no coronary heart disease Lung transplant in UK (Anyanwu AC et al. Lung transplant in UK (Anyanwu AC et al. J Thorac Cardiovasc Surg 2002;123:411-420) $50,000-$100,000 Dialysis for patients with end-stage kidney disease $50,000-$100,000 Dialysis for patients with end-stage kidney disease Antibiotic prophylaxis during dental procedures for persons at moderate to high risk of bacterial endocarditis ($88,000) ( Med Decis Making. 2005;25(3):308-20) Over $500,000 CT and MRI scans for children with headache and an intermediate risk of brain tumor Over $500,000 CT and MRI scans for children with headache and an intermediate risk of brain tumor

8. Condition/Treatment Cost per QALY Treatment for Erectile Dysfunction$6,400/QALY * Physician Counseling for Smoking $7,200/QALY Total Hip Replacement$9,900/QALY * Outreach for Flu and Pneumonia $13,000/QALY Treatment of Major Depression$20,000/QALY Gastric Bypass Surgery$20,000/QALY Treatment for Osteoporosis$38,000/QALY * Screening For Colon Cancer $40,000/QALY Implantable Cardioverter Defibrillator $75,000/QALY Lung-Volume Reduction Surgery$98,000/QALY Tight Control of Diabetes$154,000/QALY * Treating Elevated Cholesterol ( + 1 risk factor) $200,000/QALY Resuscitation After Cardiac Arrest$270,000/QALY Left Ventricular Assist Device$900,000/QALY COST/QALY: Selected Medicare services

9. The example of bevacizumab (Avastin) 2007 sales of $2.3 billion in US ($3.5 billion worldwide) to treat about 100,000 patients with advanced lung, colon or breast cancer 2007 sales of $2.3 billion in US ($3.5 billion worldwide) to treat about 100,000 patients with advanced lung, colon or breast cancer Genentech price: $4,000-$9,000 a month Genentech price: $4,000-$9,000 a month Cost to private insurers: As high as $35,000 a month Cost to private insurers: As high as $35,000 a month NY Times, July 6, 2008 NY Times, July 6, 2008 What’s the benefit? What’s the benefit?

10. Phase III trial of bevacizumab in metastatic colon cancer Median survival: 15.6 vs 20.3 mo ( HR=0.66, P<0.001) Error bars represent 95% confidence intervals Hurwitz H, et al. N Eng J Med. 2004;350:2335-2342 Percent surviving Duration of survival (mo) 20 0 121830 0 80 100 40 60 Treatment Group IFL + placebo (n=411) IFL + Avastin (n=402) 246 Median survival benefit: 4.7 months or 30% increase

11. Examining the cost and cost-effectiveness of adding bevacizumab (Avastin) to chemo in metastatic colon cancer Randomized trial compared chemotherapy alone vs. chemotherapy + bevacizumab Randomized trial compared chemotherapy alone vs. chemotherapy + bevacizumab Bevacizumab regimen prolonged median survival from 15.6 to 20.3 months (p<0.001) Bevacizumab regimen prolonged median survival from 15.6 to 20.3 months (p<0.001) Cost of extra 4.7 months? Cost of extra 4.7 months? $101,500 (assuming $5,000 per month for bevacizumab) $101,500 (assuming $5,000 per month for bevacizumab) $259,149 per year of life gained (not quality adjusted) $259,149 per year of life gained (not quality adjusted)

12. Randomized trial compared chemotherapy alone vs. chemotherapy + bevacizumab Randomized trial compared chemotherapy alone vs. chemotherapy + bevacizumab Bevacizumab regimen prolonged median survival from 10.2 to 12.5 months (p=0.007) Bevacizumab regimen prolonged median survival from 10.2 to 12.5 months (p=0.007) Cost of extra 2.3 months? Cost of extra 2.3 months? $66,270-$80,343 $66,270-$80,343 $345,762 per year of life gained (assuming $66,270 cost) $345,762 per year of life gained (assuming $66,270 cost) Grusenmeyer PA, Gralla RJ. J. Clin. Oncology. 2006;24(18S):6057. Grusenmeyer PA, Gralla RJ. J. Clin. Oncology. 2006;24(18S):6057. Examining the cost and cost-effectiveness of adding bevacizumab (Avastin) to chemo in advanced non-small cell lung cancer

