JCO recently published an article by a radiation oncologist at Stanford, and apparently believed it was important enough to make it an “Editor’s Pick.”

The article describes a cost effectiveness study conducted with a rigorous and well-documented methodology. Peter Bach provides an editorial that initially lauds the oncologist’s work, but then veers away toward his recurring litany of high prices and the Drug Abacus.

For those of you who don’t recall the final data, Perjeta offers a 15.7 month gain in overall survival for patients with HER2+ metastatic breast cancer. A quick look at the final Kaplan-Meier chart published by Roche shows that the curves began diverging early, and that the divergence continued to widen up to the point of data cutoff. The hazard ratio for OS was 0.68. Progression free survival was a similar story.

Perjeta, however, was found lacking in cost effectiveness despite this rousing improvement in survival. The analysis found that the product has a zero percent chance of being cost effective with a willingness to pay threshold of $100,000 per QALY, or even at a threshold of $200,000/QALY. Sadly, as it turned out, even discounting Perjeta 100% failed to achieve the blessed state of cost effectiveness at even the $200,000/QALY threshold.

So, what should we learn from this?

QALY analyses and willingness to pay thresholds are a throwback to the era of “scientific management” when all decisions were thought to be improved by quantitative analysis and “management engineering.” While this sort of approach has largely disappeared from the world of commerce, it seems to be proliferating among health care theoreticians in the U.S.

Proximity believes that both these authors miss the big picture here as do the other theoreticians who continue to advocate for QALY-based drug pricing. In our view, any product that adds nearly 16 months of survival for a Stage IV breast cancer patient is worth adopting. Perhaps not at any price, but certainly at some price; yet these articles seems to suggest that even “free” is too high a price if we are to accept a willingness to pay threshold of $200,000/QALY. Of course, docetaxel and Herceptin’s prices are the barrier to Perjeta’s achieving cost effectiveness when “free,” and the author does suggest that discounting all three products 90% moves the ICER below the $200,000/QALY level. However, I can’t really remember anyone complaining about Herceptin’s price in at least fifteen years of speaking with payers and providers in the U.S. and EU. Overall, this work, while apparently quantitatively rigorous, seems to reflect an absurdly Malthusian view of the world in which resources are eternally finite and can never keep up with demand.

Think of the implications for cancer drug development of adopting QALY-based pricing with low thresholds: What risk premium exists for developing new drugs to extend life and quality of life if their price is inadequate to even recoup the incremental cost of development for the drugs that successfully gain marketing approval? Will cancer drug development begin to resemble the market for new and novel antibiotics, where need exceeds available resources, but in which a concerning lack of new products are the driving issue, and price is not?

These studies are not constructive and detract from the need to find a way to reward incremental as well as breakthrough innovations if we are to to keep moving toward improved outcomes for cancer patients. The market for new ideas is not bleak; pricing by indication, payment for results, and portfolio contracting strategies have been talked about for more than a decade in the U.S. and are now moving ahead. Let’s focus our academics’ energy on studying these new approaches’ experiences rather than spending time revisiting old ideas that will always be irrelevant in a nation of optimists.