
At $2.1M, Novartis gene therapy will be world’s most expensive drug - hhs
https://www.statnews.com/2019/05/24/hold-novartis-zolgensma-approval/
======
gruez
> Novartis is likely to face backlash from critics who believe charging
> millions of dollars for any medicine — no matter how effective — renders it
> unaffordable for a healthcare system already under financial stress.

If the alternative is no cure at all, what's the issue? I guess you could
argue that some governmental organization could be doing it so you can save
money by not having to pay out profits, but I doubt voters would support tax
hikes to help the 0.001% (or whatever) of the population that has this
disease.

>There’s also competition. Spinraza, approved in late 2016 and sold by Biogen,
has already been used to successfully treat thousands of patients with severe
and milder forms of SMA. The drug requires regular spinal infusions costing
$750,000 in the first year and $375,000 annually thereafter, for life.

$2.1M vs $23.2M (assuming 60 years of life). Seems like a bargin compared to
Spinraza.

~~~
ip26
_If the alternative is no cure at all, what 's the issue?_

If it's a fair price based on all their costs, then there's no issue. But if
it is exorbitant even after considering all the costs- well, many people take
umbrage with healthcare profiteering.

~~~
aaavl2821
Avexis spent ~$700M on developing this drug. But drug prices don't just cover
costs for developing the drug. They also have to cover losses from other
failed r&d projects, and also cover the cost of capital

money isn't free. If for profit companies didn't fund this research, no one
would. Opportunity cost of money is a real cost and it is reflected in the
price of any commercial good -- drugs are no exception

Is there profiteering in some cases? Yes. Is there in this case. Probably a
bit. But it is not realistic or fair to think drug companies should price
solely based on a cost-plus model, ignoring losses from failed research
efforts and the cost of capital

However, cost of capital is a huge driver of costs and reducing it would be
very valuable. The question is how to do that

If you're curious to see how these different things affect drug price, I made
a tool where you can play around with different drivers of drug prices (incl
cost of capital) to see how they affect price:
[https://www.baybridgebio.com/drug_pricing_calc.html](https://www.baybridgebio.com/drug_pricing_calc.html)

~~~
ip26
When I say cost, I mean everything. Including R&D, including those other
failed projects, including rye cost of capital.

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aaavl2821
Avexis, the company that Novartis acquired to get this drug, spent ~$700M
developing it. The drug will treat a few hundred patients a year. Without a
high price, it isn't profitable. for these drugs to get covered at such a high
price, they have to be very effective, which this drug seems to be

However, did Novartis have to charge $2M? Avexis was trading at a $3B market
cap not long before Novartis bought it for $8.7B. Analysts were projecting a
$1-1.25M price tag, which is closer to the cost effective range

Novartis probably paid up for avexis bc it was a competitive deal process and
they thought they could get away with a higher drug price than the market
expected. At the time of the acquisition people thought Novartis was paying a
premium for the platform, by charging $2M for the drug it seems like more of a
pricing play than platform deal

I wrote a case study on avexis with more detail here:
[https://www.baybridgebio.com/blog/most_expensive_drug.html](https://www.baybridgebio.com/blog/most_expensive_drug.html)

~~~
JamesBarney
I've always been curious how that 700M breaks up? How much of that is FDA
trials and how much is paying 1000 phds to work on designing drugs for 7
years.

Of course the follow up question is there any way to get that number lower.

~~~
aaavl2821
It seems very high to me as well, especially since they were allowed to submit
for approval with only one 15-patient study completed and interim data from a
few other studies. I think they have tested the drug in under 100 pts to date

Per the financial statements, ~$500M of that $700M was r&d (the rest was
general and administrative expense). A lot of the r&d spend was payments to
third party research and manufacturing firms. Given the small clinical trial
size I'd imagine more money went to contract manufacturing than research.

There are very few companies and people that can make gene therapies at scale
at acceptable quality levels. It seems like this expertise is quite expensive.
There was probably a lot of process development here since making these drugs
at scale is so new (here "at scale" means "enough for ~100 patients")

They also spent a lot building out their own manufacturing site.

They also had a $135M license payment, I think to the company they licensed
their viral vector from

------
hombre_fatal
The final quote raises the interesting question:

> Peter Bach, director for the center for health policy and outcomes at
> Memorial Sloan Kettering Cancer Center, is troubled by Zolgensma’s price and
> believes ICER’s updated cost-effectiveness analysis takes too many
> liberties.

> “You can look at this in either of two ways. It’s an amazing treatment and
> only a few kids will need it so a million here and million there is not
> worth more than shoulder shrug,” he said. “Or we have a big problem.
> Biopharma has been entirely redirected to rare diseases because the market
> will tolerate any price and the FDA will require pretty minimal data.”

~~~
ThrowawayIP
That quote just states that some corporate board rooms have found a local
maximum in the profit vs (time to market & R&D costs).

Pharma companies do not operate by any moral mandate but are only seeking
profit.

------
Creationer
At what point do you say: this child just isn't meant to be? Why would you
subject someone to a life of annual spinal injections, and society to the huge
financial cost?

~~~
inertiatic
Any reasonable individual would "subject themselves to a life of annual spinal
injections" if the alternative was being dead.

So, if the average person wouldn't tell themselves they're "just not meant to
be", there is also no point where you get to say that for a child.

------
adonovan
Why are gene therapies so expensive? Is it simply the need to recoup high R&D
costs across a smaller "market" of patients with rare diseases? Or is the
marginal per-patient cost actually higher than a regular pharmaceutical?

