Pricing in the market for anticancer drugs Academic Article Article uri icon

Overview

MeSH Major

  • Lung Neoplasms
  • Tomography, X-Ray Computed

abstract

  • © 2015, American Economic Association. All rights reserved.In 2011, Bristol-Myers Squibb set the price of its newly approved melanoma drug ipilimumab - brand name Yervoy - at $120,000 for a course of therapy. The drug was associated with an incremental increase in life expectancy of four months. Drugs like ipilimumab have fueled the perception that the launch prices of new anticancer drugs and other drugs in the so-called "specialty" pharmaceutical market have been increasing over time and that increases are unrelated to the magnitude of the expected health benefits. In this paper, we discuss the unique features of the market for anticancer drugs and assess trends in the launch prices for 58 anticancer drugs approved between 1995 and 2013 in the United States. We restrict attention to anticancer drugs because the use of median survival time as a primary outcome measure provides a common, objective scale for quantifying the incremental benefit of new products. We find that the average launch price of anticancer drugs, adjusted for inflation and health benefits, increased by 10 percent annually - or an average of $8,500 per year - from 1995 to 2013. We argue that the institutional features of the market for anticancer drugs enable manufacturers to set the prices of new products at or slightly above the prices of existing therapies, giving rise to an upward trend in launch prices. Government-mandated price discounts for certain classes of buyers may have also contributed to launch price increases as firms sought to offset the growth in the discount segment by setting higher prices for the remainder of the market.

publication date

  • January 2015

Research

keywords

  • Academic Article

Identity

Digital Object Identifier (DOI)

  • 10.1257/jep.29.1.139

PubMed ID

  • 28441702

Additional Document Info

start page

  • 139

end page

  • 62

volume

  • 29

number

  • 1