• The Listener
  • North & South
  • Noted
  • RNZ

New Zealand's delayed access to cancer medicines is costing lives

Melanoma patient Jeff Paterson fought for improved access to Keytruda before he died at 23 in August 2016.

The story of revolutionary immunotherapy drug Keytruda crystallised the debate over our access to high-priced cancer medicines. Melanoma patients died waiting for the treatment that could save them – but that didn’t budge drug-funding agency Pharmac. Donna Chisholm reports.

For the key players, the Keytruda story reached its end game in an operating room in Auckland and a conference room in Wellington on June 17, 2016.

On the operating table in Auckland lay 23-year-old melanoma patient Jeff Paterson, who was undergoing surgery on his brain to remove a 3cm tumour that was pushing on his brain stem, blurring his vision and leaving him with nausea, dizziness and hearing loss.

On the boardroom table at Pharmac’s Wellington headquarters, was drug giant Merck’s last-ditch attempt to secure a funding agreement for its blockbuster melanoma drug, Keytruda, the drug Paterson had spent the last eight months campaigning to gain access to, both for himself and others. 

Macro alias: ModuleRenderer

The result was a win-win for Merck and Pharmac, who 11 days later announced a provisional deal to publicly fund Keytruda. But it was too late for Paterson, who died five days before the first free infusions of the drug were given to patients on September 1.

When the funding decision was announced, Paterson had only weeks to live. His mother, Anita Woodger, says he was so sick she almost forgot to tell him the news. “The campaign had taken a back seat, because he was in his bedroom dying. I suddenly thought, I haven’t told Jeffrey, this big thing we’d been fighting for, and I haven’t told him. I went into his room and grabbed his hand and said, ‘I nearly forgot to tell you the news. You did it, mate, Keytruda’s been funded.’ He could hardly talk, so it was a whisper. He said, ‘Mum, don’t stop. It’s not just for me, it’s for everyone.’”

Jeff Paterson and his mother Anita. Melanoma is this family’s curse – apart from Jeff, five of his 10 cousins have had melanomas removed, as have Anita and two of her three siblings.

Woodger takes comfort from what she sees as her son’s legacy and the fact that despite how ill he was, he’d devoted the last of his “good” days, fighting for access to a drug that Pharmac refused to fund, despite the evidence of its effectiveness.

The reality is, however, that when it comes to its negotiating chops, Pharmac has never been one to let the body-count from the fallout of its decisions change its bargaining position. And politicians generally don’t challenge them – not since the then-National government overturned Pharmac’s decision to fund breast cancer drug Herceptin for only nine weeks instead of 12 months.

 Read Donna Chisholm's first article in this series: 

Cancer cost: The great disparity between treatment for rich and poor

(A five-year Herceptin study sponsored by the Finnish Breast Cancer Group, with support from Pharmac, reported in December. It found disease-free survival for patients on the year-long course was 90.5%, compared with 88% for those on Herceptin for nine weeks. The trial’s lead investigator, Helsinki professor Heikki Joensuu, said that based on those results, the 12-month course should remain the standard of care.)

Delayed access to medicines – and the lives that costs – is the high price patients pay for the best deal.

Merck’s headquarters in the United States. With nearly 70,000 employees worldwide, this compound in New Jersey is the size of a university campus, but it’s just one of the company’s 170 sites in the US alone.
If Merck isn’t quite the house Keytruda built, the blockbuster cancer drug has certainly paid for the renovations.

Medicines like Keytruda, a revolutionary immunotherapy that holds promise in potentially dozens of cancer types, are a kind of pharmaceutical Holy Grail with the ability not only to save the lives of thousands, but also to earn billions of dollars for their makers.

This isn’t just “big” business; it’s behemothic. Merck’s CEO Ken Frazier takes home a whopping $US21.8 million a year in salary and incentives – much of those on the back of Keytruda’s success.

With nearly 70,000 employees worldwide, its New Jersey headquarters is the size of a university campus, but it’s just one of the company’s 170 sites in the United States alone. Few would be of the scale of the Kenilworth compound, however, where uniformed security staff at the entrance check the ID of every visitor. No photographs are allowed to be taken – not even of the outside of buildings – once inside the gate. When North & South was given a rare tour through the company’s research labs, we weren’t allowed to interview the researchers or even to take notes.

For Merck, which was in the midst of an eight-year innovation drought with falling annual sales before Keytruda was FDA-approved in September 2014, the drug’s discovery couldn’t have come at a better time. Once dubbed “the House that Research Built”, Merck had introduced no important new medicines since launching cervical cancer vaccine Gardasil and diabetes drug Januvia in 2006.

