US Pharm.

In the end, it’s not the years in your life that count. It’s the life in your years.
–Abraham Lincoln

It is doubtful that Abraham Lincoln could have foreseen what health care in this country would look like today when he uttered this famous quote nearly 150 years ago. It may well still ring true, but it is getting harder to imagine any limits on how much the “life in your years” will actually cost. In these days of health care reform debates, one fact that everybody agrees on is that costs are very high and are increasing at a rate that exceeds inflation. Why that is and what to do about it is fodder for the politicians that will not likely be settled by academic or scholarly deliberations. 

Soaring Costs

One other truism of health care is that it is expensive to die. This fact will be on the reform agenda. According to a 2006 survey of all 50 states, the national average spent on physician and hospital care for a Medicare recipient with a chronic disease in the last 6 months of life was approximately $17,000.2 According to the Dartmouth Atlas Project, there is a large discrepancy between states on end-of-life costs.3 For example, in Miami, Florida, Medicare typically pays out about $23,000 during the 6 months preceding the death of a Medicare-eligible patient. In Portland, Oregon, however, the cost for the same kind and length of care is about $14,000. Not surprisingly, Manhattan, at a cost of $35,838 for the last 6 months of life, is the most expensive city out of 309 hospital referral regions; Wichita Falls, Texas, is the least expensive at $10,913.2 

The debate centers not so much on these cost variations as much as on what differences in quality-of-life terms these expenditures make. Remember, Medicare benefits are spent using taxpayer dollars. Are taxpayers getting a cost-effective benefit, or are we wasting our money? Estimates show that about 27% of Medicare’s annual $327 billion budget goes to care for patients in their final year of life.2 

The cost of pharmaceuticals used to extend life for relatively short periods of time in many cases are a major factor in the overall costs of caring for patients in the last 6 months of life. For example, an 18-week course of treatment with cetuximab (Erbitux) costs $80,000.4 Yet a study found that lung cancer patients treated with the drug survived approximately 1 month longer than patients who did not take the medication. That works out to about $18,000 for the cost of this drug to extend life about 4 weeks. When the numbers are extrapolated to include the 550,000 Americans who die each year from cancer, the cost of this drug alone works out to a staggering $440 billion annually. This is for a drug that is not even approved for treatment of lung cancer. This is only the tip of the iceberg. Bevacizumab (Avastin), imatinib (Gleevec), trastuzumab (Herceptin), rituximab (Rituxan), and erlotinib (Tarceva) all fit into this category, costing upwards of $100,000 for a few months of therapy. Researchers have shown that 90% of all cancer drugs approved by the FDA over the past 4 years cost $20,000 for a 12-week course of therapy.4 

Thrown into the equation of cost-effectiveness are the benefits that are often realized when an off-label use of a drug is discovered to be efficacious for purposes never envisioned by the innovator company that originally developed the drug. Serendipity is a realistic component of scientific discovery. Forbidding off-label uses of medications could stifle medical knowledge and delay unearthing important new findings. Still, it seems grossly inequitable to spend $20,000, $30,000, or $40,000 on a drug for an unapproved and unproven use that might extend the life of someone for a few weeks at most. 

What can be done about these soaring costs? Should we adopt a policy of health care rationing? Should we limit these ultra-expensive drugs to only FDA-approved uses? Think about these questions both in personal terms and as a taxpayer who ultimately foots the bill for these kinds of therapy. If you or a loved one were seriously ill with cancer and given less than 6 months to live, would you want cetuximab administered for 18 weeks at a cost of $80,000 knowing the government would pay the tab? Would you still opt for the treatment if you had no insurance and the money would have to come out of your own pocket? Would it make any difference if you knew going in that on average your life expectancy would only increase by about 4 weeks? Now as someone who pays taxes, does it make sense to you to pay billions of dollars for a relatively short-term benefit for the more than one-half million people who will die of cancer this year with or without these costly treatments? Should there be some limits implemented to make the distribution of finite resources more justifiable? Should the FDA consider cost-effectiveness of a new drug as part of the equation for determining whether or not to approve the drug for a specific use? 

Let’s not forget about the privately insured and the underinsured who do not qualify for a Medicare benefit. Almost everyone with a prescription drug benefit package in their health insurance coverage has a copay set at either a fixed amount or calculated as a percentage of the total cost of the drug. Many plans include a 20% copay. When a drug costs $100 or $200, it may not be tremendously burdensome for most people to pay the $20 or $40 copay. But when very expensive drugs are involved that might cost nearly $100,000 for 6 months of therapy, the $20,000 copay could be prohibitive. Costs of this magnitude could find people dipping into retirement accounts or send them off to seek credit advances or second mortgages on their homes. With credit as tight as it is during these times of banking crises, that second mortgage may be more hypothetical than realistic. 

For the underinsured and the uninsured, there may be an opportunity to enroll in a pharmaceutical company trial at no cost to the individual or to participate in a drug company’s cooperative plan for those who cannot afford the price of medications that may or may not prolong lives for significant periods. But there is no guarantee that any of this kind of assistance will be available in all or even most situations. In reality, it is only the very poor or indigent who qualify for assistance, not the people who would have to mortgage or sell their homes to cover costs.5 

Rationing Health Care?

