price of newer cancer treatments

<http://www.nytimes.com/2006/02/15/business/15drug.html?hp&ex=1139979600&en=5ba29332c4ca5d56&ei=5094&partner=homepage>

A Cancer Drug Shows Promise, at a Price That Many Can't Pay

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By ALEX BERENSON
Published: February 15, 2006

Ellis Minrath, 87, is declining to take a drug for pancreatic cancer
partly because he would have to make a co-payment of about $1,000 a month.

That price, about double the current level as a colon cancer treatment,
would raise Avastin to an annual cost typically found only for medicines
used to treat rare diseases that affect small numbers of patients. But
Avastin, already a billion-dollar drug, has a potential patient pool of
hundreds of thousands of people ? which is why analysts predict its United
States sales could grow nearly sevenfold to $7 billion by 2009.

Doctors, though, warn that some cancer patients are already being priced
out of the Avastin market. Even some patients with insurance are thinking
hard before agreeing to treatment, doctors say, because out-of-pocket
co-payments for the drug could easily run $10,000 to $20,000 a year.

Until now, drug makers have typically defended high prices by noting the
cost of developing new medicines. But executives at Genentech and its
majority owner, Roche, are now using a separate argument ? citing the
inherent value of life-sustaining therapies.

If society wants the benefits, they say, it must be ready to spend more
for treatments like Avastin and another of the company's cancer drugs,
Herceptin, which sells for $40,000 a year.

"As we look at Avastin and Herceptin pricing, right now the health
economics hold up, and therefore I don't see any reason to be touching
them," said William M. Burns, the chief executive of Roche's
pharmaceutical division and a member of Genentech's board. "The pressure
on society to use strong and good products is there."

Studies show that Avastin can prolong the lives of patients with
late-stage breast and lung cancer by several months when the drug is
combined with existing therapies.

Genentech expects to seek federal approval later this year to sell it
specifically for those diseases. But even now, doctors, who are free to
prescribe the drug as they see fit, are using Avastin for some breast and
lung cancer cases ? and finding its cost beyond the means of some
patients.

"Avastin is a superb drug, but its cost is already discouraging patients
and doctors from using it," said Dr. David Johnson, who heads the cancer
unit at Vanderbilt University and is a former president of the American
Society of Clinical Oncology. "I wish it were one-tenth the cost, and if
it were I would be giving it to almost everybody."

With colon cancer, a year of Avastin treatment costs about $50,000. But
the drug will be used at higher doses for lung and breast cancer, and
Genentech does not plan to reduce the unit price, even though the
additional cost of producing a higher dose is minimal. Roche executives
described the pricing plans were described in a recent interview.

Because Genentech is a leading developer of cancer therapies, some doctors
also fear that the company's pricing plans for Avastin ? around $8,800 a
month ? may encourage other companies to charge more for their own
oncology drugs. That could potentially drive up the overall cost of cancer
treatment to unsustainable levels, they say.

Right now, one of the few cancer drugs with a higher monthly price than
the level planned for Avastin is Erbitux. The drug, used for colon cancer,
sells for $9,600 monthly, but is not as widely prescribed as Avastin and
is typically used only as a last-resort treatment for a few months.

Dr. Susan Desmond-Hellmann, the president of product development of
Genentech, which is based in South San Francisco, Calif., said that
Genentech had set Avastin's price based on "the value of innovation, and
the value of new therapies." Genentech, which had more than $6 billion in
sales last year, has many programs to help patients afford its medicines,
and last year contributed $21 million to charities that help patients with
their insurance co-payments, she said.

Genentech intends to file an application later this year with the Food and
Drug Administration to expand the drug's label to include treatment for
breast and lung cancer. While nothing stops doctors now from prescribing
Avastin for those diseases, F.D.A. approval would let the company promote
and advertise it for such treatments and make insurers more likely to pay
for the treatments.

For now, insurers are deciding case by case whether to cover Avastin for
breast and lung cancer, and in many instances they are rejecting coverage
or at least delaying decisions.

"Insurers may say, 'It's not approved for that indication, so we're not
paying for it,' " said Dr. Paul A. Bunn Jr., the director of the
University of Colorado cancer center.

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In those cases, patients must sign a waiver agreeing to reimburse the
hospital for the price of treatment if the insurer will not agree to do
so. And some patients are afraid to sign the waivers, Dr. Bunn said. "A
couple of patients have refused to sign or take treatment."

So far, insurers are generally covering Avastin's use in colon cancer, and
they say they will probably cover its F.D.A.-approved use with other
cancers.

