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Last week, Medicare created something of a stir when the agency announced that it would initiate a coverage determination on Provenge, an innovative but nevertheless expensive drug manufactured by Dendreon (DNDN), and approved for use in metastatic prostate cancer.
Given the context that surrounds Provenge – it is indicated for a disease with a poor prognosis, it has been demonstrated to extend life by about four months when compared to placebo, and it costs approximately $93,000 per treatment cycle – it seemed entirely reasonable that Medicare would, in the very least, take the time to examine exactly what it might be getting itself into before declaring the therapy worthy of taxpayer dollars. The initiation of a national coverage determination sounded simply logical, like measuring twice before cutting once.
The stock market, however, did not appear to count itself a fan of either reason or logic. DNDN shares plunged immediately after the Medicare announcement, and though it recovered some of its value as the day progressed, the sentiment that surrounded the trading declared itself clearly: If public health insurers so much as entertain the idea of rationing cancer care; if the days of Medicare virtually rubber-stamping all FDA-approved cancer therapies, regardless of cost and relative efficacy, really are over; if our federal healthcare payors are under so much financial strain that acting judiciously is even more important than acting compassionately – well, the market seemed to say one day last week, if all this is true, Provenge just might be doomed.
As DNDN’s shares fell and then climbed back up a little, it all got me wondering: Is Provenge a drug that is going to succeed or fail on its merit alone? Or is it a marginal, albeit inventive, medication whose future hinges more on the philosophical direction of healthcare in this country than any other factor?
And then I got to thinking some more: What would happen to Provenge if the United States were more like Europe? What would become of its prospective market if Medicare were run like England’s National Health Service (NHS), and cost-efficacy actually figured into coverage determinations for our various medical therapies? It seemed like a fun exercise to embark upon, and so I did.
So the first thing I looked at was the quality-adjusted life year (QALY), which is a measurement used by NHS’s National Institute for Health and Clinical Excellence (NICE). Simply put, QALY applies a value to the amount of life that a therapy procures. For example, if Provenge can provide its average patient with an extra four months of a fully functional life, than it has a QALY of 0.33. If, however, Provenge delivers four more months of a life that now has to endure bone pain due to metastases, and in those four months the patient might have a prolonged hospital stay, then it might be reasonably argued that the four months in question are lived only half as well as a healthy person’s life – and thus the QALY would only be 0.17 (or half of 0.33).
And so, I thought, it was reasonable to argue that Provenge would provide a QALY of somewhere between 0.17 and 0.33 – though for some patients, the number might be considerably lower than that.
The next thing that NHS and NICE would do in assessing a coverage determination on Provenge would be the assignment of a monetary cost to its QALY. This concept is pretty easy: If, as in the example of Provenge, the cost of procuring four extra months of life is $93K, then the cost of obtaining an extra year of a life well-lived is about $282K, or $93K/0.3. If, however, the extra life that is procured is only half as good as that of a completely healthy person’s, then the monetary cost of Provenge and its four extra weeks of life would be $93K/0.17, or $547K.
And so that’s what Provenge appears to cost – somewhere between $282K (in an absolute best-case scenario) and $547K (in a middle-of-the-road scenario) for every year of life it extends, at least as they see it in England. Of course, for those less fortunate, who might have to spend part of those four extra weeks receiving 24-hour hospice care, the cost of a QALY might come out to considerably more than that – perhaps over $1 million for four months of a life that can boast only one-quarter the quality of an average healthy person’s. For argument’s sake, however, I will take the lowest number, $282,000, which assumes four months of a life lived in good health.
The last step that NHS and NICE would take is the most difficult: the determination of what a year of life is worth – or, at least, what a QALY is worth. For the most part, NHS does not cover the expense of medical technologies that cost more than the equivalent of $30K per QALY. In special circumstances, in which patients have little in the way of options, that number may go as high as $60K, but a QALY is rarely valued as more than that.
And so Provenge, with a cost per QALY of at least $282K, would probably not be designated as a covered expense by NHS, as its cost in the best-case scenario well exceeds the $60K threshold.
If, in fact, the United States ever administered its public health benefits in a manner similar to our counterparts across the Atlantic, Provenge would never, ever be covered. It is just too expensive for what it does. In fact, Provenge is quite unlikely to find a market in many of the countries within Western Europe, who are more apt to perform cost-benefit analyses on their most expensive drugs. And certainly Provenge will have no market at all in the developing world, where absolutely no one can afford it.
But what are the chances that such a day would ever come to our soil? What are the chances that the United States, of all places, would emulate the socialistic healthcare practices of Western Europe and Canada?
I am not sure. But I look around and I see a country whose healthcare expenditures, if maintained at the rate we have seen in the last decade, will grow larger than our tax base within the next 15 years. I look around and I see a country that is spending more to pay the interest on its debt than it spends on some of its most important national security and social programs. I look around and see a recently signed healthcare bill that provides for the establishment of an Office of Comparative Effectiveness – which sounds an awful lot like the American version of NICE – and see further that our president is serious about funding it, to a tune of over $1 billion.
And I look around and see that Medicare is giving itself a full year to decide on whether it should pay for a drug that extends a terminal illness by four months, and I wonder what else might go down, economically, during those 12 months. I look at all of this, and after a while I don’t feel so good about Provenge.

Disclosure: No positions

Source: Dendreon and Provenge: What if We Lived in England?