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Health Care Needs (More) Reform: Cancer Drugs Show How Markets Remain out of Whack

The views expressed are those of the author and are not necessarily those of Scientific American.

Email   PrintPrint market for at least one class of vital drug seems to have gone haywire. Certain types of generic cancer drugs are really hard to find. In August, of the 34 generic cancer drugs available to patients, there were 14 that could only be found with great difficulty. “If you are a pediatric oncologist, you know how to cure 70 to 80 percent of patients. But without these drugs you are out of business,” wrote oncologist Ezekiel J. Emanuel last month in The New York Times.

While all of this is happening at the low end, the upper reaches of the market are just as crazy. One of the much-heralded drug approvals in recent years was a “cancer vaccine”—a drug to treat prostate cancer—that commands $93,000 and buys an average of four months for patients at an advanced stage of the disease. The problem with this treatment, called Provenge, is that there just aren’t enough buyers. Doctors have to front the money before getting reimbursed. They’re not getting paid back quickly enough, and so they are avoiding the drug. In the last week, in fact, the drug’s maker, Dendreon, laid off a quarter of its workforce because physicians are not buying.

There’s something wrong with this picture. Maybe relatively effective generic drugs should bear a higher price tag, and a drug regimen that costs as much as a small house in some parts of the country should be more affordable. In this case, the market seems to be sending a message that the current approach is unworkable. Unfortunately, the get-the-government-out-of-my-face ethos won’t solve it either.

Source: Wikimedia Commons

Gary Stix About the Author: Gary Stix, a senior editor, commissions, writes, and edits features, news articles and Web blogs for SCIENTIFIC AMERICAN. His area of coverage is neuroscience. He also has frequently been the issue or section editor for special issues or reports on topics ranging from nanotechnology to obesity. He has worked for more than 20 years at SCIENTIFIC AMERICAN, following three years as a science journalist at IEEE Spectrum, the flagship publication for the Institute of Electrical and Electronics Engineers. He has an undergraduate degree in journalism from New York University. With his wife, Miriam Lacob, he wrote a general primer on technology called Who Gives a Gigabyte? Follow on Twitter @@gstix1.

The views expressed are those of the author and are not necessarily those of Scientific American.

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  1. 1. ccrook 8:29 am 09/14/2011

    Let’s be serious, there is nothing Scientific about the last sentence here.

    I would argue that the government has been involved in health care markets since modern drugs have been developed; namely, giving preferential treatment to employer sponsored health insurance since post-WW2. Maybe if the consumer was exposed to pricing things would work more efficiently. After all, why wouldn’t more companies step in to fill the need for those cancer drugs? Could it be that they’re being paid artificially low prices because of Medicare/medicaid reimbursement rates and no one can produce it cheaply enough? Or is it barriers to entry like the FDA that keep new market entrants from entering and picking up the slack?

    Either way, I highly doubt MORE government, as this article implies, will be solving any problems. Fix the government we have first.

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  2. 2. bigbopper 10:55 am 09/14/2011

    It’s not hard to figure out what’s going on. The drugs which are in short supply are mostly older drugs for which the patent has now expired, so there’s much less profit in making them. The drug companies mostly want to focus on new blockbuster drugs with big profit margins (and unfortunately often only marginal clinical benefits). If our healthcare system was as concerned about actual health care as it is about making money, we wouldn’t have this problem.

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  3. 3. Soccerdad 10:56 am 09/14/2011

    The author doesn’t even explore the reasons for shortage, then exposes his bias that more government is the answer. If you are interested in learning more you can read a WSJ article from July 13 entitled “Most Hospitals Face Drug Shortages”. The root causes seem to be low price which limits the number of manufacturers along with FDA imposed shutdowns. These are injectibles with extremely strict manufacturing standards.

    So, let’s explore what would happen with more government – in the form of Obamacare. Price pressures will only intensify as the government gains more control of the process, making this type of problem more widespread than its rather limited scope at the moment. Further, the FDA is not known for being terribly reasonable in enforcement of manufacturing standards. There were likely some i’s not dotted or t’s not crossed in some useless piece of paperwork. I have worked in drug manufacturing and have seen this firsthand. In this case, too much government does seem to be contributing to the problem.

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  4. 4. jstaf 4:09 pm 09/15/2011

    Hmm, so countries where the government runs the entire health system pay 50% of what we pay for equivalent services leads people to believe that Government involvement is the problem.

    The problem is the same one we had in 2001 and 2008, banking and investment groups are riddled with greed and corruption, they pump up lending channels with PR campaigns and lead the sheep to slaughter.

    Corruption is the cause of the small issues with the FDA also but turning the population of this country over the sole discretion of for profit drug manufacturers has to be the best idea since we decided to guarantee those MBS’s the newly unregulated banks put together in a fit of creative innovation with tax payers money.

    People who think lower regulations will create jobs are wrong, it will lower overall payrolls, pass the cost on to future generations in the form of polluted water and air, and continue to funnel money to fewer people who no longer need to create jobs in the US.

    We need lower taxes on companies and higher taxes on individuals, in some progressive fashion that strives for a rational payment for value received by all citizens.

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  5. 5. jgrosay 5:58 am 09/20/2011

    The Dutch pharmaceutical company Organon was founded by a fellow that owned an slaughterhouse, he felt uncomfortable about the glans of animals being discarded, and started producing hormone extracts from it. The cost of one vial of an anabolic drug they produced was less than 80 dutch Guilder cents, and the price to the patient around nine Guilder, salaries of all employees and opportunity costs included in the cost. Profits of pharmaceutical industry are high, but they have to maintain a high revenue line, they can always have some new product from competitors taking their’s out of market; research is expensive, and most of it results in something good for nothing at all. Maybe this is the reason why the marketing price of a drug is set to pay all research and launching expenses in the first two years of sales. That kind of setting keeps going on a steady and fast flow of drug therapy improvements for the ill.

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