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October 15, 2012 12:21 PM The Buck Stops at Memorial Sloan-Kettering Cancer Center

By Austin Frakt

Peter Bach, Leonard Saltz, and Robert Wittes write in an NYT op-ed,

At Memorial Sloan-Kettering Cancer Center, we recently made a decision that should have been a no-brainer: we are not going to give a phenomenally expensive new cancer drug to our patients.
The reasons are simple: The drug, Zaltrap, has proved to be no better than a similar medicine we already have for advanced colorectal cancer, while its price — at $11,063 on average for a month of treatment — is more than twice as high.
In most industries something that offers no advantage over its competitors and yet sells for twice the price would never even get on the market. But that is not how things work for drugs. The Food and Drug Administration approves drugs if they are shown to be “safe and effective.” It does not consider what the relative costs might be once the new medicine is marketed.
By law, Medicare must cover every cancer drug the F.D.A. approves. (A 2003 law, moreover, mandates payment at the price the manufacturers charge, plus a 6 percent cushion.) In most states private insurers are held to this same standard. Physician guideline-setting organizations likewise focus on whether or not a treatment is effective, and rarely factor in cost in their determinations.

The authors also argue that we must consider patients’ out-of-pocket costs, which can be substantial, even for the insured. What’s interesting here is that organizations that are ostensibly in the business of managing health spending, public and private insurers, do not make coverage decisions consistent with that role. The buck has to stop somewhere, if not with insurers and patients, then with providers. Sloan-Kettering just accepted the burden.

[Cross-posted at The Incidental Economist]

Austin Frakt is a health economist and an assistant professor at Boston University's School of Medicine and School of Public Health. He blogs at The Incidental Economist.

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