More pressure to justify cost of cancer drugs versus benefits

(Reuters) - Medical providers have begun to think more about cost, as well as safety and effectiveness, when they decide on cancer treatments.

In the past, pharmaceutical companies could launch a high-priced drug with little push back. But now, there is more pressure from insurers as well as doctors to justify using drugs that provide only incremental benefits. Products that offer clear-cut advances in treatment, however, still command premium prices.

The pressure on costs is likely to accelerate. The U.S. Affordable Care Act includes several provisions aimed at improving the value of healthcare, including paying hospitals for the quality of care rather than the quantity.

"It's a sign of the times," said Mark Mynhier, partner, healthcare industries advisory at PricewaterhouseCoopers PwC. "We are in fact in a significantly financially challenging environment."

Four-fifths of U.S. health insurers recently polled by PwC now require evidence of cost savings or a clear clinical benefit to include new products on their lists of covered drugs.

Doctors at New York's Memorial Sloan-Kettering Cancer Center decided in November not to use Zaltrap, a new $11,000 a month colon cancer drug, because it has a "modest" impact on survival, works no better than Avastin, a similar but cheaper competitor, and has worse side effects.

Sanofi SA, according to the hospital, responded by offering the drug to all health providers at a 50 percent discount to its wholesale price.

The Manhattan cancer center still does not include Zaltrap on its list of available drugs. Sanofi and Regeneron, which helped develop and also sells the drug, both declined to comment.

"In order to warrant the price, you are going to have to have better overall survival," said Rhonda Greenapple, chief executive at Reimbursement Intelligence, a consulting firm specializing in medical reimbursement.

Linking value to patient outcomes - mainly a drug's impact on survival - is particularly important in oncology, where treatment costs can total tens of thousands of dollars a year.

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More pressure to justify cost of cancer drugs versus benefits