The Cost of Cancer Care: The Sky Is Not Falling

Cancer care still costs less than 5 percent of total health expenditures.

While the idea that new therapies are driving up the cost of cancer care might make a good headline, it doesn’t hold water with health economists.

Debunking such myths about cancer care was the focus of a recent paper published in Health Affairs by Tomas Philipson and Dana Goldman. Their commentary provided evidence that cancer prescription costs are actually less expensive than other health care expenditures. They attribute the outrage to the fact that insurers are asking patients to pay a higher percentage of the cost of cancer therapies than of other more expensive medical treatments. And that outrage translates into the myth that the cost of new medicines is “unsustainable.”

Health care reform must focus on patient outcomes and has to be based on facts, not unsupported perspectives.

“The unsustainability of cancer care issue is more of a Chicken Little argument than anything else,” Alex Bastian, strategy, commercialization and practice leader in health care at GfK Bridgehead, said. “Everyone keeps saying the sky is falling, but it doesn’t seem to ever fall.”

That’s because, thanks to the U.S. patent system, the costs of medicines are predictably reduced over time. Innovators have less than 12 years on average to recoup their investment before their medicines become available as generics, and these patent expirations have saved the health care system over $1.2 trillion over the past decade.

As new therapies are introduced and older ones become available as generics, the costs of cancer therapies are balanced. Overall, cancer care costs have remained under 4 percent of total health expenditures over the past decade, according to estimates from the National Institutes of Health and the Centers for Medicare and Medicaid Services.

Percentage of Total U.S. Health Expenditures Spent on Cancer Care

 

In fact, the costs of cancer care have represented less than 5 percent of all U.S. health care expenditures since the late 1980s, according to the National Cancer Institute. Furthermore, the proportion spent on inpatient admissions for cancer care fell from 64 percent to 27 percent between 1987 and 2005. Because it costs more to admit a patient than to treat an outpatient, this shift in care setting helped control costs over this time period.

Portion of Cancer Care Costs Spent on Inpatient Care

The shift in treatment setting was made possible in part by over 90 Food and Drug Administration approvals for new cancer therapies during this period. To maintain this trend toward lower-cost outpatient treatments, we need to continue investing in new therapies.

If unsubstantiated myths about cancer care are allowed to influence health care policies, there may be fewer treatment options for choice-loving Americans in the future.

“It’s a difficult challenge to overcome the myth that cancer care is unsustainable,” said Bastian. “But health care reform must focus on patient outcomes and has to be based on facts, not unsupported perspectives.”