Million-Dollar Medicines

Photo by Kevin J. Miyazaki/REDUX

Jeanne Sather of Seattle, who is fighting metastatic breast cancer, orders her cancer drug, Tykerb, through the mail. Every time the small package arrives with her three-month supply of pills, she says, “I look at that little box, and it’s just hard to believe that I’m holding $10,000 worth of medicine.”

Even with the help of a special state health insurance plan, the 53-year-old freelance writer is struggling to afford the expensive new drugs that are helping her in her battle.

“I’ve been borrowing against my house to make ends meet, and that can’t go on,” Sather says. “I’m so afraid these drugs will cost me my home.”

Anna Burdi of Bartlett, Ill., who was diagnosed with multiple sclerosis in 2000, has faced that desperate choice, too. The 53-year-old former office manager was about to start a new job when she was hit with MS symptoms that left her too sick to work, and thus uninsured. She exhausted her retirement savings and lost her home because she couldn’t balance her everyday expenses after paying more than $12,000 out of pocket for her MS medications.

Now, Burdi lives in one room in the basement of a friend’s house. “I’m destitute. Really, I’ve lost everything,” she says.

New “specialty” drugs—many of them biologics, therapies derived from natural sources​—treat complex, chronic diseases. They can keep a cancer patient alive or calm the painful, crippling symptoms of MS or rheumatoid arthritis. Genomic advances, which link specific genes or groups of genes to health conditions, are pointing the way to new therapies that target and disrupt the molecular processes of disease genes. Tykerb, the drug Sather takes, is a bioengineered molecule that blocks the signals cancer cells need in order to grow.

But the drugs are costly, commanding prices 10 to 100 times higher than other prescription drugs because patients have few alternatives and there are usually no competing medications. Multiple sclerosis drugs Avonex, Betaseron and Copaxone, for example, run about $24,000 a year, while arthritis drugs Enbrel and Humira cost from $15,000 to $45,000 a year. The costs are prompting more insurance plans to charge higher copayments, and even people on Medicare may face devastating bills for these drugs.

“This is an area that represents the best and worst in our health care system,” says James Sabin, M.D., a director of the Harvard Pilgrim Health Care Ethics Program and professor of psychiatry at Harvard Medical School. “At one extreme we have cutting-edge science that can save and change lives. At the other, we have stories where we see the consequences of having valuable discoveries with over-the-top prices.”

About 25 percent of all money spent on drugs in this country goes to specialty drugs—$73 billion this year, a figure expected to increase to $99 billion in 2010. In two years, half of all drugs approved by the U.S. Food and Drug Administration will be specialty drugs, says Stephen W. Schondelmeyer, professor of pharmaceutical economics at the University of Minnesota and director of the university’s PRIME Institute.

“The largest factor in producing any drug is what the market will bear,” says Steve Findlay, health care analyst at Consumers Union. “The industry approach is to price the drugs as high as possible and see if the world is willing to go along with that.”

The drug industry position is that the prices reflect the high cost of research and development. One biotech company official told the Los Angeles Times that it’s the cost of R&D “as well as the price determined by the market.”

Calls to two biotech companies for more detailed comment were not returned.

“These biologics actually prevent rheumatoid arthritis from progressing and decrease disability,” says Patience H. White, M.D., chief public health officer for the Arthritis Foundation. But because they’re expensive and will be for a long time, she says, “we also have a real issue of access.”

Access was the issue for Theresa Manville, 61, of Bay Village, Ohio, who simply could not afford the rheumatoid arthritis drugs she needed. She was laid off from her job as a senior account manager at a public relations firm in 1992, and though she started her own company, she could not get private insurance because her arthritis was considered a preexisting condition.

“Today,” Manville says, “I’m on Medicare disability because I didn’t have these drugs and my RA progressed. My joints deteriorated. My hands are deformed. I used to be a runner, a softball player and scuba diver. Now I need special orthotics in my shoes just to walk. And I’m going to need replacement surgery in my right knee.

“Think of the pressure on the health care system, just from me,” Manville says. “If I’d had the drugs 10 years ago, I could be independent today. I might not even be on disability.”

If RA drugs are high-priced, the prices of the new oncology drugs are shaking the entire health care system.

When Jeanne Sather was taking the cancer drugs Herceptin and Avastin in 2006, those two alone cost $300,000 a year. She was worried then because after several years of fighting her cancer, she was within a few months of hitting the lifetime cap of $1 million for health care in her special state insurance plan, which helps people who are turned down for private insurance.

“A lot of us went to the capital and lobbied, and we got the cap raised to $2 million,” she says. “Now I am safe for another few years.”

Expensive specialty drugs already are changing the basic tenets of health insurance. Now, even men and women with employer coverage may be vulnerable because growing numbers of insurance companies are demanding that patients pay 25 to 30 percent of the drugs’ costs.

“This is standing insurance on its head,” says Arthur Caplan, director of the Center for Bioethics at the University of Pennsylvania. “Instead of pooling resources and sharing the cost burdens, insurers are asking the sickest people to pay more.”

Paying for specialty drugs can cause problems even for those with a comfortable income.

“Insurance may pay 80 percent of your drug bill, but if a drug costs $10,000 every two weeks, as some cancer drugs do, the patient is left with a huge bill—one that most Americans can’t afford,” says Leonard Saltz, M.D., an oncologist at Memorial Sloan-Kettering Cancer Center in New York.

For those on Medicare—and for the program itself—these drugs are creating formidable financial pressures. Medicare prescription drug plans have higher copays for these drugs, says Jack Hoadley, research professor at Georgetown University’s Health Policy Institute in Washington.

Copays of 25 to 33 percent of a drug’s cost can mean thousands of dollars out of pocket each year. But out-of-pocket expenses are capped—at $4,050 in 2008—and at that point, catastrophic coverage kicks in. Then beneficiaries pay generally only a 5 percent copay or a small dollar amount.

While state Medicaid programs and drug manufacturers offer help to low-income patients, “the typical middle-class person isn’t eligible,” Hoadley says. “If you have even a small nest egg—assets of $7,000 or own your own home—you don’t qualify for help.”

Burdi, the MS patient, qualified for Medicare, but when she couldn’t afford the out-of-pocket payments required by the Part D drug benefit, she stopped taking her medicines.

Now, too sick to work and having lost her home and savings, she says, “I am so utterly broke I qualify for state help and just have a $5 copay.”

While catastrophic Medicare coverage helps enrollees, it’s hard on the program.

“These drug prices are going to have a significant effect on the Medicare program as more of these drugs come online every year,” Hoadley says. “And when we get a specialty drug that treats a widespread condition like diabetes or hypertension, the cost bubble will really explode.”

There’s a limit to what employers, government or individuals can pay for these drugs, says Schondelmeyer of the University of Minnesota. “These prices have created a bubble much like the dot-coms and the mortgage lending companies. It’s wild now. But at some point the bubble will burst, and the companies that have built their business on these high-priced drugs will suffer.”

The challenge, Schondelmeyer says, is to “bring pressure to bear on these companies to find reasonable prices for these drugs. That would be good for all parties involved.”

Barbara Basler is a senior editor on AARP Bulletin staff.