Source: Eli Lilly and Company.

When the FDA's advisory committee considered Eli Lilly's (NYSE:LLY) new lung-cancer drug Portrazza back in July, no one was heard shouting that it was a game-changer. But following the FDA's approval of Portrazza, Eli Lilly still slapped a five-figure monthly price tag on the therapy.

Small advances forward
Despite advances in the treatment of other cancers, the vast majority of patients diagnosed with metastatic squamous nonsmall-cell lung cancer (NSCLC) will still sadly pass away within five years.

Overall, the squamous version of NSCLC represents about 30% of the estimated 221,200 newly diagnosed cases of lung cancer in the U.S. every year and unfortunately, most of these patients present with locally advanced or metastatic disease at the time of diagnosis.

Currently, squamous NSCLC patients are treated with the chemotherapy cisplatin, or with platinum-containing regimens that include drugs like Celgene's (NASDAQ:CELG) Abraxane. Historically, only between 12% and 37% of patients respond to these front-line therapies and the median overall survival for patients taking them is just eight to 13 months.

In an attempt to improve upon those numbers, Eli Lilly developed Portrazza, a drug that inhibits the EGFR protein expressed on squamous NSCLC tumors, that can be used alongside chemotherapy in newly diagnosed patients.

In studies, adding Portrazza to a regimen that includes gemcitabine and cisplatin extended patient survival to an average 11.5 months versus 9.9 months for gemcitabine and cisplatin alone.

That doesn't seem like a lot additional time (because it isn't), but the improvement does appear to match up to Abraxane. In trials, the median overall survival of squamous NSCLC patients receiving Abraxane and carboplatin was 10.7 months versus 9.5 months for carboplatin plus paclitaxel. 41% of squamous NSCLC patients responded to Abraxane-containing therapy compared to 31% of patients responding to Portrazza.

Baby steps, at a high cost
Eli Lilly has priced Portrazza at $11,430 per month and the drug is designed to be used by patients until disease progression, which in this trial was a median 5.7 months.

Based on that monthly price tag and a 5.7 month timeline, Portrazza could cost the average patient more than $65,000. That's arguably a lot of money to pay to gain an additional six weeks or so in overall survival.

In fact, it's an extraordinarily large amount of money relative to what value-based models suggest would be a albeit subjectively "fair" price. In a study that appeared in the highly regarded JAMA Oncology, a price south of $1,309 per three-week cycle results in a price per quality-adjusted life year, or QALY, of $200,000.

Although the U.S. doesn't use QALY to evaluate drugs, the U.K.'s chief price watchdog, NICE, has used a QALY threshold of about $45,000 when approving cancer drugs in the past. Based on that number, it would seem that Eli Lilly's pricing decision is aggressive.

That assessment is backed up by the fact that drugs with QALY's far lower than Portrazza have drawn the ire of payers. For example, Celgene only recently scored EU approval of Abraxane in the first-line NSCLC setting and NICE has yet to weigh in on its QALY in that indication, but NICE has formerly opted against funding Abraxane's use in pancreatic cancer based on a QALY of about $118,000. In the United States, Abraxane's priced at between $6,000 and $8,000 per month, so it's less expensive than Portrazza.

Looking forward
It's not clear whether Portrazza's efficacy when used alongside cisplatin is strong enough to convince doctors to use that regimen instead of Abraxane plus carboplatin in the front-line setting. In the past, some doctors preferred cisplatin regimens because there is some evidence of marginal improvement in outcomes versus carboplatin, but cisplatin can be very hard to tolerate, so it's likely that doctors will remain divided on the use of these drugs. If so, then the question becomes will doctors who embrace cisplatin therapy embrace Portrazza, and will payers foot the bill for it? That's an important question that needs answering, so investors will need to watch carefully over the coming quarters to see if Portrazza sales accelerate or stagnate.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.