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Burgess COMMENTARY As a corporate cost accountant and subsequently a CFO a long time ago it annoys me that the drug companies and the authorities are obliged to work blindly regarding the behavior of costs associated with the development, approval and production/sale of drugs. Certainly the drug company should be able to earn a decent return on investment, but the outside world has no idea about the scale of the up-front true investment and then the ongoing marginal costs of production ... and I would add that there is additional confusion associated with the money number for investment and a potentially very different number for assets employed, not to mention the role of multiple flows of funding for research, basic and otherwise. If policy makers had access to facts about these cost behaviors, it might be possible to frame a better regulatory regime than the one we are stuck with at the present time. Meaningful transparency would be a game changer! Peter Burgess | ||
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The Science Of Zolgensma, The World’s Most Expensive Medicine (Part 1)
By Christopher Gerry — May 28, 2019 Gene Therapy Delivers a Missing Gene To Patients Who Lack It. Image: Muscular Dystrophy Association $2 million is a lot of money. It’s enough to buy a fleet of Tesla Model S cars, a large lake’s worth of Swedish Fish, or even a private island. One thing this hefty sum won’t get you, however, is a new drug called Zolgensma. Approved by the US Food and Drug Administration (FDA) in late May, Zolgensma treats infants suffering from a deadly genetic disease known as spinal muscular atrophy (SMA). Unsurprisingly, the drug’s $2.125 million price tag—the highest for any medicine in the world—has prompted the raising of eyebrows and wringing of hands across the country. Conversations about drug pricing are both warranted and important, but what’s often missing is a discussion of the underlying science. In other words, what’s that massive pile of cash actually paying for? SMA’s debilitating symptoms can be linked to changes in a single gene: SMN1. These changes cause the part of the nervous system that’s responsible for muscle movement (motor neurons) to die. And because muscles waste away if they’re not used, SMA patients suffer from progressively worsening muscle weakness throughout their bodies. Infants with SMA often have difficulty breathing, swallowing, and sitting up, and most live for only a few years. It’s an awful disease. While the consequences of SMA are dramatic and widespread, the fact that it’s caused by harmful mutations in a single gene renders it vulnerable to one of the most rapidly evolving fields of medicine: gene therapy. Gene therapies work by augmenting or altering patients’ genetic material. Specifically, they can either 1) introduce a healthy version of a faulty gene back into the patient’s cells, or 2) rewrite the patient’s genetic code to block the harmful effect of the mutation. Doing so targets the root cause of genetic diseases directly rather than alleviating their symptoms. It’s a field that’s still in its nascent stages, but the handful of medicines that have won FDA approval often achieve jaw-dropping results. In the case of SMA and Zolgensma, scientists at the biotechnology company AveXis (which was later acquired by the pharmaceutical firm Novartis) sought to introduce a fully functional copy of the SMN1 gene back into the motor neurons of SMA patients. Delivering DNA to a patient’s cells, however, requires more than just a pill and a swig of water. Instead, researchers engineered a virus that could house and inject SMN1-containing DNA into patients’ nervous systems, which must be administered using an IV. Patients who received a single dose of Zolgensma in clinical trials have fared remarkably well, and it’s believed that only one treatment will be required to achieve lasting—potentially lifelong—therapeutic effects. What percentage of infants with SMA will now be able to reach adulthood? And for just how long will Zolgensma extend the lives of SMA patients? Let’s hope we don’t learn the exact answers to those questions for a very, very long time. ------------------------------------------------------------------------ The Price Of Zolgensma (Part 2) By Christopher Gerry — June 5, 2019 Image: FreedomWorks I shouldn’t have been surprised—you can’t mention $2.125 million and expect people to just nod their heads and move on. Last week, I wrote about Zolgensma, the new gene therapy from Novartis that treats infants with the deadly disease spinal muscular atrophy (SMA). Though most of the article focused on the science behind this lifesaving new medicine, its whopper of a price tag—the largest for any drug—attracted nearly all the attention. During discussions