If you haven’t read it yet, run, don’t walk to the New York Magazine piece  by Stephen S. Hall on the rising cost of cancer drugs (Oct. 20, 2013). It wraps together a series of developments into a truly searing portrait of a drug industry driven to create drug after drug, profit after profit — and many of those drugs having limited efficacy.

One of the experts cited, Dr. Peter Bach, of Memorial Sloan-Kettering in New York, cites the system we have created as the main villain.

There are many strong passages, but this one in particular grabbed our attention. Boldface is ours.

“The centerpiece of the 2009 article was a chart tracking the price of every cancer drug approved by the FDA since 1965 (now regularly updated by [Dr. Peter] Bach [of Memorial Sloan-Kettering] and his colleague Geoffrey Schnorr). In preparing it, Bach discovered several dirty secrets about


drug pricing. The first is that there is no fixed price. The ‘sticker price’ of a cancer drug is listed in a compendium called the Red Book, but no one pays that price, according to experts. Drug companies can, and do, offer undisclosed discounts to health-insurance companies, hospitals, and middlemen in the health-care market. So prices vary widely. The Sloan-Kettering compendium pegs its cancer-drug prices to Medicare reimbursements, which give an indication of the real marketplace price (and the cost to taxpayers). These prices are lower than those in the Red Book, but still, according to Bach, are ‘astronomical.

“Second, the chart documents a recent sea change in pricing. It shows a very slight uptick in prices until the mid-­eighties, when the rise becomes more substantial, and then bends sharply upward around 2000. Beginning about twenty years ago, the graph also shows a series of dots way above the curve of average prices, indicating drugs that, in effect, have broken the sound barrier on price since the nineties.

“ ‘Then one day I looked at the whole landscape,’ Bach recalled, ‘and thought, Huh, I now know why cancer-drug prices are so high. Because the entire regulatory environment is structured in a way where there are no downward pressures and there are no standards. Medicare—and most private insurers, who want to do business in most states—have to include every drug in coverage. And they have to pay the producer’s price. It’s kind of that simple.’

“Bach, incidentally, doesn’t fault the pharmaceutical companies for continuing to push the envelope on pricing. They have a responsibility to shareholders to maximize their profits, he says, and ‘are responding in a logical way’ to an illogical system that, in terms of prices, has ‘no upper limits. They’re just going to creep up as fast as they can get away with.’ ” Stephen S. Hall,  The Rising Costs of Cancer Drugs — New York Magazine.

Jeanne Pinder

Jeanne Pinder  is the founder and CEO of ClearHealthCosts. She worked at The New York Times for almost 25 years as a reporter, editor and human resources executive, then volunteered for a buyout and founded...