Hello, $200B: Super-pricey new cancer drugs drive mega increases in treatment spending

It wasn't all that long ago that a six-figure price on a debut cancer drug was big news. Now, it would be more surprising if an oncology launch didn't carry a price tag of $100,000 or more—and the high cost of those new rollouts is helping drive cancer treatment costs toward $100 billion annually in the U.S. alone.

According to a new IQVIA report, U.S. cancer drug spending climbed to almost $50 billion last year, about twice the $24.8 billion spent in 2012. Along the way, median U.S prices for new therapies climbed above $160,000 last year, more than double the median $79,000 launch price in 2013.

New checkpoint inhibitors such as Merck & Co.'s Keytruda and Bristol-Myers Squibb's Opdivo drove a large portion of the spending growth over the past few years, but so did price hikes on older drugs—and though new generics helped, their cheaper prices couldn't offset the growth in pricey drugs. Volume numbers increased, too, as more patients were treated.

And with six-figure rollouts expected to continue, so is the sharp upward trajectory in spending. By 2022, payers and patients will be shelling out $90 billion to $100 billion on cancer therapies in the U.S., fully half the $180 billion to $200 billion in spending expected worldwide that year, the report said.

Last year, global spending on cancer meds totaled $133 billion, up from $96 billion in 2013.

More new cancer drugs are on the horizon, and they're not expected to be cheap, either. Some will definitely be far more expensive, because they're cell and gene therapies that target few patients and are costly and time-consuming to make.

Already, new launches in that area have made a difference in pricing stats: The mean new cancer drug price in 2017 was more than $200,000—$40,000 higher than the median—likely reflecting the superpricey new launches like Novartis' CAR-T therapy Kymriah at $475,000.

Taking note of the situation, payers have adapted. In the U.S., payers are adopting "copay accumulators" that restrict patients from applying pharma's copay coupons to their deductibles. Additionally, the Institute for Clinical and Economic Review conducted CAR-T and gene therapy value assessments last year, the IQVIA report noted, and drugmakers are warming up to value-based contracts as a way to ensure value for payers.

Outside of the U.S., payers are tweaking their pricing and reimbursement policies, according to the report. In Japan, officials have forced deep cuts on Opdivo due to surging costs; the drug is marketed there by Ono Pharmaceutical. 

In a statement, IQVIA senior vice president Murray Aitken said as cancer treatment continues to advance, payers are "challenged as they seek value and fund access to the latest oncologic treatment options." 

Nearly 700 companies or groups are pursuing oncology drugs in late-stage development, according to the report, and more than a dozen Big Pharma companies have committed significant resources to the field. At 14 pharma companies, at least one-third of the late-stage pipeline is in oncology.

In recent years, cancer treatment has become increasingly targeted, IQVIA's team points out, allowing smaller companies to launch drugs by themselves without seeking a Big Pharma partner or buyout. That's evident in classes such as PARP inhibitors for ovarian cancer, where Clovis Oncology and Tesaro are marketing their own drugs and taking on global giant AstraZeneca.

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