The Covert Rationing Blog

Is Treating Cancer Worth It?

July 24th, 2008 by DrRich

Yesterday, Jacob Goldstein of the Wall Street Journal Health Blog pointed out the financial dilemma that has been created by evidence that a new cancer drug, Nexavar, is effective in treating liver cancer.

Most liver cancers are particularly impervious to chemotherapy, and until Nexavar came along no chemotherapy had ever been shown to significantly prolong survival. So when Nexavar improved the overall survival of a subset of patients with liver cancer in a well-designed randomized clinical trial (RCT) last year, the FDA (recognizing a true breakthrough when it sees one) quickly approved the drug.

The problem? Nexavar costs over $5000 per month. That, DrRich points out, is even higher than your average monthly health insurance premium. This means that any insurance company (or government) that agrees to pay for Nexavar is going to be out some big bucks.

(The good news for the payers, if there is any good news, is that Nexavar only prolongs survival by an average of three months, and the one-year survival of a population of patients with liver cancer on Nexavar is still less than 50%. Just think of the damage if Nexavar prolonged survival by several years!)

The economic question created by drugs like Nexavar - which result from extremely sophisticated and costly research and development processes, and whose benefits are undeniable but perhaps marginal - is likely to be asked several times over the next few years. We are also hearing those questions expressed, for instance, regarding the drug Avastin, which is used for lung, colon and breast cancer. Like Nexavar, Avastin has clear-cut and undeniable benefits that have been proven in RCTs. Like Nexavar it is very expensive. And also like Nexavar the duration of its benefits are measured in months, not years.

The form this economic question usually takes is: Should we really pay for extremely expensive cancer drugs like this when the expected benefit is so transient? While DrRich does not pretend to have the best answer for this question,* he will make two observations.

First, the reason it is so difficult to answer questions like this is that we in America (citizens, the government, and the insurers) refuse to acknowledge that there are limits to what we should expect from our healthcare system. We expect to receive any bit of healthcare that offers even a possibility of benefit, even if that benefit is likely to be marginal or transient. We expect our researchers to work day and night to cure every disease, no matter how rare, and we become indignant when progress does not seem rapid enough for our particular disease; indeed, death itself is merely a manifestation of insufficient research. In other words, where healthcare is concerned, there are and can be no limits.

Given this “no limits” paradigm, when our society is faced with the inescapable need to ration healthcare, that rationing can only be done covertly. There’s no other way to do it.

And under covert rationing (whose very purpose, again, is to preserve the illusion of “no limits”), there’s simply no mechanism, or even justification, for addressing questions like the one raised by Nexavar and Avastin. Our procedure is: we do the RCT, and if the RCT shows any measurable benefit, we pay for it. End of story.

So the insurers and the feds won’t be able to base their payment decision on some objective and transparent cost-benefit analysis for Nexavar, evaluating where this analysis falls in relation to all the other cost-benefit analyses they perform for all the other forms of therapy. Rather, they’re simply going to have to announce they’re paying for it. They have no other choice, because to do otherwise would question the “no limits” paradigm.

And then they’ll perform the unavoidable rationing by some covert means probably having nothing whatever to do with this particular therapy, or of any particular therapy, but rather, according to whatever means they can get away with, wherever in the healthcare system and with whichever patient that might be. That’s the job we’ve assigned to them. And they’re very good at it.

Second, the financial questions raised by Nexavar, Avastin, and similar therapies point out yet again that the Axiom of Industry often invoked by healthcare policy experts - that is, that improving quality will always reduce cost - simply does not work in healthcare. There are many, many times when achieving the best possible clinical outcomes (i.e., optimizing quality) greatly magnifies the cost of medical care.

The real problem with Nexavar and Avastin is not that their beneficial effect is just transient. That fact, to be sure, gives insurers and commentators a convenient handle, some basis for whining about these drugs that will engender sympathetic murmurs from certain quarters (though, as we have seen, it will ultimately not get them out of paying for them). But it’s not the problem. Indeed, the fiscal challenge for the payers would be much worse if these expensive drugs resulted in very prolonged survival. The real problem is that some of the stuff that works really well in healthcare is just really expensive, you see, because a lot of expensive research and technology went into developing and producing it. It just costs a lot.

