The issue(s) with cancer drug prices

Cancer isn’t just complex—it’s costly. Research shows it’s one of the most expensive diseases to treat and is a top driver of employer healthcare costs. And unfortunately, the price tag isn’t getting any smaller. In a 2025 study, 86% of employers reported increased spending on cancer care compared to the previous year.

So what makes cancer treatment so pricey? Believe it or not, medication is the leading expense.

What drives high cancer drug prices?

Cancer drugs are very expensive—and it feels like costs just keep climbing. Across all tumor types, the median annual cost of a course of treatment is $196,000, and cancer drug prices are rising faster than inflation. Here are three of the main reasons these medications carry such high price tags:

1. Specialized and expensive research

Because cancer is complex, so is the development of necessary cancer drugs—and that’s a pricey process. The median research and development cost (from initiation through FDA approval) to bring a single cancer drug to market is $648 million.

That includes clinical trials that are significantly longer than trials for other types of drugs. Oncology clinical trials often span years, involve multiple patient cohorts, and require sophisticated biomarker testing—all of which drive higher costs.

The costs of the cancer drugs that successfully make it to market need to support these huge research expenses.

2. High failure rate

While clinical trials are a critical part of the development process for any drug, many never result in successful approvals.

On average, 90% of clinical drug development fails—and that rate is even higher among oncology drugs specifically, where 97% never receive FDA approval. The few drugs that do succeed have to carry the financial weight of those that didn’t.

3. Lack of competition

Competition has proven to improve the affordability of medications (for example, FDA approval of generics almost always drives down the price of brand-name drugs), but there’s very little competition in the cancer drug market.

Much of that is due to patents. Pharmaceutical companies with patents often have exclusive rights to produce and sell cancer drugs, and those patents last a long time—the standard is 20 years from the application date.

Plus, cancer drugs are complicated to produce and replicate, reducing competition even further. This means that the companies that create the cancer drugs essentially have a monopoly and aren’t exposed to the market forces that typically drive down prices.

Understanding the impact on patients and providers

The ripple effects of high cancer drug prices extend far beyond the pharmacy counter. For patients, they translate into significant and oftentimes overwhelming financial burdens.

In 2023, for example, Medicare Part D beneficiaries paid an average of $11,284 out of pocket for oral cancer medications—costs that contribute to the growing financial toxicity of cancer care. Some patients are even forced to sacrifice care for the sake of cost.

In one survey, one in five respondents said they had skipped or delayed taking prescribed medication because of the price.

Providers feel the strain too. Hospitals and oncology practices often face reimbursement delays or must absorb the cost of expensive drugs when insurance coverage falls short. Over time, those financial pressures can echo through the broader healthcare system and limit crucial cancer care resources.

Ongoing efforts to reduce cancer drug prices

Policymakers, insurers, and providers are all experimenting with ways to rein in the soaring costs of cancer drugs. While no single solution will solve the problem, several major initiatives are attempting to make treatment more affordable and transparent.

Inflation Reduction Act

The Inflation Reduction Act includes several provisions aimed at lowering drug costs for Medicare beneficiaries. Starting in 2025, it caps annual out-of-pocket costs for Medicare Part D beneficiaries at $2,000 and limits price increases for certain drugs to the rate of inflation. The law also allows Medicare to negotiate prices for some high-cost drugs, with the first 10 negotiated drugs taking effect in 2026—though only a fraction of these are for cancer. Currently, only 2.2% of Medicare beneficiaries with cancer take a negotiated drug.

Health Care PRICE Transparency Act

Transparency is another important lever for controlling costs. The proposed Health Care PRICE Transparency Act builds on the existing Hospital Price Transparency Rule and would require hospitals and health insurance plans to provide clear, detailed pricing information, including negotiated prices for covered prescription drugs. The idea is to give patients, providers, and payers better information to make informed decisions about care.

Value-based care

A broader shift toward value-based care is also influencing cancer treatment. Under this model, the price of a cancer drug is tied to the actual outcomes it delivers rather than just the cost of development or market demand. By linking the cost of treatment to effectiveness, value-based approaches encourage the use of treatments that truly benefit patients and minimize unnecessary or low-value options.

In addition, in some value-based models—like Carrum’s bundled payments approach—providers are incentivized to use a less costly biosimilar drug (vs. a more expensive brand name drug), as long as the biosimilar option is clinically equivalent.
 

How employers and health plans can take action

With cancer becoming more common, high-quality cancer care is more crucial than ever. But unfortunately, sky-high cancer drug prices can make treatment even more overwhelming and, in some cases, inaccessible to the people who need it.

The good news is that employers and health plans don’t have to sit idly by while cancer drug prices continue to climb. Adopting value-based care programs can help shift payments toward treatments that deliver meaningful results while also making costs more manageable and improving the patient experience.

That’s why Carrum Health provides members with access to high-quality, value-based cancer treatment—while also keeping healthcare spending in check.

Learn more about Carrum’s Cancer Care program here.