Why I Fear the Bubble, Part 1: The Pricing of #RareDisease Drugs

Posted Saturday January 05, 2013 by Melissa

NPS Pharmaceuticals just this week priced their drug for short bowel syndrome, Gattex, at an annual cost of $295,000 per patient.

This price may not raise too many eyebrows among my readership, given that most of you know that Case’s weekly infusion drug, Elaprase, costs approximately $350,000 per year. But what if I told you that Gattex was the fourth drug approved by the FDA in 2012 with an annual price per patient of over $200,000? (added to Kalydeco, Elelyso, and Juxtapid, see entire list below).

When you add those to an earlier compiled list of the most expensive medicines (Medical Billing & Coding, The 11 Most Expensive Medicines in America), here is what you get:

  1. Soliris by Alexion Pharmaceuticals: for paroxysmal nocturnal hemoglobinuria, approximate annual cost – $409,500
  2. Elaprase by Shire HGT: Hunter Syndrome (MPS II), annual cost  – $375,000
  3. Naglazyme by BioMarin Pharmaceutical: Maroteaux-Lamy Syndrome (MPS VI), annual cost – $365,000
  4. Cinryze by ViroPharma: hereditary angioedema, annual cost – $350,000
  5. Folotyn by Spectrum Pharmaceuticals (acquired Allos Therapeutics): T-cell lymphoma, monthly cost – $30,000 (typically short course treatment)
  6. ACTH /Acthar by Questcor: infantile spasms, if 2 courses of treatment – could be around $300,000
  7. Myozyme by Genzyme: Pompe disease, annual cost for adults – $300,000
  8. Juxtapid by Aegerion Pharmaceuticals: homozygous familial hypercholesterolemia, annual cost – $200-300,000
  9. Gattex by NPS Pharmaceuticals: short bowel syndrome, annual cost – $295,000
  10. Kalydeco by Vertex Pharmaceuticals: subset of cystic fibrosis, annual cost – $294,000
  11. Arcalyst by Regeneron Pharmaceuticals: inflammatory disorders like Familial Cold Auto-inflammatory Syndrome and Muckle-Wells Syndrome, annual cost – $250,000
  12. Ceredase/Cerezyme by Genzyme: Gaucher disease, annual cost – $200,000
  13. Fabrazyme by Genzyme: Fabry disease, annual cost – $200,000
  14. Aldurazyme by BioMarin/Genzyme: Hurler/Sheie Syndrome (MPS I), annual cost – $200,000
  15. Elelyso by Protalix Biotherapeutics /Pfizer: Gaucher disease, annual cost – $150-200,000

One drug that is not yet on the list is uniQure‘s Glybera (for lipoprotein lipase deficiency or LPLD), the first gene therapy approved in the western world, at a single administration price equivalent to $1.6 million. While that sounds staggering, it is much less than the lifetime cost of many of the drugs on the above list. The expected upcoming U.S. approval process should be quite interesting.

I also expect to possibly add GALNS by BioMarin to the list since they are seeking FDA approval in 2013. GALNS is a treatment for Morquio Syndrome or MPS IVA and it would be the 4th drug on this short list to treat an MPS condition. While that is exciting for the MPS community, it also speaks of the seriousness of the conditions and the determination of the parties involved to spur on research.

How do they arrive at these (seemingly) astronomical prices?

The pharmaceutical industry and others typically explain rare disease pricing as a combination of the following factors:

  • Medical value – effectiveness, first to market, medical advantages over alternatives (oral v. injections, targeted therapy, etc.)
  • Costs of alternative treatments/drugs already on market or off label
  • Health care costs (hospitalizations, surgeries, etc.) avoided by use of the drug
  • Longer patient life
  • Better quality patient life
  • Greater patient contribution to society (e.g., getting off disability)
  • Research & development  costs of drug, clinical trials, etc.
  • Extremely small patient populations (commonly referred to as the “orphan drug premium,” without which companies might have no incentive to develop drugs for such small patient populations)
  • Pricing sensitivities of insurers & governments

In addition, what is incalculable in the price of one drug is the advancement that research in rare disease is allowing us to have on more common conditions. To quote Francis S. Collins, M.D., Ph.D., (Former) Director of The National Human Genome Research Institute, “While many of the genes we will initially be pursuing are responsible for rare disorders, what we learn from rare disorders often has profound consequences for our understanding of more common conditions.”