So when some expert comes along and tells us that achieving a cost savings resulting from some brilliant new initiative - such as pay for performance, disease management, medical home, etc., etc. - will necessarily and directly yield an improved quality of care from that same initiative, we can immediately dismiss him or her as being either disgracefully ignorant of his or her chosen field of study, or disgustingly deceitful. In DrRich’s experience, the odds of any particular policy expert being disgraceful vs. disgusting is roughly 50-50.

* He does, however, pretend to have a transparent and equitable process for getting to a reasonable answer, which can be found in his book.

Posted in General Rationing Issues

11 Responses to “Is Treating Cancer Worth It?”

1. Red Baron wrote on 07/24/08 at 3:44 pm :

   Even if you forget moral issues like whether spending ‘large’ amounts of money on people who are going to die in a few months is a good use of society’s money or not (I like to call society ‘the collective’), there is still a MAJOR flaw in this logic from an economics standpoint that makes the whole article next to meaningless.

   The flaw centers on a frame of reference issue. Life and markets ‘look forward’ but journalists try to reconstruct by ‘looking backward’. And this difference makes all the difference (a little like Einstein and relativity).

   For you need to remember that a drug researcher or a drug company never actually know whether a new medicine like Nexavar is going to be ‘a cure’ or just ‘a little bit better’ until the drug has been discovered and studied. Consumers might look at the high retail prices and say ‘we can’t afford this’, but that is VERY different than saying ‘but we already developed it and now want to use it because it works’. Most of the high retail prices a consumer pays represent recovery for development costs + profit. Yet the actual cost of producing a drug which is well understood is quite low—in fact often next to nothing.

   The classic example of this might be Prilosec. Remember how it cost many thousands of dollars a year when it first came out so that its use was limited to treating things like Zollinger Ellison syndrome? Yet today the over the counter price is just a few bucks, as that is all it costs to actually make and distribute the drug now that most of the discovery issues related to the drug are known.

   Are the authors suggesting we discover and develop drugs, but once the cost to actually produce these drugs is at its lowest, we still not use them in patients? And if we did this, how do we reimburse the researchers who developed the drug?

   Or are they suggesting that someone else pay for the researchers? If they are, this solves nothing since where does that money come from?

   Or are they saying we should stop the research?

   Or are they saying we should lower development costs? If they are, then there have been lots of people in the drug industry for years that have been saying that in our quest to get it ‘perfect’, we are making it very very expensive.

   Or are they suggesting we stop research, or do ‘less’ of it?

   The way this article frames the rationing issue (which is the same way everyone else seems to frame the rationing issue) is meaningless.

2. Red Baron wrote on 07/24/08 at 4:23 pm :

   And when you say… “the fiscal challenge for the payers would be much worse if these expensive drugs resulted in very prolonged survival”

   This is not really true either.

   Remember, the drug company is looking at recovery + profit.

   If they can only get this from a patient in 6 months before they die, they have to front load the cost so to speak. If the drug company can get it over 10 years, costs per month drop dramatically.

   Keeping people alive longer is not necessaily more costly to the system, what matters is what the person who keep alive does with their gift.

   If they remain confined to a nursing home with a feeding tube or spend their remaining years on the golf course in a golden years prachute, then the collective gets no further productive economic activity from the patient, and it is pooer.

   But if the gift of life is given to a person who goes back to work and continues to contribute economically to the collective, keeping someone alive can be a wonderful collective financial investment.

   It is the difficult discussions around these issues that causes this to be “Where even angels fear to tread”.

3. DrRich wrote on 07/24/08 at 5:05 pm :

   Red,

   Thanks for your comment.

   My post did not attempt to address the issue of how a robust medical research effort could be maintained within a system of open rationing. It was simply an attempt to say that, under our present system of covert rationing, we have no way of addressing the question equitably.

   Your comment appears to indicate that we can only have true medical progress under our current system (or one like it) – I say this because all the possible alternatives you advance (under your litany of or’s) are bad ones. I disagree both that our current system is healthy for medical research, and that a system of open rationing would necessarily be bad for medical research.