In 2017, Keytruda sales accounted for nearly 10% of Merck’s $US40 billion revenue, and market analysts Bloomberg predict annual sales will reach nearly $11 billion by 2022. It’s being studied in more than 600 clinical trials globally, in at least 30 different types of tumour, and is now FDA-approved in the treatment of 10. In 2016, the FDA also approved its use in any patients whose cancers have a specific genetic feature known as microsatellite instability-high or mismatch repair deficient.

Despite innovative drugs often being rapidly superseded by more effective newcomers that suddenly render the original more or less obsolete, the hype within the company is that immunotherapy in general and Keytruda in particular will underpin its bottom line well into the future.

In the history of cancer treatment, immunotherapy is a revolution, says Auckland University’s Professor Rod Dunbar, a cancer immunologist and director of the Maurice Wilkins Centre.

If its potential is fully realised, it undoubtedly will. In the history of cancer treatment, says Auckland University’s Professor Rod Dunbar, a cancer immunologist and director of the Maurice Wilkins Centre, immunotherapy is a revolution. “We will look back at this time historically and point to the first trial and say this is the moment that our understanding of cancer completely changed. It’s that important.”

The scientific explanation of how the anti-PD-1 (programmed cell death protein 1) drugs such as Keytruda work has filled hundreds of pages in international medical journals. Dunbar explains it this way: “The [immune system’s] T cells that can recognise and kill cancer cells have a big, red off button [PD-1] on them. The tumour cell can press that button and switch the T cells off over time. What this drug does is put a whacking great plastic shield over the off button so the tumour can try to press that button, but it can’t switch the T cell off, so the T cell keeps going and keeps doing the killing.”

Targeting the drug in clinical trials towards patients with high levels of PD-1 – and who were therefore most likely to benefit from Keytruda – was a winning strategy for Merck in its lung cancer trials, enabling it to wrest market leadership from its Bristol Myers Squibb rival, Opdivo. Opdivo’s clinical trial in lung cancer failed, opening the way for Keytruda to win FDA approval in that important category first. Each new cancer indication approved gives Merck a multimillion-dollar boost.

Companies justify high drug prices by arguing that the cost of the research and development required to get a new drug to market is punishing – estimates have ranged from $US90 million to $2.6 billion – and only three in 10 drugs launched make a profit. Merck’s annual R&D bill is around $US7 billion, but that’s dwarfed by its sales and marketing spend of more than $9 billion. Critics also point out the stunning similarity in prices of new drugs of the same class. Keytruda, for example costs $US13,000 a month. Its three rivals cost $12,500, $13,000 and $13,100.

This image of a patient’s melanoma tumour, thinly sliced and highly magnified through a microscope, gives an inside view of how immunotherapy works. Melanoma cells have been stained blue, T cells are stained green, and the PD-1 molecule is shown in red. Some of the T cells in contact with the melanoma cells are starting to turn red, indicating they are switching on PD-1. Anti-PD-1 drugs, such as Keytruda and Opdivo, can protect these T cells from being switched off by the tumour so they can continue killing the melanoma cells.

To New Zealand Cancer Society medical director Chris Jackson, that appears cynical, at best. “Near-identical pricing suggests almost identical costs of development, which seems incredibly unlikely.”

It’s more likely, he says, pricing decisions are based on what the market will bear. “What the market will bear is very high in cancer, and that’s unsustainable.”

The US and New Zealand are the only two developed countries in the world that allow direct-to-consumer marketing of prescription drugs. In the US, tune in to CNN at peak-time and you’ll see ads for Keytruda (“For a longer life – it’s tru – Keytruda”) vying for airtime alongside treatments for constipation (“Don’t take with bloody or black stools”), heartburn (“Fast relief in every bite”), and enlarged prostate (with the grammatically indefensible tagline “Less urges to urinate”).

Drug pricing has been a perennial political hot potato in the US, but successive administrations have been impotent at effecting change. The average cost of a branded cancer drug in the US is around $10,000 a month – double the level of a decade ago.

In October, President Donald Trump said in a Cabinet meeting that “drug prices are out of control” and companies were “getting away with murder”. He later tweeted that he was working on a new system “where there will be competition in the Drug Industry. Pricing for the American people will come way down!”

Like the repeal of Obamacare, no one expects that to happen any time soon. Dan Ollendorf, chief scientific officer for the Boston-based Institute for Clinical and Economic Review (ICER), which analyses the cost-effectiveness of innovative therapies, told North & South cultural shifts were happening, but slowly.

“This is not a country that’s ever really embraced, even within the payer community, the idea of using cost-effectiveness analysis to try to understand value, and whether pricing matches up. Public payers – Medicare for the elderly and Medicaid for the poor – have historically stayed away from this kind of work because it’s a political minefield.”

