Eli Lilly's marginal cancer drug becomes Exhibit A in pricing debate

There are a lot of reasons why oncologists aren't exactly brimming with excitement at the idea of getting their hands on Eli Lilly's ($LLY) lung cancer drug necitumumab.

Lilly was forced to halt one study for necitumumab due to an alarming increase in deaths due to blood clots and came up with only a 1.6-month overall survival benefit in the final, pivotal study. The progression-free survival advantage for squamous non-small cell lung cancer was measured in weeks; 5.7 months versus 5.5 months. And there were only a relatively small number of Americans in the study, troubling to some.

Using what they called a "highly sophisticated" pricing model, researchers at Winship Cancer Institute of Emory University and Georgia Institute of Technology say they considered the benefits and the drawbacks and came up with a fair market value of $563 to $1,309 per three-week cycle for necitumumab--just a fraction of the six-figure annual prices that even the most marginal cancer drugs like this can fetch.

"Cancer drug prices have been skyrocketing in recent years, and these prices are not linked to the benefit that the drugs provide. Most new cancer drugs cost in excess of $10,000 per month," says lead study author Daniel A. Goldstein, MD. "These rising prices are unsustainable to the system."

Lilly, of course, may have produced another not-so-great cancer drug, but don't look for the pharma giant to start breaking any of the molds around high cancer drug prices, once an expected approval comes through. After first passing on a specific price discussion related to an unapproved drug, a strict no-no in pharma circles, a spokesperson for Lilly goes on to tell the Wall Street Journal's Peter Loftus how difficult it is to develop new oncology treatments, particularly for squamous non-small cell lung cancer. And you know what that discussion thread leads to. Eli Lilly spends around $5 billion a year on R&D and you better believe that CEO John Lechleiter has to show an ROI on that somewhere along the way.

FDA panels, of course, never discuss the relative value of a cancer drug based on price. Neither do regulators, as they're barred by law from using that as a consideration. And that sets up a repeat of a routine situation, as Lilly hunts an odds-on approval after the experts consistently backed the need for new treatments to use as a last resort.

Just about anything, so long as it has an understood risk/benefit profile, a risk mitigation program in place and a slight edge on efficacy, will earn an approval at the FDA these days. And Lilly is free to price this drug anyway that it can in this market.

Analysts are typically caught estimating on the low side when it comes to new drug prices. The industry trend now is to aim high on wholesale and see what you reap. Gilead, for all the writers and commentators who chide it for high hep C pricing, has helped set that pace. Lilly--which spent years spinning its R&D wheels ineffectively--will pump all it can out of questionable drugs just as Gilead went for the blockbuster score on a hep C cure that changed the way the disease is handled.

This is the way the game is handicapped and played today. Until the rules are changed, it's going to remain that way--no matter what the models say. -- John Carroll, editor-in-chief. Follow me on Twitter @JohnCFierce.

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