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Op-Ed Contributor

Pay Only for Drugs That Help You

IT’S hard not to be outraged by the fact that the United States spends $2.6 trillion per year on health care, far more than any other country, and has no better medical outcomes to show for it. Everyone agrees that we need to cut waste from the system. And it’s understandable that, with reports of individuals taking $100,000 cancer drugs only to prolong survival by a few months, the high cost of drugs is one of the first targets.

But simply capping or slashing the price of drugs is not the answer. Individuals and insurance companies should be willing to pay — and pay a lot — for drugs when they work. The problem is we’re also paying for drugs when they don’t. To cut costs from the system and create an incentive for drug developers to deliver more innovative new drugs, this is what has to change.

All drugs have different effects on different people, particularly cancer drugs. There are many more genetic forms of cancer than simple categories like lung cancer or breast cancer denote. Drugs like Herceptin, Avastin and Erbitux (which my former company, ImClone Systems, developed) produce impressive results in patients whose cancers are genetically matched to their treatment — they can live years longer, returning to work and productive lives. But on a large group of patients, these drugs have no effect whatsoever. That’s why a drug’s “median overall survival benefit” — an average that is used to obtain Food and Drug Administration approval for cancer drugs, and a figure that critics of expensive drugs often point to — is actually very misleading.

Instead, we need to separate out those who benefit from a drug and those who don’t. When a drug works, patients and insurance companies should pay the full price. When it doesn’t, they should pay nothing.

Here’s how this “pay-for-response model” would work: Say a drug company receives approval for a breast cancer drug. Potential patients would be screened to determine whether their cancer was likely to respond to the drug, depending on whether it had, for example, a particular genetic marker. Most of the cancers that do should respond to the drug, but the presence of the genetic marker is still no guarantee. The Food and Drug Administration could help to come up with criteria with which to determine whether a patient is responding to a drug. If the patient’s oncologist and radiologist determine that the patient is benefiting based on those criteria, then the drug company should be paid. For a cancer drug, these criteria could include anything from tumor shrinkage to survival. For other diseases, response-to-therapy criteria are more straightforward. Patients with hepatitis C, for example, who realize a “sustained viral response” in which the virus is essentially gone from the blood, would pay for their therapy. Others would not.

Not only would this save money, but it would also push drug companies to figure out why certain patients don’t respond to treatment and what to do about it, and researchers to aggressively study genetic variation in disease before beginning larger studies. It would also encourage testing with multiple drugs, approved and experimental, to target just the right pathways of disease in each and every population. Biotechnology companies like mine could stand to profit from this change, but the overall gains to the health care system would be far larger.

All this would require a shift away from the pervasive trend of developing “me too” drugs — drugs that function almost identically to other available therapies, developed by pharmaceutical companies purely to capture the largest markets possible — and toward drugs that are tailored to a smaller group of patients. Early signs of such a paradigm shift already exist. Pfizer’s Xalkori, for example, was developed specifically for patients with a certain form of non-small-cell lung cancer, one expressing a unique gene known as ALK. While only a small percentage of lung cancer patients have this mutation, for them, Xalkori has made a significant difference — 50 to 60 percent respond to therapy. But examples like Xalkori are the exception, not the rule.

Charging for drugs only when they work would provide real medical and societal benefit by changing the incentives in drug development and by untethering scientific innovation. Every day, our understanding of what drives cancers, neurodegenerative diseases, viral diseases and other epidemics grows. And our ability to match patients with the proper treatment will only get better. We needn’t wait for everyone’s genetic map to be available on their iPhones to move forward. A pay-for-response model would fuel this engine of innovation today.

Making this idea a reality would take industry and government support, as well as legislation, and it won’t happen overnight. But this is the future of biotechnology. A pay-for-response model would give our biotech and pharmaceutical industries the opportunity to rapidly create value for shareholders, for medicine and for humankind — all while eliminating waste from our health care system.

Samuel D. Waksal is the founder and chief executive of the Kadmon Corporation, a biotechnology company. He served five years in prison for insider trading at his former company, ImClone Systems.

A version of this article appears in print on  , Section A, Page 27 of the New York edition with the headline: Pay Only for Drugs That Help You. Order Reprints | Today’s Paper | Subscribe

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