Merck CEO Ken Frazier, left, talks to US President Donald Trump during a meeting with pharmaceutical industry leaders in the White House last year. Frazier quit Trump’s manufacturing council in August after the president’s comments following the Charlottesville protests.

That means public payers are essentially left to control cost by restricting access and enforcing co-payments, which in the case of new cancer medicines, often renders them unaffordable anyway.

He says in the US, ICER is the only organisation lobbying publicly for value-based pricing, and the institute’s view is that immunotherapy prices are too high. “These drugs don’t meet the common cost-effectiveness thresholds. Often the drugs are added to regimens that are already expensive, and it’s also less common now to see any approval of a cancer drug that’s for a limited duration, so patients are taking them for much longer periods.”

Harvard Medical School Associate Professor of Medicine Aaron Kesselheim, who researches drug pricing policy and has been at the forefront of the debate in the US, believes reform will likely apply to older, off-patent drugs first. Outrage over the actions of people like Martin Shkreli, whose start-up company ratcheted up the price of an HIV drug by 5000% in 2015, makes it more palatable for lawmakers to address pricing issues for those medicines.

Addressing the cost of innovative, big-budget medicines is much harder because the US, unlike nearly every other advanced nation, allows manufacturers to set their own prices and retain market exclusivity for up to 12 years, says Kesselheim. It also legally prevents payers, such as Medicare and Medicaid, from negotiating on price. “It’s not a very efficient marketplace in terms of pricing.”

The pharmaceutical industry spends “by far” more than any other industry on political lobbying in the US – nearly $US210 million in 2017 – and “that’s a substantial hurdle”. There’s also concern that legislative change might dampen innovation. “In fact, there are a lot of reasons to think that innovation wouldn’t be substantially impacted if prices were more closely tied to the value the drug offers.”

Patients are struggling, he says. They resort to either using fewer drugs to save money or don’t take them at all, or have to cut back in other areas of their lives. The reputation of drug companies has slipped accordingly.

In 2016, Kesselheim was the lead author on a widely referenced Journal of the American Medical Association paper that concluded the most realistic strategies to control prices short-term included more stringent rules for awarding and extending exclusivity rights, and providing more opportunities for meaningful price negotiation by government payers.

The fact that prices are so inflated in the US does allow companies to be more generous – or pragmatic – in less wealthy or Third World countries.

Harvard Medical School Associate Professor of Medicine Aaron Kesselheim

Merck’s global market access director for oncology, Pristish Jairam, says she was hired to ensure Keytruda reaches the greatest number of patients who need it. Last year, she visited New Zealand to brainstorm strategies that might help it get Pharmac funding for other indications, including lung and bladder cancer and non-Hodgkins lymphoma.

“We wanted to understand the New Zealand health-care system and how we can provide access in a sustainable way. You’re a relatively high OECD country but access tends to take a bit longer.”

Asked if the most effective strategy would be to reduce the price to more affordable levels, Jairam says it’s not that simple. “Our job is to find the value each market can bear. In that market, it’s this price; in another, it’s that price. Some health-care systems reward innovation and put a higher price on what they consider good-quality innovation.”

She told North & South that Merck uses different contracting models in different countries, from cross-portfolio deals to price volume agreements. It runs more patient-assistance programmes in the Asia Pacific region than other areas.

“Years back, pharma companies used to be a bit more rigid: this is the price, take it or leave it. There would almost be a certain amount of arrogance. Those days are gone. We have a product like Keytruda which is ground-breaking – like nothing we have ever seen before – so in what good conscience can we adopt that kind of attitude? Our ethos is to provide access to patients.”

That doesn’t mean it’s immune from some of the questionable tactics that have given many drug companies a bad name. In 2012, it was fined $321 million for the unlawful promotion of its rheumatoid arthritis drug Vioxx, which caused the heart attack deaths of more than 50,000 people. Over the years, the company has paid out more than $5 billion to settle lawsuits related to the deaths.

In 2016, research published in the BMJ (formerly the British Medical Journal) showed drug-makers were packaging expensive cancer medicines – including Keytruda – in doses that were too large for many patients, leading to annual waste of around $US3 billion. Cancer drug infusions are based on body size, so for Keytruda, a 70kg patient would need 140mg per treatment. But researcher Dr Peter Bach, director of the Memorial Sloan Kettering’s Centre for Health Policy and Outcomes, said Keytruda came on the market only in 50mg vials, and the company had since moved to 100mg vials. Bach estimated doubling the vial size would bring in an additional $1.2 billion in revenue over the next five years. The company responded that because Keytruda was brought to market relatively quickly, the sizes had been based on uncertainty over which of the doses would be approved.

