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Why Are Cancer Treatments So Expensive? A Pharma Executive Speaks Out

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Published on August 12, 2016

Why are cancer medications so expensive? In part one of an in-depth, three-part interview examining drug costs, Hervé Hoppenot, CEO of Incyte Corporation, shares his perspective on this topic. Listen as Hervé discusses his opinion on the policies of the U.S. healthcare system, the role of the pharmaceutical industry, and the impact of rising drug prices on patients.

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Transcript | Why Are Cancer Treatments So Expensive? A Pharma Executive Speaks Out

Please remember the opinions expressed on Patient Power are not necessarily the views of our sponsors, contributors, partners or Patient Power. Our discussions are not a substitute for seeking medical advice or care from your own doctor. That’s how you’ll get care that’s most appropriate for you. 

Andrew Schorr:

Hello and welcome to Patient Power. I'm Andrew Schorr. As a two-time cancer survivor, of course I'm very thankful that there are medicines that have helped me in the past and help me currently. I take a daily medicine, for four years, now; a little white pill in the morning and at night and it’s made a big difference. But these cancer medicines are expensive. Joining us to help us understand the expense and the various perspectives on it is a leader in the field, Hervé Hoppenot who is the CEO of Insight, which is of a leader in the MPN field but with a pipeline of drugs in cancer. Hervé, thank you for joining us. 

Hervé Hoppenot:              

No, thank you for inviting me. I think it’s a very important dialogue, and I'm very happy to be connected through this system with you this afternoon.

Andrew Schorr:                  

Okay. Hervé, so I want to understand for all of our audience, help us understand why can drugs cost so much. We know that it costs you billions of dollars, even, to develop a drug. Is that what the cost is based on? Help us understand because we all want to have access to what gets approved that might be right for us.

Hervé Hoppenot:              

As you know, it’s a question that is now becoming very much top of mind for many people who are speaking about the system and the healthcare system in this country. I want to maybe to answer it two ways. The first is to step back a little bit and think about the way systems work around the world and analyze that.

Because the U.S. system, and I'm a U.S. citizen, and I've been here for 25 years, and I really share all the experience that many people have with the healthcare system here—it is fairly different. And it’s evolving in ways that I think [are] not helping cancer patients. Maybe that’s why we have such a loud dialogue now about this issue of price of drugs. 

Because at the end of the day, what I believe is that cancer is a catastrophic disease. And catastrophic disease, catastrophes in general, are exactly what insurance is supposed to cover. And what you find in many countries around the world is that for patients diagnosed with cancer, and I've seen that for 30 years I've been in this field, we have in Western Europe, in Japan, in many countries withmost developed economic system, an insurance system that is, in fact, covering cancer patients without having to go through mechanisms of copays and coinsurance and what we are observing here.

And then you have countries around the world where there is no good insurance system at all, and you can imagine it’s covering a large geography in many countries outside of Europe and some parts of Asia. And there it’s basically a self-pay kind of system, which obviously is leading to all kinds of inequalities where basically people can be treated when they have the resources and they cannot if they don’t. Or, and that’s where many of the pharma companies are intervening, they have to have a special access system for their products. I've done that; I've seen that at work for many, many years. What’s happening in the U.S. is that we have a hybrid of the two.

There is a certain level of insurance, and it’s government insurance through Medicare and Medicaid, and it’s private insurance. And these insurance companies have been for years trying to modulate the use of medicines by using a system of copay and tier systems so that the copay will be higher for products that have a higher price. 

The reason for that is that cancer patients, and not only cancer but serious, catastrophic-diseased patients are really in the middle of a system that was not designed for them. The copay system was very soundly built so that when people are prescribed fexofenadine (Allegra) or cetirizine (Zyrtec), if one of the two is economically better, they will have to pay from their own pocket the difference which you could argue is not a big public health issue and is very rational, and is relatively limited and is creating sort of an invisible hand kind of incentive for people to use equivalent products at a lower price.

What we are seeing today in the U.S., and I think that’s where many of these issues are coming from, is that this same copay system has been used to put the burden of the cost on patients. When, in fact, when you think about it, it is really the insurance companies’ responsibility to cover these costs. I think it’s important to look at it with that perspective a little bit. I know many people could have different perspectives, but that one I think is really, really important.

Because the second part is that cancer costs, and we’ll speak about it I'm sure for the next few minutes, is coming from a multidisciplinary approach to treatment of cancer. So it’s about surgery; it’s about tradition; there is hospitalization; there are a number of costs of relative care; and then you have medicines. And medicines are not the biggest part.

In fact, when you look at the cancer cost overall, medicines in the U.S. are around 20 percent of theentirecost of cancer. And what is very odd, and I think it’s just the fruit of history of what has been happening when the system was evolving, is that the copay that is required from patients is higher for medicines than it is for any of the other 80 percent of the costs that are coming from other parts of the system.