In truth, it seems that pricing drugs for rare diseases is more of an art than a science, evidenced by the fact that sometimes companies are forced to lower their prices to receive approval in some countries.

On a personal level, while it is difficult for me to picture the idea that my son is the new Six Million Dollar Man, I see the incredible difference that his drug makes to his body, and thereby, the difference he is allowed to make in the lives of others. Although I have heard it said at several rare disease conferences, “No one is really worth $300,000 a year,” I beg to differ. When Case ultimately reaches the end of his hopefully long life, I would venture that a retrospective analysis, considering the above factors, would find his “cost” overwhelmingly worthwhile, relatively or independently.

Why does this matter?

So the list of $200K+ drugs is now up to 15 instead of 9 from just a few short years ago, but why does that matter to me? To you? I’ll talk about this more in part 2 of this series, but here are some initial thoughts.

If you or your child has a rare disease that is being treated by one of these high priced drugs? Well, you’re among the lucky ones in my opinion (and I say that with the humility that this group includes my son). Although there is a treatment, and many of you live in a country where there is insurance, governmental or private, for that treatment, not all patients do. In addition, it still matters because countries and insurers are beginning to push back. The push back could mean refusal to approve treatments in some countries, making the treatments more difficult to obtain or retain given a change in health status, or new policies for co-payments or other patient cost participation. It could also mean the dis-incentive for companies to invest in research for a better treatment or *gasp* possibly a cure.

If you or your child has a rare disease that has yet to have a treatment? If the rare disease pricing bubble pops, then we may be back to the pre-Orphan Drug Act era where companies were reluctant to invest in drugs for such small patient populations when the return is not as high or more at risk. This could again stagnate the entire rare disease research industry.

If you’re in the pharmaceutical industry? The push back from governments and insurers could mean that expected return on substantial rare disease investment might not match internal or analysts’ expectations. This could be devastating for some small biotechs, but for bigger companies, it might just mean more reluctance in future rare disease endeavors and the inability or unwillingness to expand to new markets.

If you’re “just” a member of society, not in any of these groups? First, you may only be a moment away from one of these groups. 1 in 10 Americans has been diagnosed with a rare disease. It may not be one that requires such expensive treatments, but then again, a week before Case was diagnosed, I had no indication I would be among the first group either. While many of these conditions are genetic and are diagnosed in young children, a large portion of orphan drugs are for unique types of cancer, thus, you, your child, parent, sister, or brother could at any time fall into one of these categories.

Even if you are never personally impacted by rare disease, I would venture to say that the recent debates over the U.S. health care system, the world financial challenges, and the likely rising costs of your health care premiums should be an indication that this matters to you.

Pricing escalation itself, and the governmental, insurer, and even public outcry it can create, should cause some concern. The story of Questcor’s re-pricing of Acthar, the recommended treatment for infantile spasms, to $28,000 per vial should be a cautionary tale. But when you combine that with the fact that the percentage of orphan drug applications compared to non-orphan drug applications is increasing steadily over time, I foresee a bubble that has no choice but to pop, maybe not in the next five years, but within the treatable life of my son. I am not railing over high prices and pharmaceutical profit, I am just using my looking glass.

I fear that I am the purveyor of doom in pharma’s rush of delight to the growing revenue stream of rare disease.


Next week: Why I Fear the Bubble, Part 2: A Crash at the Intersection of Personalized Medicine and #RareDisease Research?

For more reading on rare disease drug pricing, I recommend:

Copyright © 2013, Melissa Hogan. All rights reserved.

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4 Responses to “Why I Fear the Bubble, Part 1: The Pricing of #RareDisease Drugs”

  1. Amen! Amen! Amen! I only wish I had more time to commit to pushing back on the drug companies even harder! Love the perspective, Melissa.

  2. Unfortunately for adults the cost of many of these like aldurazyme is closer to a $million dollars per yr. Understandable how time consuming these drugs are to make (several weeks for aldurazyme) but at the same time for pts with little options it isnt great.

  3. […] For Part 1 of this series: Why I Fear the Bubble, Part 1: The Pricing of #RareDisease Drugs […]

  4. […] companies have become used to the receipt of high market prices for orphan drugs. As I wrote in Why I Fear the Bubble, part 1: The High Price of #RareDisease Drugs, it has become the practice for pharma companies to price orphan drugs at a high price for many […]