Dr Peter Bach Explains How Increasing Drug Prices Stifle Innovation

The ability to charge increasingly higher prices for drugs that already have competition on the market is stifling innovation and wasting resources and human subjects, according to Peter Bach, MD, MAPP, director of Memorial Sloan Kettering Cancer Center's Center for Health Policy and Outcomes.

Transcript (slightly modified for readability)

Why do you believe drug price inflation is damaging innovation?

You can get to a point where prices are so rich that people are pursuing those prices, and that's what for-profit companies do, they will take paths which are surer if the profits are there. I use the example of the market for ALK inhibitors. We have 10-plus companies chasing after what's a pretty narrow indication for lung cancer, because they know that when they get to market there will be no price competition—everybody gets their monopoly price, everybody gets to set their price. Xalkori was on the market for about $10,000 to $12,000 a month. When Zykadia got approved, same space, they charged more: $14,000 to $15,000 a month.

So we know because of the way the market is specifically broken, that everybody who gets into the spaces with the ALK inhibitor will be able to charge monopoly rent—whatever they want. Any other market would force all the makers of ALK inhibitors to compete with one another and that would stop other peopl from rushign into that space, because they'll say, "If I'm fourth to market, I'm going to be in a price war; I'm never going to get my profits."

And that's where the key issue comes up: "But I still need to create new products, I need to go down a different road. I need to look for a different indication, I would have to look for different mechanisms of action. I have to think more and I have to take a bigger risk."

And we want those risks because those risks pan out. They increasingly pan out now because of everything we know about the genetic drivers of cancer, everything we now know about immunology. So that is wasted resources and it's wasted human subjects. Going on to trials for the 10th ALK inhibitor instead of going onto a trial for a novel mechanism of action that could turn into a big breakthrough.