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Patients used to pay $10,000 a year for cancer drugs, but now they’re paying $10,000 a month, according to HBO talk show host Bill Maher.
That’s a message circulating on Facebook recently, promoted by the "Bill Maher Fanpage." A reader asked us to check it out.
The quote comes from the Oct. 2 episode of Real Time with Bill Maher, where Maher discussed Turing Pharmaceuticals, the company that jacked up the cost of a life-saving drug from $13.50 to $750 essentially overnight.
"Not that (Turing CEO Martin) Shkreli is unusual for the pharmaceutical industry," Maher said on his show. "Fifteen years ago, cancer drugs cost an average of $10,000 a year. Now it’s $10,000 a month because this cartel owns the U.S. government every bit as much as Mexican drug lords own theirs."
It’s well known that the cost of health care is on the rise, but has the annual cost of cancer drugs really increased so dramatically in just a decade and a half?
The best information we could nail down is the cost of anticancer drugs at launch, the initial price when the Federal Drug Administration approves a drug.
These are the sticker prices set by the pharmaceutical companies, not the prices patients actually pay out of pocket, which are reduced by insurance payments, patient assistance programs and other discounts. Costs increases, though, are often passed on to consumers.
Maher has a point that cancer drug costs are on the rise. We charted the launch costs of cancer drugs the FDA approved since 1999, using a list compiled by Memorial Sloan Kettering Cancer Center.
The second half of Maher’s statement -- that cancer drugs now cost about $10,000 a month -- is also on solid ground. Of drugs approved in 2015, the monthly average cost is $11,319. And experts in the field often cite that $10,000 figure themselves.
Because many cancer drugs are not administered to patients for a full year, it’s difficult to determine an average annual cost, so the first half of Maher’s statement -- that they cost about $10,000 a year 15 years ago -- is hard to nail down. To his point, though, the monthly cost of a new drug was dramatically lower in 2000 than what it is now at about $4,634.
One of the news articles that Maher’s team sent us is an academic article in the Journal of Oncology Practice that supports his statement. The report reads, "The average cancer drug price for approximately one year of therapy or a total treatment duration was less than $10,000 before 2000."
Maher’s statement is "in the ballpark," if not an understatement, said Rena Conti, a health economist at the University of Chicago who researches cancer drug prices.
In a 2015 paper Conti authored with three other leading health economists, she examined the launch cost of anticancer drugs controlled for inflation and the benefit to the patient (how much it prolongs life expectancy). For example, in 1995, anticancer drugs cost $54,100 for an additional year of life, the study found. In 2005, drugs cost $139,100 for the same benefit, and the price grew to $207,000 in 2013.
In the United States, pharmaceutical companies set their own drug prices. What’s pushing them to increase the costs?
It’s not necessarily that cancer drugs are getting better and are thus worth more. Conti’s research concluded that just about one-fifth of the cancer drug cost increase can be attributed to a better product.
There are two primary forces behind annual cancer drug cost increases, Conti said: First, pharmaceutical companies estimate a "zone of indifference" -- based on last year’s prices, how much more would buyers be willing to pay? Second, rebates and discounts for drugs have also increased over time, and this creates an incentive for drug companies to increase their costs alongside the discounts.
Pharmaceutical companies defend drug price increases by emphasizing that the revenue funds innovative research and that drugs lower overall health care costs by treating illnesses.
Because there’s no formal price regulation and competition in the industry is rare, "It really is a system where there’s no downward pressure on drug prices," said Peter Bach, director of the Memorial Sloan Kettering Center for Health Policy and Outcomes in an interview with Fortune.
Maher said, "15 years ago, cancer drugs cost an average of $10,000 a year. Now it’s $10,000 a month."
The average annual cost of a drug isn’t easy to calculate, given the way cancer drugs are scheduled; many drugs aren’t used every month for an entire year. So the first half of the statement is hard to verify, though we did find one academic source that cites a similar figure.
However, Maher has a point that the cost of cancer drugs has increased dramatically since 2000, when the average monthly price of a cancer drug, when it first hit the market, was about $4,600. In 2015, the monthly cost is over $10,000.
Maher’s numbers are a little squishy, but they’re in the ballpark. We rate his claim Mostly True.
Real Time, "New Rule: Supply Side Jesus," Oct. 2, 2015
Memorial Sloan Kettering Cancer Center, "Price & Value of Cancer Drug," accessed Dec. 1, 2015
Journal of Economic Perspectives, "Pricing in the Market for Anticancer Drugs," Winter 2015
MIT News, "Study: Prices of cancer drugs have soared since 1995," March 18, 2015
American Society of Clinical Oncology, "Focus on Cost," accessed Dec. 1, 2015
IMS Institute for Healthcare Informatics, "Innovation in cancer care and implications for health systems," May 2014
Fortune, "The drug price conundrum: a Q&A with Memorial Sloan Kettering's Dr. Peter B. Bach," Sept. 29, 2015
Journal of Oncology Practice, "High Cancer Drug Prices in the United States: Reasons and Proposed Solutions," May 6, 2014
Wall Street Journal, "For Prescription Drug Makers, Price Increases Drive Revenue," Oct. 5, 2015
Washington Post, "Cancer drugs aren’t just really expensive; they’re a bad value," Aug. 27, 2015
New York Times, "Prescription Drug Costs Are Rising as a Campaign Issue," Sept. 24, 2015
New York Times, "In Cancer Care, Cost Matters," Oct. 14, 2012
PolitiFact, "Fact-checking Martin Shkreli's claim that Daraprim is 'underpriced, relative to its peers,’" Sept. 24, 2015
Phone interview, Rena Conti, University of Chicago professor, Dec. 1, 2015
Email interview Sloan Kettering physician and policy expert Peter Bach and assistant Raina Jain, Dec 1, 2015
Email interview, Maher spokeswomen Cece Yorke and Sarah Fuller, Dec. 1, 2015
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