Genentech…makes an anti-cancer drug called Avastin. It also makes Lucentis, a closely related drug that is used to treat macular degeneration. Both drugs work equally well for macular degeneration, but Lucentis, which is FDA approved for this condition, costs $2,000 a dose compared with $50 for the same amount of Avastin. The FDA can’t approve Avastin for macular degeneration unless the company requests it, and Genentech has no financial interest in doing so. This leaves Medicare with no choice but to pay top dollar for Lucentis. Other than to save their patients money, doctors have no incentive to prescribe Avastin, even though they can do so “off label.” The difference in price costs Medicare, and taxpayers, hundreds of millions of dollars a year.
And because Medicare beneficiaries must absorb one-fifth of the cost of each treatment, Lucentis costs the patient $400 a dose, compared with $11 for Avastin. Medicare can do nothing about it…
Medicare can’t require proof that an expensive new product is any better than the one it’s replacing; it’s explicitly prevented from doing so by law. Medicare can’t even encourage patients and doctors to select a less-expensive option that works just as well. With few exceptions, neither CMS nor the Food and Drug Administration can take a new product’s price or its performance into consideration when making coverage decisions. And once Medicare starts writing checks, private health plans generally fall into line.
More from Art Kellermann at RAND.