Performance-based pricing, part 2


Last week, I posted a discussion of performance-based pricing of new drugs.  Today, a group of physicians who treat chronic myelogenous leukemia (CML) published a piece in Blood that addresses the same topic.  A few key excerpts:

How are the prices of cancer drugs decided? Of the many complex factors involved, price often seems to follow a simple formula: start with the price for the most recent similar drug on the market and price the new one within 10-20% of that price (usually higher).

 

If drug price reflects value, then it should be proportional to the benefit to patients in objective measures, such as survival prolongation, degree of tumor shrinkage, or improved quality of life. For many tumors, drug prices do not reflect these endpoints, since most anti-cancer drugs provide minor survival benefits, if at all.

The authors go on to make further arguments, some of which are more relevant to CML (which is now a chronically managed disease, similar to HIV) than to carcinomas.  But the central theme about pricing to value is worth considering across cancer and all of medicine - not just for the moral reasons cited in the CML paper, but because it's just a matter of time before pricing reform is either implemented by or foisted upon pharma.  Performance-based pricing is one of those rare ideas that makes both good moral sense and good business sense.