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`Inside The Pricing Of A $300,000-A-Year Drug - Forbes
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`Inside The Pricing Of
`A $300,000-A-Year
`Drug
`
`JAN 3, 2013 @ 10:21 AM
`
`17,679 VIEWS
`
`Matthew Herper
`FORBES STAFF
`I cover science and medicine, and believe
`this is biology's century.
`
`FOLLOW ON FORBES(cid:98)(2029)
`
`Opinions expressed by Forbes Contributors are
`their own.
`
`FULL BIO
`
`
`
`Last night, NPS Pharmaceuticals
`announced that it was pricing Gattex,
`its drug for short bowel syndrome, at
`$295,000 per patient per year, about
`triple what analysts on Wall Street
`expected. It is the fourth drug
`approved in 2012 to be priced at more
`http://www.forbes.com/sites/matthewherper/2013/01/03/inside-the-pricing-of-a-300000-a-year-drug/
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`Inside The Pricing Of A $300,000-A-Year Drug - Forbes
`than $200,000 per patient per year.
`The others are: Kalydeco for cystic
`fibrosis (maker :Vertex
`Pharmaceuticals); Elelyso for
`Gaucher’s disease (Protalix and
`Pfizer); and Juxtapid for homozygous
`familial hypercholesterolemia
`(Aegerion Pharmaceuticals.) That
`represents 10% of the drugs approved
`by the Food and Drug Administration
`last year and a 44% increase in the
`number of such high-priced rare
`disease drugs on the market.
`
`Francois Nader, the chief executive of
`NPS Pharmaceuticals, spoke with me
`this morning about how he and his
`team priced Gattex. Here is a roadmap
`for how a medicine can be priced at an
`annual cost equivalent to a house.
`These bullet points reflect NPS’
`reasons for pricing the medicine as it
`did.
`
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`1. Medical value: Gattex is the first
`non-surgical treatment for short
`bowel syndrome, a disease which
`requires patients to get their nutrition
`parenterally, or through a vein. A sixth
`of the patients on the drug can be
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`Inside The Pricing Of A $300,000-A-Year Drug - Forbes
`weaned from this parenteral nutrition.
`“this is a product that significantly
`improves the daily living of these
`patients,” says Nader. “They feel
`liberated and for them it is a life-
`changing event.”
`
`2. Direct costs: Parenteral nutrition
`can on its own cost $100,000 a year.
`But Nader says there are other costs
`that can be as high as $500,000 per
`patient, and that Gattex is expected to
`reduce those costs, which include
`hospitalization, as well, although that
`has not been shown in clinical studies.
`Short bowel syndrome also leads to
`increased mortality.
`
`ADVERTISING
`
`3.
`
`Indirect costs: Gattex improves
`quality of life and allows some
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`Inside The Pricing Of A $300,000-A-Year Drug - Forbes
`patients to return to work, so that they
`no longer receive disability payments
`and become productive members of
`society.
`
`4. The orphan drug premium: NPS
`found that there may be as few as
`3,000 short bowel syndrome patients
`in the country, fewer than expected,
`after it polled companies that provide
`parenteral nutrition. Drugs for rare
`diseases cost more. “Until recently
`orphan products were called neglected
`diseases. I think that society and
`payers are willing to pay a premium
`for these diseases that were ignored.”
`
`5. Will insurers pay? NPS says it
`polled insurers, patients, and doctors
`about what they would be willing to
`pay, and Nader says that they would
`have been able to pay a price even
`higher than what it is charging. Nader
`says that if the existing short-bowel
`treatment, Zorbtive, were used on an
`annual basis, it would cost $290,000
`per year t00.
`
`How, though, does anyone pay for
`such a medicine? The answer is that
`pricing of these rare disease drugs,
`known as ultra-orphan drugs in the
`biotech industry, are not paid for the
`way that most medicines are. Nobody
`buys them out of pocket, and the
`manufacturer refuses to grant
`discounts to insurers or to Medicare.
`Commercial insurers will usually not
`pay the whole cost of the drug, asking
`patients to cover a co-pay that could
`be 30% of the drug’s price. Through
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`Inside The Pricing Of A $300,000-A-Year Drug - Forbes
`what is known as a co-pay assistance
`program, NPS will cover patients’ out-
`of-pocket costs. Nader thinks 51% of
`potential Gattex patients are on
`commericial insurance.
`
`Another 34% of potential Gattex
`patients are on Medicare. For these
`patients, rare disease organizations
`will help pay the bill. NPS will give
`unrestricted grants to those rare
`disease organizations, but can’t say
`what they’ll be used for. Another 15%
`of patients probably won’t be able to
`pay at all. Those patients will get the
`medicine for free. NPS will have a field
`for of 38 people who will market the
`drug and get to know each patient
`personally and to negotiate insurance
`reimbursement for each drug. The
`general outline of this plan is similar
`to what is done by other rare disease
`companies like Alexion
`Pharmaceuticals, Sanofi’s Genzyme
`unit, and BioMarin. The strategy of
`targeting these rare diseases has been
`one of the most successful in biotech
`over the past decade; it has, for
`instance, made Alexion into one of the
`industry’s biggest stars. Nader says it
`cost about $250 million to develop
`Gattex, which is not that expensive in
`an industry where a drug can chew up
`$1 billion or more in development
`costs before getting approved.
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