13. Do oncologists believe bevacizumab offers good value? Survey of 139 academic med oncologists at two hospitals in Boston Survey of 139 academic med oncologists at two hospitals in Boston Designed to estimate cost-effectiveness of bevacizumab (Avastin): what is a justifiable cost-effectiveness amount; does the drug provide “good value”; ? Designed to estimate cost-effectiveness of bevacizumab (Avastin): what is a justifiable cost-effectiveness amount; does the drug provide “good value”; ? Mean implied cost-effectiveness threshold for bevacizumab was $320,000/QALY Mean implied cost-effectiveness threshold for bevacizumab was $320,000/QALY Only 25 percent of the oncologists thought bevacizumab provides a good value Only 25 percent of the oncologists thought bevacizumab provides a good value Nadler E, Eckert B, Neumann PJ. The Oncologist 2006;11:90-95

14. Studies of patients’ attitudes toward expensive cancer drugs and their benefits

15. Is it cost-effective to add erlotinib to gemcitabine in advanced pancreatic cancer? Cost effectiveness analysis of erlotinib (Tarceva) in pancreatic cancer Cost effectiveness analysis of erlotinib (Tarceva) in pancreatic cancer Study enrolled 569 patients and compared gemcitabine alone versus gemcitabine plus erlotinib Study enrolled 569 patients and compared gemcitabine alone versus gemcitabine plus erlotinib Median survival improved from 6.0 to 6.4 months Median survival improved from 6.0 to 6.4 months Cost of extra 0.4 months? Cost of extra 0.4 months? Erlotinib adds $16,613 retail for six months or Erlotinib adds $16,613 retail for six months or $498,379 per year of life gained ($332,252 per year of life gained for a 4 month course of therapy) $498,379 per year of life gained ($332,252 per year of life gained for a 4 month course of therapy) Grubbs SS et al., J. Clin. Oncology. 2006;24(18S):6048

16. Cost-effectiveness analysis of trastuzumab (Herceptin) in the adjuvant setting for treatment of HER2+ breast cancer Trastuzumab (a monoclonal antibody) associated with a 52% reduction in disease recurrence and 33% reduction in death. Trastuzumab (a monoclonal antibody) associated with a 52% reduction in disease recurrence and 33% reduction in death. Romond EH, et al. NEJM. 2005;353:1673-1684. Romond EH, et al. NEJM. 2005;353:1673-1684. Over a lifetime, cost per QALY $27,800 (range $18-39,000) Over a lifetime, cost per QALY $27,800 (range $18-39,000) Garrison LP et al. J Clin Oncology. 2006;24(18S):6023

17. Expensive new drugs and the poor Cost pressures are similar for privately insured and publicly insured (or uninsured), but the pressures are accentuated with the poor Cost pressures are similar for privately insured and publicly insured (or uninsured), but the pressures are accentuated with the poor Program and personal budgets are tighter Program and personal budgets are tighter Trade-offs are more tangible—when a state’s Medicaid budget rises, spending on other public services (e.g., schools) may decline, and this can pit poor against other taxpayers Trade-offs are more tangible—when a state’s Medicaid budget rises, spending on other public services (e.g., schools) may decline, and this can pit poor against other taxpayers

18. Wishard Memorial Hospital More than 22,000 admissions per year More than 22,000 admissions per year 10% of patients are commercially insured; approximately 36% are uninsured by any source. 10% of patients are commercially insured; approximately 36% are uninsured by any source. Pharmacy budget at WMH was around $18 million (2005) Pharmacy budget at WMH was around $18 million (2005) 855 metastatic colon cancer patients receiving FOLFOX + bevacizumab cost entire Wishard pharmacy budget 855 metastatic colon cancer patients receiving FOLFOX + bevacizumab cost entire Wishard pharmacy budget 500 stage II and III patients receiving adjuvant FOLFOX alone cost entire pharmacy budget 500 stage II and III patients receiving adjuvant FOLFOX alone cost entire pharmacy budget (Actual number of colon cancer patients at Wishard in the dozens per year; numbers above are less than in Indiana overall)

19. Growth in Medicaid spending (Medicaid expenditures as percentage of total state spending) 198719972007 Iowa 5.013.416.7 Indiana 10.717.621.4 Ohio10.620.825.9 Illinois10.123.728.4 New York16.633.428.7 All States 9.820.021.1

20. Medicaid expenditures ($ billions) for outpatient prescription drugs In 2003, Medicaid spent $33.7 billion on drugs (19% of national spending for drugs and more than 10% of the Medicaid budget).

