Cancer Drugs and Life Expectancy Focus of Health Economist

April 2011, Vol 2, No 2 - Cancer Drugs

Frank R. Lichtenberg, PhDLate last year, Frank R. Lichtenberg, PhD, Courtney C. Brown Professor of Business at the Columbia University Graduate School of Business, NY, was awarded the 2010 Garfield Economic Impact Award, which is given annually to recognize the work of economists who demonstrate how medical and health research impacts the economy. The award was given specifically for his study, “The Effect of New Cancer Drug Approvals on the Life Expectancy of American Cancer Patients, 1978-2004.”1

Cancer Drug Costs Lower Than Expected
This award-winning study showed that cancer drugs that were introduced between 1978 and 2004 increased the life expectancy of American patients with cancer by almost 1 year, and that the cost of this additional year is <$7000 per patient, much lower than previous estimates of what Americans are willing to pay for an additional year of life.1

Given the recent, and increasingly expensive, developments in cancer drug therapies, that annual cost sounds low, but Dr Lichtenberg explains that his is “a historical study. Most of the drugs taken by patients with cancer are not brand new drugs. In general, most drugs…are 20 years old, are off patent, and available in generic form. Therapy, then, becomes much less expensive.”

However, “Most new therapies are extremely expensive,” he acknowledged, “but the number of patients using them is relatively small compared with the overall population of patients with cancer.”

To back up this contention, Dr Lichtenberg cited ongoing work in which he has analyzed data on the top 6 drugs used in 2008—4 of them were launched before 1984. And the 2 top drugs were launched before 1996 (unpublished data). “The point is that the most commonly used drugs are not the brand new ones, and they don’t account for a large fraction of total drug expenditure. If new drugs were widely used,” he acknowledged, “they would indeed push costs through the roof.”

Currently, cancer drugs account for 5% of total drug expenditure, according to Dr Lichtenberg, and drugs account for about one tenth of total healthcare expenditure. So cancer drugs may account for half of 1% of total healthcare expenditure, he suggested.

Innovation and Cancer Survival
The connection between innovation and patient longevity is a major aspect of Dr Lichtenberg’s work. His previous research has shown that in some parts of the United States, new drugs have been adopted faster than in others, and in those states, there tended to be faster growth in life expectancy.2

In another study looking at 5 European countries, he found slower drug uptake in the United Kingdom relative to other countries in Europe (including France, Spain, and Germany); perhaps not surprisingly therefore, survival in the United Kingdom has been worse.3 This slower drug uptake in the United Kingdom may be related to NICE (National Institute for Health and Clinical Excellence), which carefully controls drug use based on costs, but Dr Lichtenberg acknowledged that he has not studied this formally.

Dr Lichtenberg is currently working on a paper looking at innovation in pharmaceuticals and diagnostic imaging and the impact of innovation in these 2 sectors on cancer mortality.4 Overall, imaging innovation and drug innovation jointly explain about 75% of the decline in cancer mortality.

“Where there has been the most rapid utilization of advanced imaging, we have also had the largest reductions in cancer mortality,” Dr Lichtenberg elaborated. “In fact, the survival gains from advanced imaging may be even larger than the survival gains from chemotherapy innovation.”

The Value of Cancer Therapies
In terms of whether the economist and the oncologist might actually work together, Dr Lichtenberg acknowledged, “I’m not too closely connected to the oncology community. I’ve occasionally interacted with ASCO [American Society of Clinical Oncology] and other organizations, but my approach is more from 30,000 feet.”

With regard to the physician–patient discussions on the value of cancer therapies, he recognizes the differences in perspective between economists and patients. “In principle, economists believe that as a society we should consider benefits and costs. This is what comparative effectiveness is about.” But in terms of an individual patient, “a Medicare patient doesn’t care what that organization pays [for a treatment], only what he as an individual pays.”

Cost discussions with patients are relevant, Dr Lichtenberg noted, especially for very expensive therapies. And if the government is paying for these medications (as in the case of Medicare Part D), there is no reason why the government cannot exercise a role in terms of reimbursement, he suggested.

Clearly, insurance affects decisionmaking; when people have insurance, they are not price-sensitive, and this can lead to excessive utilization of therapies that are not necessarily worthwhile. “We cannot expect patients or physicians to be too concerned about costs if they are not bearing those costs,” Dr Lichtenberg concluded.


  1. Lichtenberg FR. The effect of new cancer drug approvals on the life expectancy of American cancer patients, 1978-2004. Econ Innovation N Technol. 2009;18: 407-428.
  2. Lichtenberg FR. The Quality of Medical Care, Behavioral Risk Factors, and Longevity Growth. NBER Working Paper No. 15068. Issued June 2009. Accessed December 13, 2010.
  3. Lichtenberg FR. The effect of cancer drug vintage on cancer survival and mortality. Ann Oncol. 2007;18 (suppl 3):iii67–iii77.
  4. Lichtenberg FR. Has medical innovation reduced cancer mortality? NBER Working Paper No. 15880. Issued April 2010. Accessed December 13, 2010.