How much should new drugs cost?
There are a lot of innovative therapies with encouraging prospects and eye-popping price tags in the news lately. All of them pose hard questions about the big commercial risks drug companies must take and the enormous pricing power of medicines that can help suffering patients.
Sovaldi, the new drug to treat hepatitis C, costs $1,000 per pill, or about $84,000 for a full treatment regimen. Novel cancer drugs, perhaps the leading edge of a whole new class of oncology therapies, are coming to America soon at a cost of about $150,000 a year for a single patient.
The Sovaldi drug, sold by Gilead Sciences, can help 3 million Americans with hepatitis C and many more around the world. I can’t even imagine the potential market for cancer treatments that really work better than what's available today.
And then there’s Genzyme, the Cambridge biotech company known for its drugs that treat rare disorders. It just priced a latest therapy for patients with Gaucher disease at $310,250 per year. Wow.
Compared with the numbers of people suffering with cancer or hepatitis C, the patient population targeted by Genzyme’s Gaucher drug isn’t just small, it’s practically microscopic. How tiny? Just 2,000 people in the United States and about 10,000 worldwide.
“This is truly the ultrarare,” says David Meeker, the chief executive at Genzyme.
Gaucher patients have an enzyme deficiency that can cause enlargement of the liver, excessive bleeding and bruising, and bone pain. Genzyme has sold therapies to those patients for decades.
A drug company that charges sky-high rates to such a small group of patients doesn’t pose much of a problem for the US health care system. It’s a few drops in a very big bucket.
But here’s another way to look at it: We give companies like Genzyme special commercial advantages if they invest time and money to help people with relatively unusual medical problems.
The federal government offers explicit commercial advantages — including tax incentives and patent extensions — to those companies by designating their products as orphan drugs.
As public policy, this is a good thing. Drug companies, which are in the business of making money, have no reason to pursue treatments for rare diseases. So we give them one.
If those medicines work, companies can charge high prices because no one is developing any alternatives in the immediate future. Even if competitors eventually join those little markets, incumbents enjoy a huge advantage and their prices reflect that.
So when is enough, enough? Public policy distorted normal market conditions to help create those opportunities. At some point, the public interest is owed something in return. But it never seems to work out that way.
Unlike most drug companies, Genzyme was actually built around a strategy targeting rare diseases and the commercial advantages of the federal Orphan Drug Act. Once it was alone on that path, but today more companies — some of them in Boston and Cambridge — are doing the same kind of thing.
“I think you’ll find it’s a pretty remarkable number and they’re only there because there’s a business model that works,” said Meeker. That means companies and investors would never choose to go into those markets without the advantages of orphan drug status.
Fair enough. But Genzyme’s track record selling drugs to Gaucher patients since the 1990s speaks to the point about long-term prices.
When I wrote about it five years ago, the biotech’s cumulative sales to those patients were about $10 billion. Gross profit margins were through the roof. Since then, I would estimate Genzyme has sold $3 billion to $4 billion more in Gaucher drugs.
In 2009, some analysts worried that Genzyme’s Gaucher drug sales would slip because manufacturing problems had limited the company’s supplies. That turned out to be true. Competitors moved in and grabbed a piece of the market under those special circumstances.
But patients, or whoever pays their bills, didn’t get a break. Genzyme’s therapy cost about $200,000 at the time. Now it’s $300,000 and Genzyme’s brand new pill, as I mentioned, is a bit more expensive than that.
Meeker describes Genzyme’s drugs for Gaucher patients as parts of a broader therapeutic portfolio targeting tiny markets. One drug may hit it big, while others don’t perform as well. Genzyme looks at the big picture and doesn’t think the price to treat Gaucher patients is out of line.
I look at the billions of dollars the company has made treating a rare disease and see one very expensive orphan.
Steven Syre is a Globe columnist. He can be reached at firstname.lastname@example.org.