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Economic comments on proposal for a novel cancer drug pricing model

Nature Reviews Clinical Oncology volume 15, page 587 (2018)Cite this article

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We recently read with interest the article ‘Sustainability and affordability of cancer drugs: a novel pricing model Nat. Rev. Clin. Oncol. 15, 405–406 (2018)’1. In this article, Uyl-de Groot and Löwenberg describe a model for determining a reasonable price for oncology drugs. This topic is important, as challenging the price of new pharmaceuticals by health authorities has become a new trend owing to the substantial increase of drug prices in the past few years. We would like to comment on several economic assertions made in this paper.

The authors argue that the drug price should be based on the actual costs of research and development (R&D), other costs, and a fair profit margin. From an economic point of view this is incorrect, as it would mean that a product should always have a price because costs have been incurred in its production. Value is also not similar to prices and costs and, therefore, we also do not favour their use of ‘cost plus pricing’ for drugs. Moreover, their model does not include the cost of capital and how this is affected by timing differences between investments and receipts. Furthermore, epidemiological variations could lead to each year having a different value in their equation. The model assumes that all eligible patients will use the drug. However, not all eligible patients will be treated and new competitor drugs might later enter the market. Another overestimation is the size of the global market: the population of patients who can realistically expect to receive novel anticancer drugs is far lower, as only economically developed countries currently provide serious markets for pharmaceutical companies.

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References

  1. Uyl-de Groot, C. A. & Löwenberg, B. Sustainability and affordability of cancer drugs: a novel pricing model. Nat. Rev. Clin. Oncol. 15, 405–406 (2018).

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  2. Nuijten, M. J. C. & Vis, J. Evaluation and valuation of innovative medicinal products. J. Rare Dis. Res. Treat. 2, 1–11 (2016).

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Authors and Affiliations

  1. A2M, Amsterdam, Netherlands

    Mark J. C. Nuijten

  2. Istanbul Technical University, Istanbul, Turkey

    Mark J. C. Nuijten

  3. Nyenrode Business University, Breukelen, Netherlands

    Jan Vis

  4. Talanton, Amsterdam, Netherlands

    Jan Vis

Authors
  1. Mark J. C. Nuijten
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  2. Jan Vis
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Correspondence to Mark J. C. Nuijten.

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Competing interests

M.J.C.N. is the founder and owner of A2M, a health economics consultancy firm, and an adjunct professor at Istanbul Technical University (ITU). A2M and ITU had no influence on any aspect of the preparation of this manuscript. J.V. reports that he is an adjunct professor at Nyenrode University and is the owner of Talanton Valuation, a company specializing in business valuations. Talanton had no influence on any aspect of the preparation of this correspondence. This correspondence was written without any direct funding from another party.

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Nuijten, M.J.C., Vis, J. Economic comments on proposal for a novel cancer drug pricing model. Nat Rev Clin Oncol 15, 587 (2018). https://doi.org/10.1038/s41571-018-0083-2

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