Can you measure the value of a life-saving drug?

February 21st, 2018

By Judith Garber

The release of Kymriah, a new CAR-T therapy for aggressive childhood leukemia, was remarkable not only for its clinical effectiveness, but for its hefty price of $475,000. Including hospitalization and managing side effects, experts estimated that the total cost of treatment could reach $1.5 million.

How do you find a price for a drug that saves someone’s life?

In response to concerns that the drug is priced unfairly high, Bill Hinshaw, the head of U.S. oncology at Novartis, said that they easily could have charged $500,000 or even $800,000 for Kymriah. His justification is that Kymriah deserves a “different kind of value proposition” because there is no other option for children with aggressive lymphoblastic leukemia.

Here’s where we get into a central dilemma of the drug pricing debate – how do you value a drug that saves someone’s life? Pharma advocates like John LaMattina, director at Ligand Pharmaceuticals, argue that a price of $475,000 is fair because a child’s value to society and future economic contributions would be much, much more:

“Kymriah restores the life of a child or teenager, which is invaluable to his or her parents and family. In addition, the contributions that a person makes to society over the course of a lifetime are quite meaningful. How do we value that? In the U.K., using a calculation called “Quality-Adjusted Life Years” (QALY), they use a value of $50,000 per QALY. Using this methodology, one could argue that a drug that restores the life of a child could be worth $50,000/year for the rest of that patient’s life… Against this backdrop, Novartis’ price of $475,000 doesn’t seem unreasonable.”

Of course a human life is worth more than $475,000, or $1.5 million, or any monetary amount. But using this logic, we should be pricing all life-sustaining or life-saving medications at $50,000 a year. Why not raise the price of insulin from $300 to $960 per vial? Why not raise the price of penicillin or other antibiotics from $15 to $450,000? If someone with severe dehydration needs an IV, that should cost $1 million too! Isn’t someone’s life worth that much? 

Using this logic, why not raise the price of insulin from $300 to $960 per vial?

In fact, this is not far from what’s happened with several drugs. In 1996, the price of insulin was $21 per vial (about a month’s worth); today, it’s nearly $300. The dramatic increase of EpiPen prices from $57 to $500 in ten years led to congressional investigations of Mylan in 2016. And let’s not forget Martin Shkreli, who raised the price of Daraprim, a drug that treats a life-threatening parasitic infection, from $13.50 to $750 per pill. 

The reason these price increases have come under fire is because the drugs don’t cost that much to manufacture and the technology isn’t new. It’s an obvious profit-grab at the expense of patients’ lives. With Kymriah, it gets more tricky because it’s a breakthrough technology. However, as patient advocate David Mitchell and his colleagues write in an analysis in Health Affairs, at its current price, Novartis will make a net profit of 65 percent, which is more than twice the amount the company generates on its current product portfolio. They estimate that a price of $160,000 would give Novartis similar profits compared to previous years, as well as covering research and development spending. 

Mitchell and colleagues’ study, while unlikely to change the price of Kymriah, is an interesting and much-needed exercise in new ways to measure drug pricing. Basing prices of new drugs on “industry norms” only creates a spiral of price inflation, as does evaluating “cost-effectiveness” based on prices of existing treatments. Evaluating how much pharma spends on research, development, and manufacturing, while taking into account taxpayer investments, is a good start toward finding a price that’s reasonably affordable but still incentivizes research.  

A patient’s life is priceless, but setting absurdly high prices for life-saving drugs means we’re holding patients hostage. We need to have conversations about pricing and value that include patients, and more investigations into the real investment of pharma in new research, so we can find a middle ground and an affordable price for life-saving drugs.

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