   First, our current system is clearly headed towards demonizing medical research, especially research done by for-profit companies, and is likely some day to severely stifle it if not shut it down. Drugs like Nexavar and Avastin are seen as bad things (because of the cost) developed by bad people (who care only for profit) instead of as remarkable advances that, with enough time and enough work, will lead to affordable and much more effective solutions.

   So that’s one difference between us. You see the current system for conducting medical research as healthy and effective. I see current medical research as reasonably effective (though inefficient), but as being systematically driven down a path that will ultimately lead to its suppression. As I see it, if we don’t move away from covert rationing, covert rationing will act powerfully to stifle the kind of research that leads to expensive therapies, even if those therapies have enormous promise.

   Second, I can imagine (and have described in detail) a healthcare system which openly recognizes limits and which organizes itself in order to minimize the damage such limits do to individuals, and to make sure that the healthcare we do provide is maximally efficient and effective. (Covert rationing, on the other hand, maximizes inefficiency and waste; it must since it inherently must operate under a hidden agenda.) This envisioned system would specifically provide mechanisms for paying for new therapies like Nexavar and Avastin, that is, therapies that represent the first step in some new therapeutic pathway. It will do this because encouraging research that aims to advance diagnostics and treatments would be defined up front as a primary mission of the healthcare system.

   For instance, coverage for new advances could be guaranteed if they: can save the healthcare system money (spend $100 on this product, and you’ll save $120 over the next two years); can save society money (by, say, increasing the probability of returning a patient to productivity for at least a time); represent true innovation (something other than a me-too drug that offers only marginal benefits in a mature product line – both Nexavar and Avastin would fit here as innovative); show promise of moving some aspect of healthcare outside of the healthcare system and into the realm of consumer products (so that it eventually would be paid for like TV sets and cars). Other categories of medical advances that would receive guaranteed coverage could be imagined.

   Further, coverage would also be likely for therapies that measurably improve survival or quality of life. The coverage decisions here would be based on objective, pre-defined cost-benefit methodologies. Treatments that do not quite meet those pre-defined thresholds could be covered up to the threshold, and patients could be given the option of paying the difference themselves.

   In my view, as one who has worked extensively in the biotech industry doing R&D, such parameters for payment would wonderfully focus American entrepreneurs and researchers in a way they are not focused today.

   Again, details of my ideas are available, and I’m sure you will have quibbles should you choose to read them. Anybody would, and the specifics of any such system obviously would require much negotiation and debate, not to mention heartache and pain.

   But please don’t just assume that I haven’t thought about supporting ongoing medical research under open rationing. It is clearly a fundamental issue, and it’s one in which I am heavily invested in my “other” career.

   Finally, it is unfortunate that I cannot address all possible aspects of a question in each and every blog post. I try to limit the subject of my blog posts, such as they are, to one specific, circumscribed point. I am writing a blog and not a treatise. And when I fail at limiting myself I am not being comprehensive, but rather, undisciplined.

   Rich

4. Paul P wrote on 07/24/08 at 5:22 pm :

   Short answer: No.

   If a $5,000 a month drug can cure the cancer, then give it for as long as it takes.

   To “gain” months to a year, at those costs, will bankrupt the system eventually. Just as keeping people alive through artificial means, with months in the hospital or elsewhere, when there is NO quality of life, will.

   This country (Americans) can not seem to accept death. We’d better learn to, soon, or we will bankrupt ourselves.

5. Red Baron wrote on 07/24/08 at 9:26 pm :

   Rich, I am sorry, you have misunderstood my posting. Having only recently come to your blog, and not having read any of your older posts, I should have put two and two together and realized it was the ‘covert’ aspect of rationing you are were angry at, but I did not We are completely on the same page here.

   I am not suggesting that I prefer our system of covert rationing over a system of open rationing; in fact I prefer just the opposite. Open rationing seems a much ‘fairer’ way of keeping the discussin where it always should have been– a national values discussion.

   And yes, there are definitley some who demonizing ‘for profit research’ (Maggie Mahar comes to mind), but these people have been around since the beginning of time. For profit research remains the primary source of new drug development in countries that openly ration, I am not aware of a national outrage by British citizens at the profit motive of these researchers.

