It costs a lot of money to bring new drugs to market — and cancer medications are no exception. Manpower, equipment and lab space are just a few complex expenses. Clinical trials, patented formulations, dosage-strength testing and more play a role in initial drug development costs. But it turns out developing new cancer medications doesn’t cost as much as you’d think. (Or rather, as much as drug companies claim.)
How Much Does Research and Development Cost for Cancer Medications?
A Scientific American article from 2014 discusses how much it costs to develop a new prescription drug for market. According to that article, it cost $2.6 billion at the time to develop just one — a 145% increase since 2003. And what’s more, that’s the estimated cost after adjusting for inflation. Experts credit Research and Development (R&D) for most expenses, but additional money goes to post-approval development. Those costs include creating formulations, new indications, and dosage strengths — all studied within a laboratory setting.
John LaMattina, former R&D director at Pfizer, worried the study’s findings would justify excessively high prescription prices. He believes that pricing should reflect the value each drug provides the customer — not R&D costs. But he does concede that this particular study helps the public understand why producing a new drug isn’t easy. “This is a high-risk, expensive, and long-term endeavor,” said LaMattina. Still, pharma companies almost certainly cherry-picked which data to share for the 2014 Tufts study’s analysis.
Investigation Finds Pharma Companies Inflate R&D Costs for Developing Cancer Medications
Recently, a JAMA 2017 investigation countered the 2014 Tufts study’s argument in the Scientific American article. One common explanation why cancer medications cost so much to develop is high R&D costs. Since pharmaceutical companies do inflate real costs for new drug development and blame it on R&D, LaMattina’s concerns seem justified. The JAMA investigation’s goal was adding transparency for this claim — and produced staggering results.
The JAMA analysis included 10 different pharmaceutical companies and drugs with a median 7.3-year development time. In the 2014 study, manufacturers stated that it cost $1,658,400,000 to bring one new drug to market. However, the 2017 analysis disagrees. According to the data they used, each drug actually costs a median $648 million to develop for market. That’s a full billion dollars less than pharmaceutical manufacturers claimed in 2014. In other words, drug companies added 61% to the overall cost for markup purposes.
How Inflation Influences Rising Costs for Cancer Medications
Every year, U.S. pharmaceutical drug costs increase — and cancer medications in particular rise much faster than inflation rates do. A 2016 study published in the Journal of Clinical Oncology looked at 24 injectable cancer medications approved since 1996. Researchers found that out-of-pocket costs for cancer medications increased 25%, on average, over an eight-year period. Even after adjusting costs to account for inflation, that’s an average 18% increase per drug. Some cancer medication costs rose an average 6% or more while the inflation rate stayed below 1.1%.
High R&D costs can’t explain steady price increases on already-developed cancer medications. And inflation can’t account for higher prices on these drugs, either. Dr. Daniel Goldstein, lead researcher for the 2016 study, says that “massive overnight hikes” in drug costs aren’t typical. Instead, he found a gradual price creep on patented injectable cancer medications like Gleevec, which rose 438% in 15 years. In 2001, Gleevec cost $26,000; in 2016, it cost $140,000, even though a once-daily generic pill version was also available. Dr. Goldstein says that pricing for cancer medications doesn’t go down when new competitors or generic forms enter the market. “Over the course of 10 years, that gradual creep becomes significant,” concludes Dr. Goldstein.
Patients Pay Much Less for Identical Cancer Medications in Other Countries
What’s more, U.S. consumers spend at least twice as much as other countries do to purchase the same cancer medications. Health Affairs analyzed 20 top-selling drugs globally to see if Americans were covering R&D costs to develop new cancer medications. They found that overall, companies generated $116 billion more in annual revenue from U.S. drug sales compared to other countries. Yet the same companies spent just $76 billion (66% of that amount) on global R&D. Whether you agree with that price strategy or not, companies’ stated justification for higher U.S. drug costs doesn’t add up.
Health Affairs concludes, “To put the excess revenue in perspective, lowering the magnitude of the U.S. premium to a level where it matches global R&D expenditures across the 15 companies we assessed would have saved U.S. patients, businesses, and taxpayers approximately $40 billion in 2015.” In 2016, the Centers for Medicare and Medicaid Services reportedly spent $328.6 billion on pharmaceutical expenses.
What Costs Are Involved With Bringing New Cancer Medications to Market?
It’s safe for a pharmaceutical company to blame R&D costs for high cancer drug prices. After all, patients deserve access to effective, safe cancer medications. But most R&D budgets also include high marketing costs — and U.S. consumers may not even realize it.
A 2012 analysis found that marketing new drugs to consumers accounts for 25% of R&D costs, yet pharmaceutical companies spend only 1.3% on basic research. While companies attribute high drug prices to R&D costs, the analysis concludes that marketing is “the enemy of real innovation.” Why? Because while companies do spend significant money to test new drugs for safety and efficacy, market expansion is higher priority. Finding new FDA-approved uses for existing cancer medications extends their patents, which keeps cheaper, generic versions off the market. Since the mid-1990s, about 85-90% of new drugs were developed to replace near-identical medications with expiring patents before cheaper generics became available. The remaining 10%-15% included new, innovative treatments or drugs that offered clinical advantages over currently available medications.
How Much Do Popular Cancer Medications Cost in the U.S.?
Let’s start with Tasigna, a life-saving cancer drug approved to treat chronic myeloid leukemia and Philadelphia-positive CML in 2007. According to GoodRx.com, the average co-pay for Tasigna varies significantly across different insurance plans ($2311-$14,645). Not all patients can afford this overpriced medication, since out-of-pocket costs vary up to $10k for one month’s supply.
Popular breast cancer drug Taxotere costs patients more every year, even though there’s a generic version available (docetaxel). The drug’s current listed cash price is $609.49-$2,411.70. But if you’re tempted to ask your doctor for cheaper generic docetaxel, you might not get what you bargained for. Manufacturer Dr. Reddy recently recalled 1,000 docetaxel injection vials with defective container seals. This required a class II recall, since the FDA stated that it could otherwise cause “medically reversible adverse health consequences.” And while your exposure’s “medically reversible,” other side effects from Taxotere or generic docetaxel treatments may be permanent. Taxotere is known to cause permanent hair loss in about 9% of breast cancer patients — despite its high price point.
How Injured Cancer Patients Can Get Compensation and Justice
Since cancer medications generate high revenue, many pharmaceutical companies build litigation costs and compensation for injured parties into their budgets. Sanofi, Taxotere’s manufacturer, warned breast cancer patients in Europe and Canada their hair might never grow back after completing chemotherapy. Yet the company failed to disclose this permanent side effect risk to American patients from 2006 to 2016. If you or a loved one experienced persistent alopecia after chemo ended, you may qualify for a cash settlement.
To check your eligibility for compensation, complete your free Taxotere claim evaluation online today. You’ll see your results in less than two minutes! After submitting your information, an experienced lawyer will call to discuss your case.
Mandy Voisin is a freelance writer, blogger, and author of Girls of the Ocean and Star of Deliverance. As an accomplished content marketing consultant, mom of four and doctor's wife, Mandy has written hundreds of articles about dangerous drugs and medical devices, medical issues that impact disabled Americans, veterans' healthcare and workers' compensation issues since 2016.