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Why “cost-effectiveness” is becoming meaningless

As the prices for new drugs get higher and higher, it has become increasingly important to evaluate whether the health benefits of these drugs are worth the price. One way to do this is through cost-effectiveness analysis, which compares the clinical benefit and price of a new drug to existing alternatives. Think tanks and agencies have been hard at work analyzing the cost-effectiveness of Kymriah, a new cancer drug using CAR-T technology that is priced at a whopping $475,000.

“A BMW will look like a bargain when the only other car on the lot is a Ferrari.”

Unfortunately, this exercise will likely be meaningless, Dr. Peter Bach and colleagues from the Memorial Sloan Kettering Cancer Center write in a recent JAMA viewpoint. Because cancer treatments are priced so high already, Krymriah will seem cost-effective by comparison, even though the drug’s exorbitant cost may not reflect its real therapeutic benefit. “This is the same mechanism that allows a BMW to look like a bargain when the only other car on the lot is a Ferrari,” the authors write.

In this way, absurdly high prices beget more absurdly high prices. Prices for cancer drugs “have already increased more rapidly than the benefits they have provided patients over the past several decades,” the authors write. This price spiral has made cost-effectiveness a meaningless term. 

“How are we going to pay for this?”

Others point out that just because health economists can justify a $475,000 drug doesn’t mean people will be able to afford it. “How are we going to pay for this?” asked Dr. Harris Berman, Dean of Tufts Medical School, at a recent panel. “If this has to be factored into the premiums, which it does, the cost of health insurance is going to become absolutely unaffordable,” he said. Or at least, more unaffordable than it already is.