Bach told CBS News he doesn’t believe companies are making those sorts of choices by chance. “It is nearly impossible that no one at Merck thought about the impact of revenue by changing the vial size.”

Martin Shkreli, whose start-up company ratcheted up the price of an HIV drug by 5000% in 2015.

In 2012, Bach and his colleagues decided not to give a “phenomenally expensive” new drug Zaltrap to advanced bowel cancer patients, saying it had proven no more effective than a similar medicine and, at $US11,000 a month, was more than twice as expensive. After the publicity generated by the doctors’ decision, drug-maker Sanofi halved the price.

Competition, which keeps prices in check in many other industries, doesn’t have the same effect in pharmaceuticals, with companies routinely raising their prices in step with each other.

And while generic versions of brand-name drugs – which enter the market after the original’s exclusivity period expires – can provide significant savings, they haven’t stopped prices of old drugs being progressively ramped up.

For example, despite reaping billions in profit from its breakthrough cancer drug Glivac, Novartis has regularly increased the price – in 2001, it listed at $26,400 a year in the US; today it costs more than $120,000, despite several generics being available. The cheapest of the generics sells for more than $57,000 a year, or $150 a pill, despite it costing only around $1 to produce one pill.

If the good news about new immunotherapy treatments is their stunning effectiveness in certain groups of patients, leading in some cases to what’s now being called a cure, the bad news is that prices seem certain to head only one way in the foreseeable future: up.

That’s because the focus of the next wave of research is on combination therapies: “The general expectation is that combinations are likely to be potentially more valuable than just a single agent,” Merck’s senior vice president of global clinical oncology research, Dr Roger Dansey, told North & South. He says almost all of the company’s oncology trials now involve Keytruda, either as a monotherapy or in combination.

Dansey says immunotherapy agents such as Keytruda are “absolutely transformational” and the revolution has just begun. “It’s like standing on a huge stage and looking forward – and it’s very, very positive. Once you buy into the concept that you can actually manipulate the immune system to take on a cancer, the sky is the limit. Because there may be no barrier that cannot be broken down by science in terms of how to switch an immune system on or provide an immune system that will attack a cancer.”

He acknowledges companies “wrestle” with putting an appropriate value on such a therapy. “Look at the melanoma survival curve now and go back five years and see how dismal and miserable it was. The world of melanoma has fundamentally and irrevocably changed from a dread disease with no future to, for many patients, a manageable outcome. There’s a huge value in that. How you capture all of that value… the impact not just on the patient but on the health system, on the families. There are rings and rings of people that are affected positively, so the clinical value is enormous.”

It doesn’t mean companies can afford to stop looking for the next “next big thing”.

“I sure hope there’s another one,” says medical oncologist Dr Eric Rubin, Merck’s vice president of clinical oncology. “I guess I’m a little sceptical, but we’re trying. If it’s out there, we will certainly try to find it.”

Dr Eric Rubin, Merck’s vice president of clinical oncology.

He says about 20 new compounds are the focus of early research. Some, which have been used on patients relatively recently or are about to go into early clinical trials, operate almost as the flipside of Keytruda. Where Keytruda effectively takes the brakes off the immune system, these drugs press down on the accelerator with what are known as immune agonists.

That mechanism obviously raises safety concerns – what happens to the body, for example, when the immune system is operating in the same way as a car with its accelerator pedal jammed to the floorboards? Rubin says the drugs require slower and more careful safety evaluation to find appropriate doses. “It can be risky because you might also turn the immune system on to recognising non-cancer and create side effects.”

One of the new compounds the company is “fairly excited about” is injected directly into the tumour, or in specific sites that will enable the body’s T cells to recognise tumours elsewhere in the body.

Rubin says the FDA’s approval of Keytruda for use in any cancer with microsatellite instability is a paradigm change. “For the first time, we are redefining cancer; we are classifying it on the basis of a test rather than how it looks under the microscope.”

For Merck in New Zealand, where the company is known as MSD, Keytruda has led directly to the company doubling the number of staff involved in organising clinical trials, from about 10 to 20, but a more important lift, says MD Paul Smith, is in morale.

That’s tempered by frustration over this country’s slower access for patients. “In Australia, as long as the assessment of the drug says it’s good and cost-effective, you know it’s going to be funded. Here, it might be proven to be cost-effective, but they say, ‘Sorry, we can’t fund it’ because of the budget cap.”