~~~
toufka
These new gene-/immuno-therapies tend to be:

1) much more sophisticated/cutting edge in terms of R&D,

2) the R&D is all of a new kind, so there has been little prior amortization
of resources from prior successes.

3) __curative__ , so from a purely market perspective a XX% discount on a
[cost/year * lifetime] relative to a small-molecule drug that needs to be
taken regularly, forever, is in these very high ranges, and still economically
appealing from a cold hard actuarial perspective.

The high prices also attract advanced technology development in the area, and
I think society wants & demands that rapid technological development of these
powerful tools. Imagine trying to pay competitive salaries to a large number
of sophisticated genetic engineers and all of their tools and equipment, when
there are literally only a five or six products on the market with which to
support their efforts.

It is still very unclear how we as a society should be paying for that
development. And placing that burden on (those) individuals seems
unreasonable.

------
codeulike
Just an FYI - The R+D and govt approval process is expensive. The actual
treatments are - I'd wager - relatively easy to produce. So this Novartis
treatment is delivering DNA fragments via AAV. Its not attempting CRISPR or
anything like that, its just gets extra copies of the unmutated gene into the
nuclei so the right proteins can get made. I think they call that
upregulation. So its basically AAV plus DNA fragments.

So for example you can buy engineered AAV viruses online. They sell this stuff
for research. Looks like its about $350 a pop

[https://www.addgene.org/viral-service/aav-
prep/](https://www.addgene.org/viral-service/aav-prep/)

Novartis aren't using CRISPR here but as another example these guys sell
CRISPR for your research experiments:

[https://www.addgene.org/crispr/guide/](https://www.addgene.org/crispr/guide/)

Here's some Crispr for plant experiments for about $400

[https://www.addgene.org/kits/stuttmann-dicot-genome-
editing/](https://www.addgene.org/kits/stuttmann-dicot-genome-editing/)

So I'm sure there a lot more to it than that, but even so, it seems to me that
the nuts and bolts of this stuff - once known - are going to be easy to
produce. How long till we get a generic?

------
JamesAdir
I can't shake the feeling that the medical companies have huge incentives to
develop drugs that are taken for a long period of time instead of one time
treatment. There should be some government incentives that will make sure that
companies who offer simple cheaper solutions will have some benefits out of
it.

------
avocado4
Do payers in other countries agree to cover 2.1M bill or is it only the US?

~~~
tareqak
Payers in other countries can use their countries' negotiating power to
negotiate with Novartis. The United States is definitely capable of doing the
same in theory.

~~~
arkades
No, it’s not. Medicare is legally restricted from negotiating drug prices.
Yes, that’s a ridiculous law.

Edit: to clarify, Medicare does not only cover seniors. Other important groups
include those with end-stage renal disease and those with significant
disabilities. Those often also receive Medicaid, and are known in industry
jargon as “dual-eligible.” Medicare becomes their primary payor, with Medicaid
picking up the balance of what Medicare won’t cover. Both programs are
ultimately overseen by CMS (center for Medicare and Medicaid services). Pay
negotiations for Medicaid occur on a state level, but a huge chunk of the tab
is picked up federally, so they tend to weigh in.

Newborns with SMA will almost certainly be initially covered by parental
private insurance (pre-dx), and transition to dual coverage afterwards. Please
note that there are a combination of gene therapies under discussion, only one
of which will be given once at birth- the rest will entail ongoing costs that
will be borne by Medicare and Medicaid.

~~~
tryptophan
Its not ridiculous. How can you "negotiate" when you have 0 leverage? There is
no "negotiation", ever. Even calling it that is disingenuous because it
implies that some low cost could be reached if it were not for those darn evil
corrupt capitalists. To illustrate how absurd it is, think of a scenario in
which a woman with a gun robs a jewelry store and then boasts she got a 99%
discount due to her "negotiation" skills. The clerks have 0 leverage in that
situation, so it is not a "negotiation" in any way.

The only option the company has is to sell. If they don't, they lose all their
investor money and go bankrupt. The reason other countries get away with
obscenely low prices is because the good'ol USA is paying for it, and the
companies are better off getting anything other than 0.

If you look at how well industries are doing, you would also see that you
would actually make more money investing in a burger chain than in the pharma
sector. These high prices exist because of the incentives the insurance model
creates (i.e. save people at any cost), not because companies are super greedy
or evil and make 1.99$ million profit on a 2$ mill drug(which they do not).

~~~
protastus
> Its not ridiculous. How can you "negotiate" when you have 0 leverage? There
> is no "negotiation", ever.

Why zero leverage? Government contracts contemplate volume purchasing
agreements for suppliers. Many medications include alternative suppliers which
can be used as leverage.

As noted by others, extremely expensive treatments for rare conditions are
often not offered in socialized systems. When they are, it's often the result
of a court order forcing the government to make it happen. Better pricing
could allow a treatment being provided as an option to the population (by
default, without necessitating a court order), which can be interesting to the
pharma company due to increased sales volume.

------
negamax
Reading at the comment and $8B acquisition cost and $1M profit. They just need
to treat 8000 people. Eventually market forces will take over and cost will
come down by magnitudes

Hint: genome sequencing

------
Causality1
>The drug requires regular spinal infusions costing $750,000 in the first year
and $375,000 annually thereafter, for life.

I don't understand how this is justifiable. As an insurance company, the only
way to cover this treatment is by raising premiums for all customers. By
raising premiums, people on the edge of being able to afford insurance are
pushed out. There is no way in hell this treatment doesn't cost more lives
than it saves.

~~~
TheOperator
Which is why most insurance plans wouldn't cover it.