The idea of limiting expenditures for health care treatment may seem untenable to most Americans, who are used to getting access to every conceivable benefit. But other countries impose different policies. In the United Kingdom, for example, the National Institute for Health and Clinical Excellence (NICE) considers cost-effectiveness and efficacy for all new drugs. That organization makes recommendations to the National Health Service (NHS)—the equivalent of the U.S. Medicare office. Of 60 cancer drugs evaluated by NICE, five were excluded from the recommended payment list because the drugs did not meet cost-effectiveness standards.5 For example, NICE suggested that NHS not pay for cetuximab or bevacizumab as part of treatment for metastatic colon cancer. The standard unit for cost-effectiveness is known as the quality-adjusted life year (QALY). In the case of bevacizumab, the QALY was calculated at approximately $94,350. The QALY for cetuximab was determined to be around $142,500. NICE does not recommend coverage for any medication with a cost per QALY of more than $45,000. Andrew Stevens, MD, the chairman of NICE, who did these cost comparisons, acknowledged that some of the newer, more expensive drugs represent reasonable value compared to the next-best therapy. He went on to state, “But often they only offer marginal improvements which do not justify the diversion of resources from other treatments and other patients.”5 

In the U.S., the cutoff for cost-effectiveness is closer to $100,000 per QALY gained.5 However, the QALY figure is not considered by the FDA in determining whether a drug is safe and effective for marketing in this country. Could that change? “I fear the NICE approach is necessarily going to come to this country sooner or later, and most likely sooner,” Memorial Sloan-Kettering Cancer Center Oncologist and Professor of Medicine Leonard Saltz, MD, said. “The finances of the country are not what they once were. So I think it’s very unreasonable for us to say that we as a society will be able to offer anything for any patient at any cost.”5 

On the other hand, “Money talks,” said Mary Callaghan, MN, RN, who recently became the director of the cancer center at Loyola University Medical Center in Maywood, Illinois. She added that the government is “really reluctant to put cost effectiveness into guidelines. So unless changes are made it’s going to break our health care system, especially now with everything that’s going on with the economy.”5 

While it cannot really be called rationing in the traditional sense, Medicare does have some limits on what it will pay for in the case of a terminally ill patient. The Medicare hospice benefit covers many palliative services for the elderly (over age 65 years) who have a life expectancy of 6 months or less. The hospice benefit is designed to provide pain relief, comfort, and emotional and spiritual support to patients with a terminal diagnosis. Those who elect the Medicare hospice benefit agree to forgo curative treatment for their terminal condition. For conditions unrelated to their terminal illness, Medicare continues to cover items and services outside of the hospice. Medicare payment for hospice grew from $2.9 billion in 2000 to over $10 billion in 2007.6 The Centers for Medicare & Medicaid Services’ Office of the Actuary projects that Medicare spending for hospice will double by 2018, reflecting a growth rate exceeding all other Part A services. 

Two caps limit the amount and cost of care that any individual hospice agency provides in a single year. One cap limits the number of days of inpatient care an agency may provide to not more than 20% of its total patient care days. The other cap is an absolute dollar amount, based on the number of Medicare patients the agency serves. Total payments over total number of beneficiaries may not exceed $22,386 in the year ending October 31, 2008.6 This may only be the beginning of rationed health care. 

Of the many issues on the health care reform table, cost controls and restrictions on the use of medications the government will pay for are under serious consideration.7 “Americans can expect a quick, hard push to build more federal bureaucracy, impose price controls, restrict medicines and technology, boost taxes, mandate the purchase of health insurance, and expand government health care,” said then Sen. Thomas Daschle in his book, Critical: What We Can Do About the Health-Care Crisis, written just before he was appointed secretary of the Department of Health and Human Services.8 In the book, Mr. Daschle proposes a National Health Board to regulate the way health care is provided. This board would have vast powers in regulating the massive federal health care system—a system that includes Medicare, Medicaid, and other programs. The government is a huge player in the health care market, accounting for 46% of health care spending.7 It has been speculated that the board would be charged with deciding the cost-effectiveness of drugs and treatments, therefore influencing what costs would be covered by the government and effectively setting parameters for private insurers as well. Mr. Daschle believes, along with many in the current presidential administration, that America needs to ration new technology and drugs. In his book, Mr. Daschle complains about overuse of new technology and praises the United Kingdom’s NICE as a rationing system that controls government costs. However, remember that NICE is the British government agency that has recommended against paying for some of the most expensive drugs because they are not cost-effective. 

Of course, these proposals are controversial, and there is no hard evidence that Americans are ready to accept a rationing system such as this. But pay attention. The system will change, and being prepared for change is the first step in successfully playing on the new field. 


1. Abraham Lincoln quotes. BrainyQuote. quotes/a/abrahamlin137180.html . Accessed July 1, 2009.
2. Appleby J. Debate surrounds end-of-life health care costs. USA Today. October 19, 2006.
industries/health/2006-10-18- end-of-life-costs_x.htm. Accessed July 1, 2009.
3. The Dartmouth Atlas of Health Care. Accessed July 1, 2009.
4. Johnson A. Cost-effectiveness of cancer drugs is questioned. Wall Street Journal. June 30, 2009.
SB2000142405297020387240457425 8302761872972.html. Accessed July 1, 2009.
5. Frei R. Benefit of expensive cancer medications questioned in midst of economic slump. Oncology Nursing News. February 3, 2009.
Benefit-of-Expensive-Cancer- Medications-Questioned-in- Midst-of-Economic-Slump/ article/126792/. Accessed July 1, 2009.
6. Hospice services payment system. Payment basics. Revised October 2008.
MedPAC_Payment_Basics_08_hospice.pdf. Accessed July 2, 2009.
7. Pipes SC. Obama will ration your health care: think of his health plan as a federal HMO. Wall Street Journal. December 30, 2008.
SB123060332638041525.html. Accessed July 2, 2009.
Daschle T, Greenberger SS, Lambrew JM. Critical: What We Can Do About the Health-Care Crisis. Thomas Dunne Books (MacMillan). February 2008.  Accessed July 2, 2009.

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