And that’s why we end up where we are. We are basically today, patients in the U.S.—many patients, there is a myriad of cases, and I can try to describe them quickly. But patients in general end up having to carry, to pay for a larger part of their medicines, the drug part of their cancer treatment than they have for the rest. And that’s why there is so much noise about it, because I think it’s fundamentally unfair, and it’s not something that is helping. 

And it’s not helping society, obviously, because frankly there is a sort of discrimination based on people with money versus people with less money, which I think is intolerable in 2016. But it’s also bad for the system, because the use of medicine has been shown, in many cases, to, in fact, save money to the payer system by reducing the rate of hospitalization or the rate of other interventions. So it’s not even a good system to save money for the healthcare entire standing. It is, in fact, very progressing, and it certainly is something that needs to be dealt with.

I don't think the system as we have it today is very sustainable. So what we are facing in our case where we have this work we do over a long period of time, we spoke a little bit about ruxolitinib (Jakafi) or any of these products that have been helping patients with cancer recently.

We are speaking literally of 10 years ago or before even the drug became available commercially when decisions were made to start investing through research. We have chemists who are working years, two or three years in a row on a project like that. And we have biologists, and we do all the toxicology work. Then we go into the clinic, where finally we can start evaluating if these drugs are helpful for patients with cancer.

Then we do that for a number of years, and probably 10 years after we started, we are entering the sort of the commercial phase of the project where the drug is becoming available and is reimbursed, in many countries fully with no copay, or in the U.S. with this basically mixed system of reimbursement and becomes available for patients.

And what many companies are doing is trying to permeate the weakness of the system by creating patient financial support systems for when the insurance companies are not able to or are not choosing to cover the costs of these products. And as you know, there are is many pharma companies—I don’t know the percentage but most of them have a program for patients who are not insured—and that’s still something that we can see beyond the U.S. —have programs of copay assistance for patients who have a certain level of coverage and a certain level of income.

And then when patients are fully covered, which is still a good part of the population in that case, then it will be covered by the insurance companies. So that sort of cycle that goes from 10 years of investment into relatively adventurous type of research where you are never really sure exactly where it’s going to go, to the day when it’s becoming available is really what people are paying for 

It’s society interested in having a very large number of private companies like this one, and like most of the pharma companies we are speaking about, invest with the hope of return in the year 2028, ’29; sorry. That’s what we do at Insight. When you think of what’s behind the economics of this industry, we have today hundreds of chemists here. We are in Wilmington, Delaware where we have hundreds of people working in biology. And they are working on projects that may or may not be available for patients in 2027, ’28, ’29.

So it is a cycle that is extremely long, and that’s basically what goes into the cost structure of this industry as a whole. Again, I think the cost of the product, and you could argue there are many different ways countries are dealing with it.

Some of them have a government who is saying okay, your price is this. And they do calculations and say if your drug can reduce—look at a disease like CML, which is a best example of success from pharmaceutical intervention to date, let’s say. We have pills that can literally transform a disease like CML. And what you see is that the cost of bone marrow transplant, which was not uncommon in the treatment of CML, the hospitalization which was going on during the long, catastrophic evolution of the disease; all of these costs have been more or less eradicated by the availability of new products.

And this TKI, and they were the first, in fact, to become available. And what you see today, we are 10 years after, and it’s a story that is very familiar to you and I because it’s really a call to the discussion about the innovation in cancer.

Today these products are generic. So all of this innovation because available to society, and these products are still delivering exactly the same values that they had during the time when they were under patent protection. So the logic of the system is long term investment, a certain duration of exclusivity based on patents that is available, and then everything is becoming public ownership, literally, after the patent has expired.

And that’s a model that has shown a lot of resilience in stimulating innovation, in getting new products widely researched through private investment, which I think is very, very important. And frankly, as a member of the U.S. community, it’s also one of the industries where this country is the leader of the world.

When you look at most of the new drugs that have been discovered over the past 10 years of immuno-oncology, you could look at the list of recently improved products; most of them, the most important of them have been discovered here in the U.S., and I think it’s an industry through this system that has been very fruitful in many, many ways in terms of helping patients with cancer and in terms of creating a very dynamic industry. 

At the end of the day, if the insurance system does not cover that cost, I think there is no possibility to make the system work. So it’s really back to where I started of saying what we need is to find a way so that insurances, both government and private insurance, are understanding that having a reasonable use of this product in the right patient, at the right time, at the right dose, etc., will in fact be beneficial to the healthcare system.

It’s a bit like what we have seen with HIV 20 years ago, now. I was part of it at the beginning where there was a very big fear that the cost of medicine was going to bankrupt the entire system, because people were multiplying everything by big numbers. And what we have seen is exactly the opposite; is that more use of medicines ended up translating into firsts; a very big improvement in the treatment of the disease.

Please remember the opinions expressed on Patient Power are not necessarily the views of our sponsors, contributors, partners or Patient Power. Our discussions are not a substitute for seeking medical advice or care from your own doctor. That’s how you’ll get care that’s most appropriate for you. 

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