The Economic Efficiency of Cancer Drugs

New cancer drugs account for 10.7 percent of the overall increase in U.S. life expectancy at birth... The estimated cost of the drugs used to attain each additional year of life was less than $3,000.

In 1971, President Richard Nixon declared "war on cancer" and the National Cancer Act was enacted. Since that time, both government and industry have devoted enormous resources to fighting this war.

In The Expanding Pharmaceutical Arsenal in the War on Cancer (NBER Working Paper No. 10328), author Frank Lichtenberg asks, "Are we winning the war?" He analyzes data on 2.1 million people diagnosed with cancer between1975 and 1995, and concludes that new cancer drugs introduced since 1971 - about two-thirds of the 80 drugs currently used to treat cancer - have increased the life expectancy of those people by about one year, from 9.6 to 10.6 years. His analysis controls for the effects of numerous other factors on cancer survival, including surgery and radiation treatment, cancer site and stage, and age at diagnosis.

Since Americans face a lifetime risk of being diagnosed with cancer of about 40 percent, the one-year addition to life implies that new cancer drugs account for 10.7 percent of the overall increase in U.S. life expectancy at birth. Life expectancy has grown from 72.3 years to 76.1 years, or by 3.8 years. The estimated cost of the drugs used to attain each additional year of life was less than $3,000. That is far below recent economic estimates of the value of a statistical life-year of about $150,000.

Still, at first blush the data would indicate that the war on cancer is not being won. The age-adjusted U.S. mortality rate from all malignant cancers was essentially the same in 2000 as it was in 1969. During that period, the age-adjusted mortality rate from all other causes of death declined by 38 percent. Cancer today is the leading cause of years of potential life lost before age 75.

But, Lichtenberg notes, the stagnancy of the cancer mortality rate is misleading. The cancer incidence rate - the number of new cancer cases per 100,000 people - was 16 percent higher in 2000 than it was in 1975-9. This is presumably attributable primarily to the decline in mortality from other causes, particularly cardiovascular disease. As medical advances for diseases other than cancer lowered the risk of dying from those diseases, the risk of developing cancer increased.

But cancer survival rates also increased. There was only a 50 percent probability that a person diagnosed with cancer in 1975-9 would not die from causes associated specifically with the cancer within five years. For a person diagnosed with cancer in 1995, though, that probability had risen to 62.7 percent.

-- David R. Francis