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The high price of Erbitux

Lee Perry was running out of options to treat his advanced colon cancer until he enrolled in a medical trial with a drug call Erbitux that made his tumors shrink.

"It doesn't work for everyone and I understand that, but for me, it's worked miracles," he says.

Erbitux, made by a company called Imclone, has received a lot of attention for non-medical reasons. The drug sparked a scandal that led to a seven-year prison sentence for Sam Waksal, Imclone's former CEO and his friend Martha Stewart was convicted of lying to investigators.

Last February the drug finally won FDA approval and now Erbitux is becoming famous for another reason. It's been priced at $12,000 a month — even though it's never been proven to prolong survival — making it one of the most expensive cancer drugs ever.

Why the high price? It turns out the cost is set by Imclone's marketing partner Bristol Myers Squibb.  In a written statement, the company cited "research," "manufacturing" and other costs. But consumer advocates see a different reason.

"We believe the main thing that determines the price of a new drug is what the market will bear," says Dr. Peter Lurie of the Public Citizen Health Research Group, a medical watch-dog group. "There is very little relationship between the amount spent on research and what is ultimately charged. If the companies think they can charge an arm and a leg, they will."

Medicare and private insurers have not yet announced polices about paying for the drug. And while Erbitux may be setting records, other new drugs are also expensive. Avastin, also approved in February for colon cancer, costs $4,400 a month.

Cancer specialists are worried that soon insurers will stop paying for these new drugs. Says Dr. Leonard Saltz of Memorial Sloan-Kettering Cancer Center in New York, "Sooner or later we're going to run into some ceiling on what we as a society are willing pay for cancer care."

And that ceiling may keep people like Perry from getting drugs they and their doctors believe will help.