By Sandy K. Johnson

More than 1,813 new oncology drugs are in development, a promising sign for people stricken with cancer. If the new therapies gain FDA approval, the process of setting launch price is next.

How pharmaceutical companies set prices for their new drugs is both an art and a science, according to David Howard, a health economist and professor at Emory University’s Winship Cancer Institute. He told National Press Foundation fellows that the drug companies typically use these four measures:

  • Evaluation of the cost of the next best therapy,
  • Physician surveys,
  • Surveys of insurance company medical directors, and
  • Consideration of political and public relations risk.

Howard argued that research and development, which is often cited by pharmaceutical companies for the rising cost of drugs, is not really a factor. He said the reverse is true – that high prices drive R&D because it’s such a profitable market.

He cited the example of Zaltrap, a colon cancer drug initially priced at $11,063 per month. Physicians at Memorial Sloan Kettering Cancer Center made a very public announcement of their disapproval with an op-ed piece in The New York Times. Sanofi and Regeneron subsequently cut the price.

Rising prices also drew a protest from 118 cancer experts in Mayo Clinic Proceedings. The oncologists said the average price of new cancer drugs increased up to 10-fold over 15 years, to more than $100,000 per year in 2012. By 2014, new cancer drugs were priced higher than $120,000 per year of treatment.

Resources for journalists suggested by Howard: