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Why a $93,000 Cancer Drug Can't Shake Off Rumors It Doesn't Work

By Jim Edwards

Updated on: August 2, 2010 / 12:28 PM EDT / MoneyWatch

Provenge, a new prostate cancer drug that can cost up to $93,000, may not work, according to an article in the New England Journal of Medicine that has stirred up yet another set of conspiracy theories surrounding the company that makes the medicine, Dendreon (DNDN). Some of the planks of the conspiracy theory were laid by the NEJM itself which has a strange, contradictory policy about when and to whom it releases its market-moving information. The lesson here is that not telling everyone the same thing at the same time is a great way to sow confusion: Transparency is as much about timing as it is about being candid.

There are a lot of moving parts here, but here's a brief summary of what's happened in the last few weeks:

Dendreon's provenge was approved by the FDA. The drug is intended to spur an immune response to prostate cancer.
The Centers for Medicare and Medicaid Services began a review to consider national coverage for Provenge. This was unusual, because CMS normally covers all drugs. CMS is not supposed to consider price as a fact (that's one reason the U.S. has out of control healthcare costs) but the $93,000 price tag is an invisible 800-lb gorilla in the room.
The NEJM published an old study of the drug, funded by Dendreon, which showed four things: 1) A 22% reduction in the risk of death for Provenge patients. A 4.1-month improvement in survival rates. 3) 31.7% of Provenge patients survived past 36 months compared to 23% in the placebo group. 4) The drug appeared to have no affect on the progression of the cancer itself.
An editorial in NEJM wondered out loud whether the study was a statistical fluke, because it didn't show an effect on the disease itself.
A bogus but plausible-sounding critique of Provenge was circulated anonymously in mid-July, sending Dendreon stock down before investors realized it was wrong. (You can read the bogus paper here and its cover letter here.)
The NEJM study was released early to a select group of Wall Street analysts whose customers traded on the news on a Tuesday while the media was snookered by an embargo that kept them silent about the study until Wednesday night. NEJM actually has a policy of favoring Wall Street insiders over Joe Schmo the retail investor or the media.

This was disastrous for Dendreon because the company has long been dogged by unfounded rumors that its stock is manipulated by Wall Street insiders.

Up next: The CMS decision on Provenge could prove hugely controversial if it elects to restrict coverage for the drug. The Provengistas will be up in arms. Even so, such a decision might be useful: The U.S. desperately needs to become more serious about putting cost limitations on marginal drugs. $93,000 for 4.1 extra months of life, while still suffering from cancer, isn't worth it for most people (unless you're very, very rich.) That's heresy in America, of course, but it's a heresy we need to take seriously if we're going to bring healthcare costs down.

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Image by Flickr user Pulmonary Pathology, CC.