Smith suggests drug pricing is more nuanced than most people realise. “We generally look disease by disease at the value it brings. You might have a disease where the benefit is a bit more marginal than what is currently funded and that would bring the price down. But we might see a disease where the drug is extraordinary compared to anything out there and the price might go up.”

Public hospitals here are taking part in 16 global clinical trials of Keytruda in melanoma and also cancers of the blood, breast and stomach, costing the company around $15 million a year.

Although Keytruda isn’t yet funded for use in lung cancer in New Zealand, Smith hopes that will happen soon. He estimates up to 100 patients are paying for the drug privately – about 20 people a month are getting their PD-1 levels checked to find out if the drug would work well for them. Patients paying for the drug here get it free after they’ve spent $60,000 on the medicine (excluding administration costs and GST).

Keytruda is costing Pharmac nearly $14 million a year, second only to Herceptin ($39 million) on the cancer drug bill, and three times more than that spent on its rival Opdivo, which was controversially funded first. But that amount is significantly less than the agency budgeted for. Pharmac estimated about 700 patients would be prescribed Keytruda in the first year – based on 350 new cases and a backlog of others waiting for it – but the actual figures are around half that.

The miscalculation must have added millions to the estimated annual cost. Chris Jackson believes that could have been prevented by better consultation with oncologists in the field, and wonders if it delayed Keytruda’s approval. Opdivo use has now fallen away to almost nil.

What if the Opdivo decision was the sort of brinkmanship required to get Keytruda across the line at a better price to the taxpayer? Does that make it understandable – worthwhile even? Jackson responds with just four words.

“Ask Jeff Paterson’s family.”

NZ Cancer Society medical director Chris Jackson: “Near-identical pricing suggests almost identical costs of development, which seems incredibly unlikely.”

For Paterson’s mother Anita Woodger, the anguish of losing her youngest son is still intolerable, as is the memory of how much of the precious time he had left he spent on his campaign for Keytruda.

“It was a toll on him.” She points out the window. “He sat out there in his chair and recorded a video message to Pharmac. He must have practised I don’t know how many times to get the lighting right. He wasn’t well when he did that, you can tell, but he was determined.”

She believes the same agency should not be responsible for both approving and funding new medicines. “We need someone to tell them, ‘You’ve got to fund this.’”

She remembers going with Jeff to Parliament where he helped deliver a petition requesting that Keytruda be funded. “I felt a bit like a pawn being shuffled around. One of the politicians said to me, ‘Your son has changed my mind’ and I thought, ‘At least we’ve done some good.’ But I don’t think they fully understand what it means. Most politicians have got money and it doesn’t affect them like it does us. To me, if I didn’t raise that money, my son would die.”

Yes, she says, the fundraising efforts were a distraction from the terrible situation they were facing, but “I wish we hadn’t had to do it because I felt it took too much of our family’s energy and focus, and it was a huge effort for Jeff”.

The family raised more than $100,000, but Paterson, who had been started on another form of therapy before Keytruda was funded, deteriorated rapidly and was never well enough to use it.

Melanoma is this family’s curse – apart from Jeff, five of his 10 cousins have had melanomas removed, as has his mother and two of her three siblings.

The money raised is already paying for some of the expenses of Jeff’s cousin Michael Kooge, who in a cruel double blow is now battling glioblastoma, diagnosed in 2016 after major surgery for melanoma in 2013. The chemotherapy for his brain tumour is fully funded.

Jeff’s Paterson’s cousin, Michael Kooge. In a cruel double blow, he is now battling glioblastoma, which was diagnosed in 2016, after major surgery for melanoma in 2013.


Kooge, 34, creative director at Auckland radio station The Edge, says he grapples with how far to go to find innovative therapies. “Do you go to Sweden to try a new treatment? Go to the US? Hang out with monks or just accept it? I don’t know. Some days you think, ‘I want every possible answer’ and the next day you don’t care. You turn up to treatment, you go home, and you don’t want a thing to do with it. People think you research everything but I put my trust in the health system we have.”

He was involved in the family’s efforts to fundraise for Paterson but, like Woodger, questions the emotional toll that took at an already stressful time. “You’ve got enough to worry about. It’s good for family and friends to be able to do something, but they should just be able to be there in support. I was proud it was something we could do to help him get the drug.”

Nearly $90,000 of the money raised remains. It’s also paying for the regular melanoma screening tests Paterson’s family has. “His life wasn’t wasted,” says Woodger.

“I can say hand on heart, he had a purpose and a legacy. Every time we go for a mole map, we say, ‘Thanks Jeffy. Thank you for looking after us.’”

Donna Chisholm travelled to the US with the assistance of a health journalism scholarship funded by health insurers nib.

This was published in the February 2018 issue of North & South.