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In 2000, the average cost of 1 year of a new systemic anticancer therapy was less than US$10,000, in contrast to 2016 when new drug treatments cost in excess of US$100,000 for the same duration of treatment. The US Agency for Healthcare Research and Quality reported a total spend of US$88.7 billion in 2011.1 The European Union, with a considerably larger population, reported spending €126 billion in 2009.2 It is increasingly apparent that there is also a significant out of pocket financial burden on patients, even in the UK healthcare system, which is founded on the principle of free care at the point of delivery.3 Ramsey et al.4 reported that a diagnosis of cancer in the USA increased the chance of bankruptcy by 250%. They also reported that those who went bankrupt increased their mortality risk to a degree that outweighed the benefits of many cancer therapies. At the same time the growth in total healthcare expenditure in developed countries has continued to outstrip the rate of economic growth. In some countries, public sector funding of healthcare is approaching 50% of total public expenditure.

The sustainability of high-quality cancer care may well depend upon better understanding the drivers of cost and identifying where the choices we make for the future of cancer care improve value for money. In this chapter we provide an overview of the explanations that have been proffered for the cost of cancer care, describe a range of strategies for slowing the rate of growth in the costs of cancer care in the context of the precision oncology revolution, and finally outline how consideration of the economics of cancer therapy could influence go/no-go decision making in R&D and health system decision making for new precision cancer therapies.

Why are cancer drugs so expensive?

The Tufts Center for the Study of Drug Development estimates that the full cost of developing a new drug is in the region of US$2.3 billion; a figure that has been strongly contested5 and one that has increased a great deal less than the 10-fold increase in the price of new cancer drugs observed over the same period. As such, it seems likely that other factors must explain the change in the price of new cancer drugs.

One possible explanation is that targeted therapies are dramatically more effective than traditional therapies. Although targeted therapies do indeed appear to produce larger clinical effects, the magnitude of this improvement is notably less than the observed increase in prices by established value thresholds for health improvement.6

Targeted therapies, by definition, are suitable for fewer patients than traditional therapies; hence, the commercial return on the investment in R&D must be achieved from fewer sales. The reduction in the volume of sales combined with high R&D costs would certainly drive up prices if the return on investment is ...

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