The cost of Keytruda: The CEO & the PM at odds?

John Key says his budget boost for Pharmac should be enough to get a melanoma drug over the line, after the Pharmac CEO says it wouldn't fund Keytruda even if it had the money. Let's unpack this...

How high is "quite high"?

That's a life and death question having heard both the Pharmac CEO Steffan Crausaz and Prime Minister talk about funding a melanoma drug over the past 48 hours.

On Saturday morning Crausaz had this conversation on The Nation with Lisa Owen:

Owen: So are there actually other drugs as good as Keytruda or better? You know, because the Health Minister has acknowledged that Keytruda could save about 120 lives a year. But are there others ahead of that that are better and there’s more evidence that suggests they’re better value for money?

Crausaz: Yeah, so after that review, they’ve [Pharmac's review committee] said this isn’t in the top tier of medicines that we would like to see funded. That’s why they said compared to everything else, a low priority. The context is—

But how many? How many—?

About 20 at the moment we’re actively working on would have a high-priority recommendation from those committees.

This morning, on RNZ's Morning Report, Key told Susie Ferguson:

"It's [Keytruda] not at the head of their list, or it wasn't last time I was given the advice, it might move around a wee bit. But on the principle that we give them the sort of money we're talking about then I think it would be enough for them to fund it, or fund a treatment.

Asked then if he thinks Keytruda should be funded, Key replied:

"...For want of a better term, they fund in an order of what will provided the most value for the dollar they're given... and a melanoma drug, not necessarily Keytruda, is quite high on their list. So we have a sense of how much money we would need to give them to get them over the line on as melanoma drug."

It's interesting to unpack those comments. Crausaz was quite clear; a lack of funds isn't the main reason Keytruda isn't being funded. Sure, it's part of the picture, because the way Pharmac's formula works, the cheaper the drug the more willing it is to take a punt on encouraging (yet not definitive) research. In other words, the lower the bet the more willing it is to take long odds. Keytruda is very expensive.

But Pharmac views Keytruda as a "low priority" because, bluntly, "Keytruda hasn’t been proven to help people live longer lives", the CEO says. Yes, it shrinks tumours. But there's no proof yet that leads to longer and better lives.

At least 20 other drugs have been graded "high priority", and so are ahead of low priority Keytruda in Pharmac's thinking. They include other cancer drugs, but also medicines for shingles and chicken pox.

Which raises questions about the Prime Minister's comments this morning. He acknowledges, rightly, that Keytruda isn't at the head of Pharmac's list. But he immediately says that if National gives it enough funding in this year's budget, the drug agency should be able to fund it or another melanoma treatment.

Now that appears to leave the PM and the CEO somewhat at odds. For a start, Crausaz said it's not just about the money, it's about a lack of evidence that it works terribly well. As I noted before, price plays a part because, the cheaper the drug the more willing Pharmac is to give it a crack. And Crausaz did say that if Merck Sharp & Dohme cut their price, that "helps".

But that means a funding increase by government wouldn't be enough on its own to fund Keytruda or a similar treatment; Merck would have to come to the party. And even then, Crausaz says there are 20 drugs ahead of Keytruda on his list.

So is Key saying the funding boost will be enough to fund at least 21 new drugs? Does he somehow know there's new research coming that will push it up the list? Or is this pressure for Keytruda or another melanoma drug to jump the queue?

Because if I'm waiting on one of those other 20 "high priority" drugs and Keytruda or something similar gets funding before me, I'm going to be rather cross.

Before we go any further, let's address that "something similar". Crausaz and Key seem to be on the same page, implying that a different melanoma treatment may be funded before the highlighted Keytruda. Crausaz named a competitor, Opdivo, as another potential form of treatment.

But the CEO says it isn't even available in New Zealand yet and it will be "a couple of months" before it arrives and Pharmac can begin trials. So presumably it's also months before that could be funded.

Both the PM's and CEO's comments seem to be as clever as they are blunt. They are presumably trying to create a price war between Keytruda and Opdivo, hoping one or both of either Merck or Bristol-Myers Squibb will do a deal and cut their price.

But that's a big if. And it doesn't offer any certainty as to whether one of those drugs will be able to climb to the top of Pharmac's list. That mostly depends on trial results.

If Crausaz is playing with a straight bat and there are 20 drugs – even 20 less expensive drugs – ahead of Keytruda, then is Key playing with fire – and raising false hope – saying that the government's funding increase will get a melanoma treatment "across the line".

Key says a treatment is "quite high" on Pharmac's lists, but at this stage the only viable drug on the market sits outside the agency's top 20. Is that what Key means by quite high? Could all 20+ drugs be funded? Is Pharmac more flexible on this drug than it says?

It's not clear. But the men's comments don't quite square.