8 September 2015 - How much would you pay to live an extra four months with prostate cancer? This isn’t an easy question to answer, but it’s highly relevant. A prostate cancer drug from 2010 offers a nice case study.

Dendreon, the company that developed Provenge – a treatment for castration-resistant prostate cancer (survival rates are abysmal compared to overall prostate cancer) – thought that $77,000/month (according to DrugAbacus, a tool developed by Dr. Peter Bach at Memorial Sloan Kettering Cancer Center) was the right price. The UK’s National Institute for Health and Care Excellence (NICE) disagreed, and using default inputs in the DrugAbacus tool, the drug would appear to be overpriced by about $50,000 per month.

Is Provenge overpriced? The pivotal trial for Provenge found that average survival time was about 4 months longer for Provenge relative to placebo. Assuming a full-treatment cost of $93,000 (not including associated costs of physician visits), the cost per life-year gained is a fairly significant $282,000 ($93,000/0.33=$281,818). And the quality of life in those 4 months isn’t likely to be great, which means that we shouldn’t value each extra month of life as we do a month in full health. (Typically, economists use a threshold of up to $150,000 per quality-adjusted life-year [QALY] to establish cost-efficiency. Some economists argue for higher or lower thresholds).

For more details, go to: http://www.forbes.com/sites/theapothecary/2015/09/09/why-im-not-worried-about-drug-prices-how-i-stopped-worrying-and-learned-to-love-the-100000-drug/