Top U.S. hospital won't use pricey Sanofi cancer drug

Watch out, oncology drugmakers. Memorial Sloan-Kettering Cancer Center has made a move that could crimp your ambitions for premium pricing. The leading hospital says it will exclude Sanofi's ($SNY) new colorectal cancer drug Zaltrap from its treatment protocols--because its price is twice as high as competing treatments, but has proven no more effective than its rivals, namely Roche's ($RHHBY) Avastin.

Sloan-Kettering's choice comes after long debate over the skyrocketing costs of cancer care--and at a time when new drug prices are setting records. By announcing its Zaltrap rejection in a New York Times op-ed, Sloan-Kettering is practically demanding a new round of arguments.

It might also inspire copycats. If an institution as venerable as Sloan-Kettering decides to weigh the cost-effectiveness of cancer treatments, then why wouldn't other providers? The hospital's decision gives others cover to do the same.

And Sloan-Kettering may follow up with more. As hospital officials note in their op-ed, new cancer drugs cost about $4,500 per month, in 2012 dollars, a decade ago. Since 2010, the median price of new drugs has hovered at about $10,000, they say, while two of the newest treatments cost more than $35,000 per month of treatment.

Consider two new melanoma drugs, the first breakthrough treatments in years. Bristol-Myers Squibb's ($BMY) Yervoy has a sticker price of $120,000 for four courses of treatment. The U.K.'s National Institute for Health and Clinical Excellence decided it was too expensive for routine use. Its targeted rival, Roche's Zelboraf, also has failed to persuade NICE that it's cost-effective, even after the company offered a discount; its list price is $2,700 per week, or about $12,000 a month. Medicare is required to cover all cancer drugs, regardless of price.

The ever-rising cost of healthcare is lamented daily in the press--if not hourly, this election season. Drug prices in the U.S. are the highest in the world. But there's little to no political will for government-backed cost-effectiveness watchdogs like those in the U.K. and Germany. Indeed, Medicare is strictly prohibited from making the sort of comparisons that Sloan-Kettering has made.

Americans do tend to trust their doctors, however. Medical practitioners just might get away with the kind of "rationing" that government programs can't. "If no one else will act, leading cancer centers and other research hospitals should," the Sloan-Kettering authors wrote. With so many drugmakers pinning their hopes on targeted cancer drugs, that could be a chilling prospect.

- read the NYT piece