With growing concerns about the rising costs of healthcare one seemingly obvious target has been flying under the radar. But a team of researchers from Memorial Sloan Kettering Cancer Center in New York City published an article in the March 2016 issue of BMJ (formerly the British Medical Journal) detailing the enormous amount of waste built into the way many drugs are distributed. Though the practice is common, they focused their attention on the top 20 cancer drugs and found that typical doses given, and typical vial sizes sold by pharmaceutical companies are completely out of synch. This mismatch is not accidental. Based on projected 2016 sales of $18 billion, these 20 drugs account for over 90% of sales of all such drugs. About 10% of those sales, or $1.8 billion, is derived from wasted drug. Drugs that are sold exclusively in a “one size fits all” vial in the U.S. are often sold in smaller or varied sizes in Europe where governments play a more active role in drug pricing and distribution.
For example, a typical dose of the breast cancer drug Paclitaxel is 260mg/m2. The amount of drug in single dose vials in the U.S. is 100m. Per the BMJ article, this means that 9% of the drug in the vial will go unused. Once the vial is opened it must be used within six hours and leftover drug can only be used to benefit other patients in specialized pharmacies. Current regulations regarding use of one vial for more than one patient are inconsistent. The Centers for Medicare and Medicaid Services say it is permissible to administer doses from one vial to multiple patients, while the Centers for Disease Control and Prevention say it is not.
The expected 2016 sales of Paclitaxel are over $960 million; the portion of sales derived from wasted drug is almost $77 million, or about 8%. The portion of sales derived from waste of the prostate cancer drug Cabazitaxel is over 20%.
Even though the patient is given only part of the Paclitaxel in the vial, she is still paying for the entire vial, and hospitals and doctors can mark up the price of the drug on the bill based on the cost to them of the entire vial. On top of being charged for medication (both used and unused) plus a mark-up, the patient is also being charged a co-insurance payment - a financial triple whammy. Under Medicare Part B, the drug co-payment is 20% with no upper limit, so if a particular drug costs $150,000 per year that’s $30,000 in co-insurance for just one drug. It’s not likely that the typical patient is on only one drug.
The last ten cancer drugs approved before July 2015 have an average annual price of over $190,000 and pharmaceutical companies typically raise the price of their best sellers an average of 10% per year – far above the inflation rate. Industry executives argue that high drug prices are necessary to fund research and development, but according to their financial statements, companies like Pfizer and Merck spend just 17% of their revenue developing new drugs, with far more going to marketing and profits.
According to the Kaiser Family Foundation, since Medicare began covering prescription drugs in 2006 costs have risen an average of 1.5% per year. However, spending on drugs increased by 13% in 2014 and is expected to continue to rise at a 6% rate per year going forward driven by rising drug prices, an increasing number of prescriptions per person and an aging population.
Historically, doctors didn’t focus on the issue of pricing, but as their patients began to struggle financially, some physicians began to speak up. In 2012 two of the authors of the BMJ article, Dr. Peter Bach and Dr. Leonard Saltz, wrote an opinion piece in the New York Times stating that Memorial Sloan Kettering would not buy a new cancer drug that cost twice as much as an existing medicine, but was not more effective. The drug maker cut the price of the new drug.
Dr. Saltz said he first noticed the problem of waste when he was considering adding Keytruda to the hospital’s list of drugs to be used for metastatic lung cancer and melanoma. A typical dose would be about 136m, but Merck only sold the drug in 50m vials, thus ensuring waste. Eventually, Merck switched from 50m vials to 100m vials exclusively in the U.S., thus guaranteeing more waste. The company still sells 50m vials in Europe.
Bach, Saltz, et. al. suggest in their article that policy makers should consider approaches that reduce or eliminate payment for wasted drug, and requiring manufacturers to provide drugs in a reasonable range of size options. They also call for consistent guidelines for using one vial of drug for more than one patient in order to eliminate, or at least drastically reduce waste.
1. BMJ 2016; 352:i788. Overspending Driven by Oversized Single Dose Vials of Cancer Drugs.
2. International New York Times, Waste in Cancer Drugs Costs $3 Billion a Year, Study Says,
Gardner Harris, March 1, 2016.
3. Winston Salem Journal, Medicare’s Rising Drug Bill, March 30, 2016.