   Research can be focused, but there is also a Black Swan element to the whole thing.

   Paul,

   I agree with your view that IF cure than pay– but pay regardless of what the person does with the gift society has given them? The road to hell is paved with good intentions…

   But my main problem with your statement is your little rider “when there is NO quality of life”…

   What if it is 3 months of quality life, but still VERY expensive to maintain?

   Though I agree getting americans to start a rationing dialogue at this most basic of discussions is still a big improvement over the current national dialogue (which is none).

6. DDx:dx wrote on 07/25/08 at 9:34 am :

   If you are interested in the “marginal benefit” in medicine there are some more researched and established examples. For instance, invasive treatment for acute MI(CABG, or Angioplasty…NOT stents) have been shown to save lives in 2 and 4/1000 treated. That is we do 250 angioplasties and 500 CABGs to save ONE patient….Yet the “culture” of medicine is strongly on the side of intervention.
   I’ll bet if you asked most docs they do not know this Number needed to treat. We tend to believe we save every life we treat…And the patients with the scar on the chest and the inguinal hematoma tend to believe they were “saved” too…Something about us humans and “belief”…

7. Red Baron wrote on 07/25/08 at 10:48 am :

   DDx:dx Agreed.

   Have you ever looked at the number needed to treat and cost per year of life saved for telemetry?

   Makes cardica transplantation look like a real bargin in comparison.

8. Matt wrote on 07/25/08 at 1:19 pm :

   What about the idea that a lot of the scientific research that lays the foundation for these types of discoveries is funded with public money (government grants)? Isn’t there an ethical obligation to ensure that the therapies developed from this knowledge be available to the people that originally footed the bill?

9. Red Baron wrote on 07/25/08 at 4:41 pm :

   Matt, you are making a “which came first: the chicken or the egg” argument

   So while the answer to your question is “yes”, still the money that the government uses to pay for research is part of the reason healthcare is so expensive in the first place. The fact you do not recognize this implies you do not see the circular nature of economics.

   For if you ask “where did the government get the money to give to research grants in the first place”? You will of course realize the government got the money by taxing people. And taxing people means those who are taxed have less money to spend on healthcare in the first place vs. had the research never been funded and had they never been taxed in the first place.

   Asking that publicly funded research be made available to patients does not solve the issue of escalating healthcare costs at all. The belief that it does rests on falty assumptions.

   Only rationing solves the problem (i.e not doing the research), or improving producitivity (i.e. doing the same research for less money) solves the problem.

   This blog suggests that we as a collective consciously decide how we are going to ration based on common values we all share, as opposed to letting rationing happen in ways that might run contrary to our collective values.

   … I guess I should ask whether you agree with that description Dr Rich?

10. DrRich wrote on 07/27/08 at 10:40 am :

    Red,

    That’s pretty close. Covert rationing is so incredibly destructive to patients, doctors and society that, since rationing is absolutely unavoidable, open rationing - which offers at least a chance at doing the rationing in such a way as to minimize harm to individuals and to spend public healthcare dollars relatively fairly and effectively - has become a far more attractive alternative, as astoundingly difficult and painful as it will be to figure out how best to do it.

    Rich

11. Red Baron wrote on 07/27/08 at 5:08 pm :

    Then you and I strongly agree.

    Evolutionary psychologists believe almost all social interactions between two people can be described by a game theory ‘game’ commonly referred to as The Iterated Prisoner’s dilemma.

    These same evolutionary psychologists believe the emergence of societies can similarly be seen as a fractal of the iterated prisoner’s dilemma; a multiplayer version known as The tragedy of the commons.

    At the heart of both the prisoner’s dilemma and the tragedy of the commons, is trust-faith. Evolutionary psychologists believe that trust-faith itself is the very glue that holds the fabric of our society together (odd how close evolutionary scientists get to religion, but that is for another blog…)

    Open rationing engenders trust, making it is easy for all to to see what the rules we have and whether we are following them ‘fairly’. On the other hand covert rationing destroys trust, for reasons I should think are obvious to see.

    When trust is gone… Need I go further?

    You do the collective a great service, I for one say “thank you”.

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