Cancer drug prices keep rising.  The industry says this reflects the rising costs of drug development and the business risks they must take when testing new drugs.  I think they charge what they think they can get away with, which goes up every year.

Let’s consider the two arguments, and how the latest new drug for lung cancer supports each.

The drug is Zykadia, Novartis ’ pill for a sub-type of lung cancer caused by a defect in the Alk gene, approved by the FDA in April of this year.  The company charges $13,200 per month for it.  Its competitor is the older drug Xalkori, Pfizer's pill that has the same mechanism of action and targets the same type of lung cancer.  Approved in 2011, it costs $11,500 per month.   In other words, Zykadia costs almost $2000 more per month.

The industry talks about the risk that a drug they develop may not work.  True, there are large risks, as clinical research often fails to pan out.  Novartis took that risk with Zykadia. But Zykadia is a me-too drug.  Xalkori, the drug it imitates, was the first of its kind.  So whatever Novartis’ risk, Pfizer’s was greater.    Yet Zykadia costs more.

The industry says that clinical research costs a lot of money because the FDA requires large human studies.  True.  Novartis had to run a trial of 163 patients to convince the FDA about Zykadia.  But Pfizer had to run two studies with 255 patients in total.  More studies with more patients means Pfizer spent more than Novartis on clinical research.  The pricing of the two drugs suggests the opposite.

For more details, go to: http://www.forbes.com/sites/matthewherper/2014/08/13/cancer-unpronounceable-drugs-incomprehensible-prices/