With standard chemotherapy, this man can expect to live around 12 months. That standard treatment isn’t all that expensive in today’s terms, only $25,000 and his insurance company will pick up the entire tab since he is already maxed out on his yearly deductible and co-pays.
But wait! Before prescribing the standard treatment, you find out there is a new chemotherapy on the market, one that costs $75,000 (in other words, fifty thousand dollars more than usual care) and has no more side effects than that standard treatment.
How much longer would patients like this have to live, on average, for you to feel that this new chemotherapy is warranted?
That’s not an easy question to answer. But it’s not an impossible one either. Clearly if the treatment would provide only, say, 1 day of additional survival on average, that would not amount to $50,000 well spent. Just as clearly, if this man could expect 10 years of additional life, no one would deny him this new treatment.
So when, between 1 day and 10 years, does it become a tough call whether to prescribe this new treatment?
In a recent study published in Health Affairs, my colleagues and I presented Canadian and U.S. oncologists with a scenario very like the one I described above. The median respondent to our survey indicated that the $75,000 drug would need to extend life expectancy by an average of 6 months to be worth prescribing, an answer that suggests that oncologists think that it is worth spending about $100,000 to extend patients’ lives for a year. Of course, oncologists’ opinions were scattered widely. Some said that a week or a month would be enough time to justify this drug. Others thought that, with medical care being so expensive, we need to demand more out of expensive drugs—a year of survival, maybe even two.
An interesting result then: No consensus among oncologists about the price of life, but a pretty strong sense that anything more than $100,000 for a year of life is starting to get a bit expensive.
But I’ve only told you about half of our study. Because you see, when we mailed this survey to oncologists, we conducted an experiment. In a second group of physicians, we said that the new chemotherapy costs $150,000. This treatment, in other words, wasn’t a mere $50,000 more expensive than standard treatment; it was $125,000 more expensive. With this much more money at stake, oncologists should demand even more out of this drug, right?
As it turns out, the median respondent to our survey once again indicated that they would prescribe the drug if it extended patients’ lives by an average of 6 months. For these oncologists, in other words, it was worth spending about $250,000 for a year of life.
What’s going on here?
The oncologists responding to our survey were essentially insensitive to the price of treatments when telling us how they would think about new chemotherapies.
I spoke about this experiment with a pharmaceutical executive once, a man who ran the oncology division of a major pharmaceutical company. He told me: “Oh yes, we know that oncologists are not very price sensitive.” That’s one reason why his company is able to charge so much for its new treatments.
How much? Six figure treatments are becoming common in oncology. Some studies tout new drugs that cost more than $100,000 for a course of treatment, and which extend people’s lives by maybe 2 months on average. That amounts to $600,000 per year of life.
I don’t pretend to know the price of life, or have unique insight into how we ought to decide whether expensive new treatments are worth their costs. But I do know that at some point, we need to demand more from these ultra-expensive medicines or we are going to spend our way into fiscal oblivion.
Peter Ubel is a physician, behavioral scientist and author of Pricing Life: Why It’s Time for Health Care Rationing and Free Market Madness. He teaches business and public policy at Duke University. Peter’s new book, Critical Decisions will be available in the fall of 2012. You can follow him on his personal blog.