21. What drives increased spending on pharmaceuticals? Number of prescriptions dispensed (42%) Number of prescriptions dispensed (42%) more beneficiaries more beneficiaries more medications per beneficiary more medications per beneficiary Types of prescriptions (34%) Types of prescriptions (34%) newer, higher-priced drugs replacing older, less- expensive drugs Manufacturer price increases for existing drugs (25%) Manufacturer price increases for existing drugs (25%) Prescription drug trends. October 2004; http://www.kff.org/rxdrugs/upload/Prescription-Drug- Trends-October-2004-UPDATE.pdf

22. Is increased spending on drugs bad? Prescription drugs can treat—or prevent—serious illnesses Prescription drugs can treat—or prevent—serious illnesses consider, for example, statins to lower cholesterol and the risk of heart attacks, insulin to control blood sugar But there is considerable over-prescribing—many people receive But there is considerable over-prescribing—many people receive prescriptions when they don’t need a drug (e.g., Ritalin) a brand-name drug when a generic could be taken, an expensive drug when a less expensive alternative would work as well (e.g., Nexium for heartburn), or a very expensive drug that provides little benefit (? Avastin) Covering very expensive drugs may be done for only some, and at the same time divert limited funds from more effective health care, particularly for the poor

23. Expensive new drugs and the poor Difficult to protect the poor when it’s only the poor whose interests are at stake Difficult to protect the poor when it’s only the poor whose interests are at stake Political decisions driven by interest group advocacy, and the poor often fare poorly in such a system (but sometimes their interests coincide with those of more effective advocates—see formulary restrictions) Political decisions driven by interest group advocacy, and the poor often fare poorly in such a system (but sometimes their interests coincide with those of more effective advocates—see formulary restrictions) Need to link the fortunes of the poor to those of others (Medicaid versus Medicare) and need other systemic reforms to address the wasteful spending problems Need to link the fortunes of the poor to those of others (Medicaid versus Medicare) and need other systemic reforms to address the wasteful spending problems

24. Successful health care reform Social welfare programs fare better when Social welfare programs fare better when Universal rather than targeted just at poor (Medicare vs. Medicaid) Universal rather than targeted just at poor (Medicare vs. Medicaid) Perceived as earned (Medicare Part A, EITC) Perceived as earned (Medicare Part A, EITC) Beneficiaries are “innocent” persons (Medicare, SCHIP) Beneficiaries are “innocent” persons (Medicare, SCHIP) Benefit levels determined by federal rather than state government (Medicare vs. Medicaid) Benefit levels determined by federal rather than state government (Medicare vs. Medicaid) Benefits can be limited easily (food and shelter vs. health care) Benefits can be limited easily (food and shelter vs. health care)

25. Systemic reform: reduce over-prescribing Important social pressures The identifiable victim versus saving statistical lives (low osmolar contrast media and the Canadian experience) The identifiable victim versus saving statistical lives (low osmolar contrast media and the Canadian experience) Physician relationships with industry (consulting fees for opinion leaders) Physician relationships with industry (consulting fees for opinion leaders) Physician reimbursement (cancer chemotherapy) Physician reimbursement (cancer chemotherapy) Patient desire for a prescription (direct-to-consumer advertising and cyclyooxygenase-2-inhibitors (coxibs) for arthritis (e.g., Vioxx)) Patient desire for a prescription (direct-to-consumer advertising and cyclyooxygenase-2-inhibitors (coxibs) for arthritis (e.g., Vioxx)) Counter-regulation is critical (e.g., preferred drug lists), but some regulations cause more harm than good (e.g., prescription caps) Counter-regulation is critical (e.g., preferred drug lists), but some regulations cause more harm than good (e.g., prescription caps)