One prominent analyst believes we may soon see a new drug price controversy erupt, only this one will have nothing to do with price gouging on an old therapy.
The drug is Spinraza, the newly approved pioneering therapy for rare cases of spinal muscular atrophy from Biogen and its partners at Ionis. Earlier this week Biogen priced the drug at about $750,000 for the first year and half that for each year after, or $1.5 million over three years.
And a presidential-level Tweet storm may not be far behind, says Leerink’s Geoffrey Porges. He notes:
“The sticker-shock presented in the media could turn Spinraza into the Sovaldi of rare disease drugs, or the straw that breaks the camel’s back in terms of the US market’s tolerance for rare disease drug pricing. At the very least, and implied in our updated model, the price is going to force payers to closely scrutinize which patients receive access and limit the overall access provided. To us it seems certain that patients who have the less severe Type III and IV forms of the disease or who are older with relatively milder symptoms will find it difficult to obtain treatment.”
The price is substantially above what Porges had forecast, but it isn’t necessarily way out of line, he notes. Other rare disease drugs have a built-in price escalation model as patients start on a drug as infants and then increase their dosage as they grow older. Biogen won’t be able to hide any price hike under its flat price, and overall the Spinraza price won’t be that far off from other rare diseases.
In the meantime, look for Biogen to benefit from a sudden surge in revenue once the new drug becomes available.
Its interesting to note on our end that drug price controversies come in several models. Spinraza and Sovaldi may be subject to a payer backlash as certain new drugs command jaw-dropping prices that can stun insurers. Rare disease drugs, though, have generally not attracted the kind of attention that Sovaldi garnered, with its focus on a major disease like hepatitis C.
Then there are the Turings and Valeants of the world, which jacked up prices on old drugs and attracted the attention of lawmakers who responded to the online lynch mobs that formed to demand a response. But even with public hearings and regular condemnation, Turing didn’t budge on its price for Daraprim.
Finally, there’s the regular price escalation that can add up to big money over the years, a business model followed by most of the biopharma world. Now that strategy is also coming under pressure as industry insiders like Allergan CEO Brent Saunders challenge the industry to self-regulate prices, limiting annual price hikes to modest single-digit increases.
The jury is still out on that one, but the industry is far from rushing into a wholehearted embrace of price discipline, especially as R&D continues to disappoint most major manufacturers.
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