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Now The Fastest Rising Segment of Health Care Costs

As public debate over the rapidly-increasing costs of cancer care continues to escalate, a roundtable of experts gathered at the University of Pennsylvania to discuss the topic.

Organized by Penn's Wharton Health Care Management Alumni Association (WHCMAA), the five-member panel weighed in on what a recent Institute of Medicine report called a "system in crisis." The IOM concluded that, "The cost of cancer care is rising much faster than for other diseases, and there are
panel headerPeter Bach, MD

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Peter Bach, MD, Director of the Center for Health Policy and Outcomes, Memorial Sloan Kettering Cancer Center.
Peter Fishman

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Peter Fishman, MS, CEO of Tolograph and former Manager of Global Pricing Strategy and Government Policy at Novartis.
Joseph Leveque

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Joseph Leveque, MD, Vice President, Bristol-Myers-Squibb, US Medical - Oncology.
Scott Harrington

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Scott Harrington, PhD, Professor of Health Care Management; Insurance and Risk Management; and Business Economics and Public Policy at the Wharton School. Also a Senior Fellow at the Leonard Davis Institute of Health Economics.
Jennifer Dreyfus

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Jennifer Dreyfus, MS, a Washington, D.C., bioethics consultant and former fellow of the Presidential Commisson for the study of bioethics issues surrounding genome sequencing.
Arnold Rosoff

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Arnold (Skip) Rosoff, JD, FCLM, Professor Emeritus of Ethics and Legal Studies, and Health Care Management at the Wharton School. Also a Senior Fellow at the Leonard Davis Institute of Health Economics.
few systematic efforts or incentives to eliminate waste and the use of ineffective therapies."

Financial catastrophe
The United States spends about $125 billion on cancer care annually and by 2020, that spending is expected to exceed $170 billion, up from $104 billion in 2006. The impact of those costs is frequently catastrophic for families. A study led by Scott Ramsey of Seattle's Hutchinson Institute for Cancer Outcomes Research published in Health Affairs in May found that people with cancer are 2.65 times more likely to declare bankruptcy than those who do not have the disease.

Despite all the money being spent on its treatment, cancer outcomes in the U.S. are no better than in Europe, where treatment costs are much lower. So what is driving the rapid growth in spending?

In the distributed backgrounder for their "High Cost of Cancer Care" roundtable discussion, the WHCMAA noted a number of forces that continue to drive cancer treatment costs upward. These include:
~ Monopolistic pricing based on patents
~ Inelastic demand for the therapy
~ Mandated Medicare coverage of all chemotherapeutic drugs
~ Lobbying and support for cancer care from the more than 250 U.S. cancer nonprofit organizations that generate significant negative publicity when insurers attempt to deny high-cost treatments.

Market distortions
The WHCMAA concludes, "In aggregate, these market distortions help create relatively higher and more 'protected' pricing in cancer care than in other therapies. They also incent drug companies to develop marginally effective treatments."

The WHCMAA is a professional organization representing more than 2,000 graduates of the University of Pennsylvania Wharton School's health care management programs who are highly placed throughout the global health care industry. These graduates are now senior executives, scientists, delivery system administrators, investors, and policymakers.

Among the panelists in the WHCMAA roundtable was Peter Bach, the Director of the Center for Health Policy and Outcomes at Memorial Sloan-Kettering Cancer Center, who was recently featured in a New York Magazine article that examined the meteoric rise in the cost of cancer drugs.

He noted that the law mandating federal programs to pay for all cancer drugs creates a system that lacks downward pressure on prices.

A 'beautiful monopoly'
Drug makers have a "beautiful monopoly," Bach said. While in other markets, increased competition leads manufacturers to lower their prices, the opposite has been true for the pharmaceutical industry: as more competitors emerge, drug companies raise their prices to match them.

To combat the proliferation of high cost drugs that offer little-to-no advantage over the drugs already on the market, Peter Fishman, a former global pricing strategy manager for Novartis, suggests adopting something similar to the United Kingdom's National Institute for Health and Care Excellence (NICE). Before a new drug or therapy goes to market in the UK, it must be approved by NICE, which evaluates it against the current standard of care.

While the idea of using such a system often incites fear of healthcare rationing among Americans, Fishman pointed out that a system of cost-benefit analysis that takes quality into account is used throughout Europe.

Drug companies' risk
According to Joe Leveque, vice president of pharmaceutical company Bristol-Myers Squibb, the high prices are attributable to the risk assumed by drug manufacturers. While Leveque agreed to the need to rethink the way cost-effectiveness is evaluated for cancer drugs, he also said that valuation of drugs must take into account their full lifetime value. While drug prices remain constant in Europe, in the United States, prices decrease over a drug's lifespan as generics become available, he said.

Wharton Health Care Management professor Scott Harrington agreed with Leveque that concern over drug costs is overblown, stating that high prices are necessary to incentivize the development of new drugs due to high break-even points.

Not evidence based
For Penn bioethicist Jennifer Dreyfus, there is a clear need for reform in the market for cancer therapies. Dreyfus cited the IOM report, which called cancer care "not patient-centered, accessible, coordinated, or evidence-based." She emphasized the need to distribute resources in a morally acceptable way, and underscored the potential value of directing more resources into preventative care, a topic that receives little attention in discussions of cancer costs.

Cancer's diverse character makes it inherently more expensive to treat than other diseases, and the rapid progress of cancer research makes it difficult to assess, since no one knows how close a breakthrough might be. Still, many believe there are effective means of keeping costs under control to a greater extent than they are today.

End-of-life decisions
An article in the New England Journal of Medicine outlined several potential fixes, from changing oncologists' attitudes toward the use of chemotherapy to better integrating palliative care to improved communication regarding end-of-life decisions.

Summing up the philosophical dilemma of the discussion that collegially pitted market proponents against egalitarian advocates, panel moderator and Wharton Law Professor Emeritus Arnold Rosoff turned to the politics underlying the issue.

"Which of these would you as an American want to live in," he asked the audience, "an egalitarian regime where all lives are equally valued so that all citizens have access to life-saving or life-extending therapies? Or a total market regime in which most things in life are rationed by the pocketbook, including health care? Why should cancer care be any different? Is it different? Should it be different?"

"If you're not comfortable with either of these extremes," he continued, "describe the hybrid that could allocate resources in cancer care in a way that you regard as equitable."

"And then," he said, "think about the chances of getting that solution adopted by the U.S. Congress in this day and age."

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Lauren Reed-Guy is a University of Pennsylvania senior majoring in English and a free-lance writer.

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