about drug pricing, questions with no easy answers often bubble to the surface. What’s the value of a year of human life? What about a decade? And does it matter if the patient is young or old? How should innovation be incentivized? How do we protect patients’ families from price gouging when they’d be willing to pay any price to save their loved one’s life? A nuanced, thoughtful answer to any of these questions would require many more words than this article can hold. But rather than punting on the cost issue once again, I’ll spend the next few weeks examining some of the most common answers to a more specific and topical pricing question: why is the price of Zolgensma so high? Image: Benzinga Answer #1: The company that invented Zolgensma needs to recoup the costs of developing it. Arguments over the exact price of developing a new drug and bringing it to market continue to consume electronic ink by the bucketful, but nearly everyone agrees that it costs a lot. Therefore, it might seem reasonable that a company that wins FDA approval for a new medicine would try to make that money back. But what any college sophomore majoring in economics will tell you is that those costs are already sunk and should not influence the firm’s behavior moving forward. Though it may seem counter-intuitive, that precocious 19-year-old has a point: companies should price their new drugs to make as much money as possible from that point on, regardless of how much was spent to get there. Revenue and cost projections are important factors when determining whether to start a project, but those decisions are made before the costs are sunk. Setting a drug’s price after the vast majority of drug development costs have already been paid is a different story. Novartis wouldn’t have acquired AveXis—and thus the rights to push Zolgensma to the finish line—if it hadn’t believed that it would make money on its investment. The expectation of being able to charge a high price for Zolgensma was likely a key factor in that decision. But if that cost–benefit calculus had flipped at any point along the way, Novartis should have pulled the plug; there’s no need to “throw good money after bad” and chase the ghosts of sunk costs. Novartis believes that $2.125 million is their magic, Goldilocks-esque number for a single dose of Zolgensma. If the price is too high, then patients/insurers won’t be willing or able to pay, and the number of customers will decline. And if the price is too low, then each purchase will yield less revenue. Embedded in the price of Zolgensma, therefore, are predictions of how SMA patients, insurance companies, politicians, activists, and others will behave for many years. How do you make a spreadsheet for that? Is Zolgensma expensive? Absolutely. Are high R&D costs a viable excuse? No way. But is it still worth it? Very possibly. ------------------------------------------------------------------------ Zolgensma: More Musings On The Price Of The World’s Most Expensive Drug (Part 3/3) According to The Picture of Dorian Gray by Oscar Wilde, “there is only one thing in the world worse than being talked about, and that is not being talked about.” I think a certain Swiss pharmaceutical company would beg to differ. Novartis recently won FDA approval for Zolgensma, a new medicine that can potentially cure infants suffering from the otherwise fatal disease spinal muscular atrophy (SMA). But its record-high price of $2.125 million has sparked a broader conversation about drug pricing characterized by bemused practicality, scathing indignation, and everything in between. I wrote about the science behind Zolgensma a few weeks ago, and since then I’ve been examining common justifications for its unprecedented price tag. I’ve already concluded that the need to recoup R&D costs is not a viable excuse. This week’s article will explore two other oft-heard answers to the question of the moment: why is the price of Zolgensma so high? Answer #2: Zolgensma is a bargain compared to the standard of care for SMA. Though the numbers are big, this looks like a straightforward math problem. The only other treatment for SMA is a drug called Spinraza (made by Biogen). But unlike Zolgensma, which is administered just once, Spinraza must be taken for life. The first year of Spinraza costs $750,000, and all subsequent years cost $375,000, so five years of Spinraza ($2.25 million) costs more than one dose of Zolgensma ($2.125 million). Therefore, if Zolgensma proves to be as effective as we all hope it to be—one dose for decades of therapeutic benefit—then it’s clearly the least expensive way to treat SMA. But “least expensive” is a relative term. $2.125 million is an astounding sum that only looks reasonable when compared to the prices of other healthcare products and services. The United States