Treating cancer becomes 10% more expensive for Americans every year

In 1971, president Nixon declared a war on cancer. But if drug prices are any measure of success, Americans are surely losing: they pay 50-100% more for cancer drugs than patients globally.

According to a recent study by MIT researchers (pdf) David H. Howard, Peter B. Bach, Ernst R. Berndt and Rena M. Conti, the cost of new cancer drugs has increased 10% annually, even when adjusted for inflation. The group of MIT economists selected 58 cancer drugs approved between 1995 and 2013 and observed the launch price through the years, finding that it increased regardless of the drug’s impact on survival.

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Chart by David H. Howard, Peter B. Bach, Ernst R. Berndt, Rena M. Conti

The cost at which a new drug is put on the market (adjusted for inflation and survival benefit) rose $8,500 on average amongst the 85 considered in the study. The authors write:

In 1995 patients and their insurers paid $54,100 for a year of life. A decade later, 2005, they paid $139,100 for the same benefit. By 2013, they paid $207,000.

The US health care system puts few limitations when it comes to drug pricing; a Wall Street analyst notes that “market structure effectively provides no mechanism for price control in oncology other than companies’ goodwill and tolerance for adverse publicity.” Americans spent $37 billion on cancer drugs in 2013 (latest available data), about 40% of an entire global market of $91 billion.

The authors of the paper reject the notion that it’s the developing cost for new drugs that cause the surge in price:

We believe the direction of causation runs from prices to research and development costs—as prices increase, manufacturers are willing to spend more to discover new drugs—rather than the other way around.

While the US ranks high in the five-year cancer survival when compared to other OECD countries, the cost of health care is a huge setback. Health care costs are the first cause of bankruptcy in the US, and cancer patients in particular are two and a half times more likely to go bankrupt than other Americans. The high cost of cancer drugs also affects both patients’ and doctors’ decisions on therapy.

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