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FDA Should Consider Cost in Some Decisions

FDA decides whether drugs, biologics and medical devices are safe and effective and can be marketed legally in the United States. The agency analyzes risk-benefit, but never cost. In contrast, public and private insurers, along with physicians and pharmacists, have the responsibility for cost-benefit decisionmaking.

FDA Matters has always felt quite strongly that this was the right way to allocate roles. Safety and efficacy determinations are difficult enough without weighing cost, so keeping a barrier between them makes sense. Two events this past week have left me wondering whether there are certain limited circumstances when FDA should be able to take product cost into consideration.

On September 26, 2011, The Oncology Commission of the British medical journal, Lancet, released a report entitled: “Delivering Affordable Cancer Care in High-Income Countries.” The 40-page report is wide-ranging, but its conclusion straightforward: as cancer care grows more expensive (and it is doing so at a rapid pace), affordability, accessibility and value are issues that need to be confronted aggressively.

Medicare, Medicaid and private payers are undoubtedly looking at this report, hoping to glean insights on cost containment strategies that can mesh with improved cancer care. They may also be looking for support and better rationales for tough decisions they may need to make in the near future.  

FDA also has a stake in affordable cancer care. The growing problem of drug shortages in the United States is heavily skewed toward oncology drugs (mostly generic injectable products). Patients suffer, research is delayed, and more expensive drugs are often substituted (or patients do without).

While ingredient shortages and manufacturing problems play a role, there are also economic drivers. In many cases, it is not sufficiently profitable for manufacturers to produce older oncology drugs. FDA cannot hope to  improve the shortage situation without considering cost—and may need to find ways to favor less effective or riskier products only because they can be made available at a market-driven price.

FDA also plays a role (however unintentionally) in exacerbating the crisis in affordable cancer care. Oncology is one of the hottest areas at FDA, with a large number of new products added to the market over the last few years. More are coming. Increasingly, they are being priced at about $100,000 per cycle. Some patients may need multiple cycles or multiple expensive drugs, all of which contribute to further cost escalation.

This brings us to the second event that occurred last week. I was asked the seemingly naïve question, what would FDA do if a drug was only 90% as good as the safest and most effective therapy on the market (the standard of care), but would be available for only 10% of the cost? I gave the stock answer: FDA only approves therapies that are as good as or better than the existing standard of care. The cost aspect is irrelevant and would never be considered or even discussed.

But then I thought about the Lancet Oncology Commission report. Wouldn’t patients benefit if FDA had some room to consider standards of care, risk-benefit and comparative cost? It scares me to write this….the whole notion of FDA putting cost on the table seems like an abandonment of principles, as well as fraught with potential misuse. Certainly, FDA should not be rejecting therapies because they would be expensive.

In a sense, there are already two possible exceptions. To demonstrate bio-equivalence, generic drugs must have a bio-availability profile within the range of 80% to 125% of the innovator drug. For potentially expensive new products, there is the possibility of approval based on clinical trials that show the product is “non-inferior” to the best therapy on the market. It is possible that a product could be approved as non-inferior with a 10% margin of error, setting up a “90% as good” paradigm. 

But neither of these situations gives FDA explicit permission to say: we are approving a drug, biologic or device that is not quite as effective or safe because it will make care more affordable and accessible. I am not yet an advocate for this….but I think it is one of the possibilities that we need to be discussing. 


The Lancet Oncology Commission Report is available only as a reprint from Lancet, which charges for it. http://www.thelancet.com/commission/delivering-affordable-cancer-care-in-high-income-countries. If any reader knows of a site where it is available without charge, please let me know.   

US press coverage of the Lancet Oncology Commission Report was thin. Here is the Reuter’s story: http://www.reuters.com/article/2011/09/26/us-cancer-costs-idUSTRE78P26B20110926

A prior column with some relevance:

Drug Product Pricing 101   March 26th, 2011

A thousand good deeds of the pharmaceutical and biotechnology industries have been washed away by the decision of K-V Pharmaceuticals to charge $1500 per dose for Makena, a drug that reduces the risk of pre-term delivery in pregnant women. There is an easy comparator: the same therapy has been compounded in pharmacies for years at a cost of $10 to $30 per dose. Congressional and public reaction has, quite understandably, been one of outrage.