Other medicines as expensive as Avastin are typically prescribed only for
rare conditions affecting small numbers of patients, and their makers
justify the costs as necessary for getting a return on their up-front
investments in the drugs. A few medicines, like Ceredase, a treatment for
Gaucher disease (pronounced go-SHAY) from the biotechnology company
Genzyme, can cost as much as $500,000 a year for some patients. Gaucher
disease is a rare metabolic disorder whose symptoms include anemia.

Avastin is currently used mainly in cases of late-stage colon cancer, a
disease that affects about 50,000 Americans annually. On average, those
patients take the drug for 11 months and it extends their lives an average
of 5 months, compared with other treatments.

Genentech and Roche are also testing Avastin for use in earlier stages of
colon cancer, lung and breast and cancer, which collectively are diagnosed
in almost 500,000 Americans a year. Genentech and doctors hope that if the
drug is used earlier in treatment it can extend lives much longer ?
although that would require patients' finding the means to pay for it
longer, too.

Earlier this week Roche stopped recruiting patients for one clinical trial
that included Avastin, while researchers try to explain the deaths of
several patients. But doctors generally view Avastin as one of the safest
cancer treatments. About 200 clinical trials including Avastin are taking
place worldwide.

With Avastin's expanded use, analysts expect the drug's sales to soar to
$7 billion in the United States alone by 2009, compared with $1.1 billion
last year. Over the same period, Genentech's overall profits are forecast
to triple, to $4 billion in 2009, as sales ? $6.6 billion last year ?
climb to $18 billion.

"They are certainly blazing new ground with the price of the drug," said
Geoffrey C. Porges, an industry analyst at Sanford C. Bernstein & Company.
"They're saying, we think this is fair value, at least on a relative
basis."

Genentech has always been aggressive in pricing its therapies, Mr. Porges
said. But insurers and government agencies have eventually accepted
Genentech's terms, because its treatments, which include Herceptin, its
current breast cancer treatment, have been shown to prolong life.

When they were originally discovered, drugs like Avastin, which aim at the
blood vessels that tumors use to grow, were expected to replace
traditional chemotherapy, which directly fight tumor cells. Instead, the
drugs have been found to work best when used in conjunction with
chemotherapy. That has caused the overall cost of cancer treatment to
soar, said Dr. Len Lichtenfeld, deputy chief medical officer of the
American Cancer Society.

"The financial resources are not limitless," he said. "There are
tremendous pressures on the cost of cancer therapies today."

The high prices are especially discouraging for patients who have been
told that the new drugs may have only marginal benefits for them.

Ellis Minrath, who has pancreatic cancer, said he had chosen not to take
Tarceva, a drug from Genentech that is approved for lung cancer and has
shown promise in pancreatic cancer. He did so after learning that it would
cost him about $1,000 a month in co-payments, even though he is covered by
Medicare.

"If anybody came out and said, 'By God, this is the stuff. You want to get
well, find a way to buy it,' that would be one thing," said Mr. Minrath,
who is 87. "But that isn't the case. The forecast of how much it's going
to do is not that wonderful."

But Dr. Desmond-Hellmann, the Genentech product development chief, said
she would recommend that Mr. Minrath be treated with Tarceva. "I don't
think any patient should go without a Genentech drug for an inability to
pay," she said. "If this is about money, that would disturb me."

The higher cost of using Avastin in breast and lung cancer, compared with
colon cancer, is a result of cancer drugs' being priced on the basis of
weight. In colon cancer, Genentech tested Avastin at a dose of 5
milligrams of the drug per kilogram ? or 2.2 pounds ? of the patient's
body weight. But in lung and breast cancer, the company tested the drug at
a dose of 10 milligrams per kilogram of body weight.

Because the actual cost of producing Avastin is a fraction of what
Genentech charges for it, some analysts and doctors had expected the
company to lower Avastin's price per milligram for use in lung and breast
cancer.

Dr. Leonard Saltz, an oncologist at Memorial Sloan-Kettering Cancer Center
in New York, noted that Genentech had not tested the Avastin at the dose
level for colon cancer in large-scale trials of lung and breast cancer. As
a result, no one really knows whether the lower dose might turn out to be
equally effective in lung and breast cancer, he said. Besides costing
less, he said, a lower dose might have fewer side effects.

"There are no meaningful data to allow us to address that question," he
said.

Dr. Desmond-Hellmann said that Genentech was assuming that some cancer
doctors might, in fact, use Avastin at the lower dosage to treat breast
and lung cancer. That is a reason the company does not want to lower
Avastin's per-milligram price, she said, because doing so would cut too
deeply into revenues if doctors do not prescribe the higher doses that
were used in the breast and lung cancer trials.

"We don't actually know whether physicians will actually use Avastin as
was used in the clinical trials," she said.

But Dr. Saltz and other doctors said that they would almost certainly
stick to the higher Avastin dose that was tested in the clinical trials,
for fear that a lower dose might not be as effective.

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