Valuing New Cancer Therapies
Effective Cancer Therapy and Cost Effectiveness Analysis
There is a flurry of research going on right now for various cancer treatments, and the list of new cancer drugs grows almost every day. Recently, e.g., Pfizer agreed to buy Array BioPharma for $10.64 billion in order to expand their target therapy cancer line up. Array BioPharma has developed Braftovi and Mektovi for skin cancer, but both have potential for treating colon cancer patients. The market for cancer drugs is estimated to top $237 billion by 2024.
How does a company decide if a drug therapy is worth pursuing from an economic standpoint? The drug must be superiorly effective over existing treatments, and the cost must not be so prohibitive so that it can be widely used so as to generate enough revenue for the company. This is where cost effectiveness analysis (CEA) is superior to other methodologies for analyzing such problems. In this analysis, the analyst compares the old therapy with the new therapy in a decision tree. Both costs and effectiveness are computed along with the probabilities of various outcomes. In that way one can get a realistic view of how the new drug will perform.
This type of analysis has been used in the pharmaceutical industry over the years, but is not a widely used methodology. It has particular useful application for drug cost effectiveness and should be more widely applied to predict successful outcomes as well as to provide better economic value information to payors, both private and public