No one knows the right price for this drug, but there are ways to find out. In conversations this week, FDA Matters discovered that many knowledgeable people don’t know that there are tools to rationally evaluate and guide product pricing decisions. Read the rest of this entry

4 Responses to “FDA Should Consider Cost in Some Decisions”

  1. Matt Duffy says:

    FDA is continually squeezed between those looking for tighter regulation to avoid safety problems and those preferring a more laizze fair approach to allow patients more access to needed medicines. That seems to be a tall enough task for e agency; some might even say more than tall enough.

    Asking FDA to take on the task of considering cost would be a dangerous choice for two important reasons:
    1) it would immediately put FDA (and the Federal Government) ahead of the market in making pricing determinations, an inherently inefficient and stifling position
    2) FDA is highly unlikely to be able to handle this job well. Throughout the country, in managed care organizations and academia alike, there is little agreement on the proper methodology to approach cost effectiveness questions. Imagine trying to now write codes and statutes to handle this task! Asking FDA to begin making these judgements invites massive uncertainty – another inherently inefficient and stifling position.

    FDA is uniquely suited and vital to making safety and efficacy decisions for marketed drugs and devices. However the cost question should be handled by the market, letting those who will live with the consequences make the choices. While imperfect, you can see it working in the reaction to KV’s price action and recent decisions regarding Avastin in certain breast cancers. I think most would agree this is preferable to the situation in the UK with NICE, which is the type of outcome we could envision if we tried to put FDA in this difficult position.

  2. jabebe says:

    Although safety and efficacy is the historical framework for FDA to regulate drugs,biologics and medical devices, the sustainability of cost through insurance policies, Medicare and Medicaid services does force us to look at the corner of cost-benefit ratio in decsion making. As you pointed in your article, Steve, and also the media reports that the expiration of patents,entry of generics and cost are creating a shortage of available therapeutic drugs, especially in oncology to a crisis point…..the qustion is whether FDA is sidelined due to the traditional practice of safety and efficacy to mitigate risk or use best practice of incorporating cost-benefit as an option to the patient. It is an issue that will not go away at midnight.

  3. Ron Rader says:

    Those calling for consideration of costs by FDA in approvals risk not getting what they want, apparently some type of FDA guidance or rulings on appropriate costs for specific products, or even more extreme, denials based on perceived excessive high cost. For example there is recently and apparently still ongoing a campaign by venture capital organizations and small biotech companies to require FDA consider cost considerations from the developers point of view. While this mainly involves faster and simpler approvals, the issue of developers needing to make their expected or needed profits could well overtake or counterbalance any considerations given to consumer costs. It would be hard or impossible (simply unrealistic), particularly in the current political climate, for FDA to not consider developers costs and needed profits in cost-benefit rulings. In fact in today’s political climate, developers’s needs for profits could well be given higher priority than consumer costs. Actually getting Congress to authorize any FDA consideration of costs (which seems likely to be needed for this to happen) could result in a situation even less desirable to consumer advocates than the current situation. Keep in mind that the pharmaceutical industry is genuinely contracting, losing revenue, cutting back on R&D, etc., and that for many, fixing or helping alleviate this (with pharmaceuticals one of the few profitable industries still largely based in the U.S.), including allowing costs to support development of more and better new products, is more important than fixing problems of high consumer costs on newly-approved products (I presume cost controls would not be retroactive or cover all products). Many would point out that the health and welfare of the nation are much better served, particularly in the long-term, by a healthy indigenous pharmaceutical industry turning out more new and improved products with increased competition vs. trying to impose some type of UK NICE-like or other cost controls. So, those seeking FDA consideration of costs need to make sure they have sufficient support for this up-front before bringing this issue to Congress, making it an issue in upcoming political campaigns, etc.

  4. jabebe says:

    I have identied a Small Scientific Conference grant funded by FDA,
    The company I represent,Venture Group Enterprise,LLC is interested to submit a proposal to organize an event for this topic discussed in this post and related topics.The issues on safety and efficacy, cost-benefit to developers,the crisis of shortage of therapeutic drugs in oncology and infectious disease needs to be addressed by experts like you using webinars and conferences.If the idea appeals to you contact me through Steve.

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