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Pricing in the Market for Anticancer Drugs

Author

Listed:
  • David H. Howard
  • Peter B. Bach
  • Ernst R. Berndt
  • Rena M. Conti

Abstract

Drugs like bevacizumab ($50,000 per treatment episode) and ipilimumab ($120,000 per episode) have fueled the perception that the launch prices of anticancer drugs are increasing over time. Using an original dataset of 58 anticancer drugs approved between 1995 and 2013, we find that launch prices, adjusted for inflation and drugs’ survival benefits, increased by 10%, or about $8,500, per year. Although physicians are not penalized for prescribing costly drugs, they may be reluctant to prescribe drugs with prices that exceed subjective standards of fairness. Manufacturers may set higher launch prices over time as standards evolve. Pricing trends may also reflect manufacturers’ response to expansions in the 340B Drug Pricing Program, which requires manufacturers to provide steep discounts to eligible providers.

Suggested Citation

  • David H. Howard & Peter B. Bach & Ernst R. Berndt & Rena M. Conti, 2015. "Pricing in the Market for Anticancer Drugs," NBER Working Papers 20867, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20867
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    Cited by:

    1. Dubois, Pierre & Kyle, Margaret K, 2016. "The Effects of Pharmaceutical Innovation on Cancer Mortality," CEPR Discussion Papers 11487, C.E.P.R. Discussion Papers.
    2. Mark Shepard & Katherine Baicker & Jonathan Skinner, 2020. "Does One Medicare Fit All? The Economics of Uniform Health Insurance Benefits," Tax Policy and the Economy, University of Chicago Press, vol. 34(1), pages 1-41.
    3. Dankó, D. & Blay, J-Y. & Garrison, L.P., 2019. "Challenges in the value assessment, pricing and funding of targeted combination therapies in oncology," Health Policy, Elsevier, vol. 123(12), pages 1230-1236.
    4. Anne E. Hall, 2015. "Adjusting the Measurement of the Output of the Medical Sector for Quality: A Review of the Literature," BEA Working Papers 0122, Bureau of Economic Analysis.
    5. Massimo FLORIO & Francesco GIFFONI, 2019. "L’impatto sociale della produzione di scienza su larga scala: come governarlo?," Departmental Working Papers 2019-05, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    6. Alice M. Ellyson & Anirban Basu, 2021. "Do pharmaceutical prices rise anticipating branded competition?," Health Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 1070-1081, May.
    7. Caroline Savage Bennette & Anirban Basu & Scott D. Ramsey & Zachary Helms & Peter B. Bach, 2019. "Health Returns to Pharmaceutical Innovation in the Market for Oral Chemotherapy in Response to Insurance Coverage Expansion," American Journal of Health Economics, MIT Press, vol. 5(3), pages 360-375, Summer.
    8. Edouard Debonneuil & Anne Eyraud-Loisel & Frédéric Planchet, 2018. "Can Pension Funds Partially Manage Longevity Risk by Investing in a Longevity Megafund?," Risks, MDPI, Open Access Journal, vol. 6(3), pages 1-27, July.
    9. David B. Ridley & Chung-Ying Lee, 2020. "Does Medicare Reimbursement Drive Up Drug Launch Prices?," The Review of Economics and Statistics, MIT Press, vol. 102(5), pages 980-993, December.
    10. Rau, Tomás & Sarzosa, Miguel & Urzúa, Sergio, 2021. "The children of the missed pill," Journal of Health Economics, Elsevier, vol. 79(C).
    11. Boone, Jan, 2020. "Pricing above Value: Selling to an Adverse Selection Market," Other publications TiSEM eda6a1de-4db6-49a6-87e4-3, Tilburg University, School of Economics and Management.
    12. Salas-Vega, Sebastian & Shearer, Emily & Mossialos, Elias, 2020. "Relationship between costs and clinical benefits of new cancer medicines in Australia, France, the UK, and the US," Social Science & Medicine, Elsevier, vol. 258(C).
    13. Geng, Difei & Saggi, Kamal, 2020. "Optimal price regulations in international pharmaceutical markets with generic competition," Journal of Health Economics, Elsevier, vol. 71(C).
    14. Sabine Vogler & Valérie Paris & Alessandra Ferrario & Veronika J. Wirtz & Kees Joncheere & Peter Schneider & Hanne Bak Pedersen & Guillaume Dedet & Zaheer-Ud-Din Babar, 2017. "How Can Pricing and Reimbursement Policies Improve Affordable Access to Medicines? Lessons Learned from European Countries," Applied Health Economics and Health Policy, Springer, vol. 15(3), pages 307-321, June.
    15. Seabury Seth A. & Goldman Dana P. & Lakdawalla Darius N. & Gupta Charu N. & Khan Zeba M. & Chandra Amitabh & Philipson Tomas J., 2016. "Quantifying Gains in the War on Cancer Due to Improved Treatment and Earlier Detection," Forum for Health Economics & Policy, De Gruyter, vol. 19(1), pages 141-156, June.
    16. Kristopher J. Hult & Sonia Jaffe & Tomas J. Philipson, 2018. "How Does Technological Change Affect Quality-Adjusted Prices in Health Care? Systematic Evidence from Thousands of Innovations," American Journal of Health Economics, MIT Press, vol. 4(4), pages 433-453, Fall.
    17. Stefano Capri, 2020. "High prices of new drugs: we are ready to do whatever it takes," LIUC Papers in Economics 2020-8, Cattaneo University (LIUC).
    18. Dubois, Pierre & Kyle, Margaret, 2016. "The Effects of Pharmaceutical Innovation on Cancer Mortality Rates," TSE Working Papers 16-688, Toulouse School of Economics (TSE).
    19. Boone, Jan, 2020. "Pricing above Value: Selling to an Adverse Selection Market," Discussion Paper 2020-023, Tilburg University, Center for Economic Research.
    20. Radion Svynarenko & Qun Zhang & Hyungsoo Kim, 2019. "The Financial Burden of Cancer: Financial Ratio Analysis," Journal of Family and Economic Issues, Springer, vol. 40(2), pages 165-179, June.
    21. Boone, Jan, 2020. "Pricing above Value: Selling to an Adverse Selection Market," Other publications TiSEM 700b2f3e-d1c8-4422-9b54-f, Tilburg University, School of Economics and Management.
    22. Nasuh C. Buyukkaramikli & Peter Wigfield & Men Thi Hoang, 2021. "A MEA is a MEA is a MEA? Sequential decision making and the impact of different managed entry agreements at the manufacturer and payer level, using a case study for an oncology drug in England," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 22(1), pages 51-73, February.

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