Today’s Managing Health Care Costs Number is $9850
The Wall Street Journal reported last week on the internal process at Pfizer to set the price for Ibrance (palbociclib), a new oral drug for certain types of metastatic breast cancer.
Determining the price took three years of research before the drug was even named, and involved interviews with over 125 physicians and interviews with 80 health plan pharmacists and medical directors. Pfizer considered the price of an older mainstay drug (Herceptin, $4775 a month), and three newer medications used for similar indications (Kadcyla, $10,807 a month, Perjeta, $7783 a month, and Afinitor, $8701 a month).
Pfizer found that if its price was over $10,000 a month, insurers were likely to make it subject to prior authorization, which would lower its market share. If its price was under $9000, physicians would be no more likely to prescribe it –so Pfizer would be leaving money on the table.
In a sidebar, the reporters pointed out neither the cost of manufacturing nor the cost of research and development played any role in setting the drug’s price. Pfizer would not have invested in the drug if it didn’t see the potential for a high price and a large market, but R&D expenses were a “sunk cost” by the time the drug came to market. It’s a pill – so the cost of production is a miniscule component of the total price.
DrugAbacus.org – the Memorial Sloan Kettering tool to determine the “value” of oncology medications – finds that the costs of all of these drugs substantially exceeds their value.