spends an exorbitant amount on healthcare, and the high price for prescription drugs—especially compared to other countries—is a one of the primary contributors. Therefore, how meaningful is it that Zolgensma is the most cost-effective treatment for SMA? How well can the one-eyed man see, even if he is king of the blind? Answer #3: The ability to set a high price for new drugs incentivizes biomedical innovation. It takes a lot of time and money to bring a new drug to the market, and the most innovative therapies often rely upon years—if not decades—of basic research from both industry and academia. How, then, do you encourage drug hunters to work on medicines that will treat just a handful of patients with an exceedingly rare but debilitating disease? The current system in the United States offers several financial incentives. The Orphan Drug Act of 1983, for example, established a tax credit for companies that develop new drugs for diseases that affect less than 200,000 patients. But the federal government’s biggest impact stems from its granting of patents for new medicines, allowing holders to behave as de facto monopolists for ~20 years (1). As a result, pharmaceutical companies can price their new drug at a level that will maximize revenue without worrying about competition (as I discussed last week). These incentives appear to be working, but perhaps too well. More than 200 drugs for rare diseases have been approved since 1983, signaling an industry-wide shift in focus. The only way that these drugs can make money, however, is with high prices—there just aren’t enough patients. In the case of Zolgensma, insurers are expected to cover most (if not all) of its cost, but that just establishes a new baseline for what’s considered tolerable. At what price does innovation become too costly? So, what’s the truth? Is the price of Zolgensma too high, or is it justified? If there’s one thing this exercise has taught me so far—and if I haven’t used up my allowance of Oscar Wilde quotes already—it’s that “the truth is rarely pure and never simple.” NOTES: (1) You won’t be surprised to learn that patent law in the pharmaceutical industry is maddeningly complex. The 20-year clock starts on the date that the patent filed, which (almost) always happens before the drug is first tested in clinical trials. Human testing and FDA review can take upwards of 10 years, so companies often have much less than their original 20-year allotment when the drug first hits the market. But various combinations of high-paid patent attorneys—many of whom have PhDs in science—and government provisions can extend the life of a patent. And when lawsuits are brought, the court system isn’t exactly known for its speed. Like I said, it’s complicated. ------------------------------------------------------------- Related articles Dollars and Sense: How to Think About the Price of Zolgensma (Part 2) Zolgensma: More Musings on the Price of the World’s Most Expensive Drug (Part 3/3) First clinical trial of gene therapy for Parkinson s disease is successful Gene therapy brings new hope for Tay-Sachs disease Some More Clarity On SIDS, But So Much Still Unknown Related articles Zolgensma: More Musings on the Price of the World’s Most Expensive Drug (Part 3/3) The Science of Zolgensma, The World’s Most Expensive Medicine (Part 1) First Biosimilar Launched - So Where Are The Savings? Immunotherapy to fight leukemia: Some impressive results We Can't Just Subsidize Back to Antibiotics Leadership Related articles Dollars and Sense: How to Think About the Price of Zolgensma (Part 2) The Science of Zolgensma, The World’s Most Expensive Medicine (Part 1) When It Comes To Muscular Dystrophy Drugs, Is It Always Better To Buy American? As President Trump Calls For Low Drug Prices, Media Hypes Pharma’s Recent Increases FDA Closing Loopholes That Game Orphan Drug Act ------------------------------------------------------------- By Christopher Gerry Dr. Christopher Gerry was recently awarded a Ph.D. from the Department of Chemistry & Chemical Biology at Harvard University, where he studied the science of therapeutics using a combination of synthetic organic chemistry, chemical biology, and small-molecule screening. At Harvard, Dr. Gerry contributed over 30 articles to the Science in the News blog, and he served as its Co-Editor-in-Chief from 2017-2019. His writing has also been featured in CCB Magazine.
By Christopher Gerry
| June 13, 2019 The text being discussed is available at | https://www.acsh.org/news/2019/05/28/science-zolgensma-world%E2%80%99s-most-expensive-medicine-part-1-14053 and https://www.acsh.org/news/2019/06/05/dollars-and-sense-how-think-about-price-zolgensma-part-2-14074 and https://www.acsh.org/news/2019/06/13/zolgensma-more-musings-price-world%E2%80%99s-most-expensive-drug-part-33-14090 and |