Was PTC Therapeutics playing games when it tried to defuse the deflazacort controversy with a $35,000 annual price?
When PTC Therapeutics $PTCT CEO Stuart Peltz rolled out the biotech’s Q1 report this morning, he noted that company execs came up with what they believe is a “sustainable” price for the cheap, old steroid acquired from the controversial crew at Marathon Pharmaceuticals for $140 million up front and targeted at the Duchenne community in the US.
The net price, he said, would average $35,000 a year for a patient that weighed 25 kilograms, or 55 pounds.
“We believe this represents sustainable pricing which balances providing access to all eligible patients in the US in an ultra orphan population while maintaining sufficient infrastructure and programs, including continued investment in Duchenne,” Peltz said.
That $35,000 net — the price payers could expect after discounts — sounded like quite a drop from the $89,000 annual price point that triggered a storm of protest for Marathon, until you start to do the math on what these patients actually weigh.
RBC’s Matthew Eckler did the math, and came up with a much higher number. If you consider that most of the boys are in the 35- to 40-kilo range, he says, you’re really talking about an average range more like $45,000 to $50,000 a year.
That’s 45 to 50 times more than the $1,000 average price Duchenne parents have been paying to bring in deflazacort, a generic outside the US which has been available for decades at a low price. But now that it’s approved and available in the US, those foreign suppliers are being closed to American families. And PTC’s “net” price may actually wind up higher than the $54,000 price Marathon fielded, but failed to sell.
According to community activist Christine McSherry of the nonprofit Jett Foundation, many of the older patients like her son now weigh 60 to 100 kilos, and at that range the price — provided PTC sticks to the weight/cost ratio — parents would actually be forced to buy the steroid with a net price higher than Marathon’s $89,000 tag.
So, I asked Eckler, for boys weighing 75 kilos this would mean a price of $105,000?
Based on what they have told us yes, but that assumes the cost per mg is the same for all size boys.
It’s possible that they could work out agreements with payors where the cost per mg is not static based on the weight of boys. At this point (we) will have to wait and see. Regardless, there will be boys who are much heavier than the 25mg guideline and thus (their) cost is going to be more.
PTC did not explain what it’s wholesale acquisition cost, or WAC, was or how the weight/price formula would work. It’s extremely unusual for companies to avoid the high WAC price tag entirely. Most begin with that and then negotiate privately with payers.
Even at $35,000, analysts like Eckler expect the headlines to continue to run against PTC, now that the company has picked up the price gouging title that Marathon has been trying so hard to shed. And that could play havoc with PTC’s plans to start working with the US Duchenne community as it tries to force the FDA to reverse its position on ataluren — a drug that failed its last three studies in a row — and approve it for US marketing. The drug is available in Europe.
Drug pricing has remained in the headlines as a non-partisan political rallying cry, and we don’t anticipate this will change in the near term. Ultimately, we see this asset as negative on an NPV basis given: 1) the significant upfront investment ($140M vs. 2017 sales guidance of $5-$10M) for a drug which we view as having ~120M in peak sales potential; 2) the availability of other corticosteroids for DMD patients; and 3) the likelihood of continued pricing controversy and payor pushback resulting in a tempered commercial launch.
I asked another angry Duchenne parent what she planned to do now that PTC has posted a price.
“Still going to Mexico,” she replied, referring to the low-cost pharmacies that sell drugs cheap along the border.
One big stumbling block that PTC faces is generic prednisone, which is shaping up as the preferred steroid among payers — for some obvious reasons. I asked Express Scripts about their approach to deflazacort (brand name Emflaza), and they replied:
We are requiring a prior authorization for this medication. For the management of DMD, our criteria requires patients to try the lower cost, equally effective prednisone before Emflaza. Except for rare cases, the lower cost prednisone should work for patients. The price of prednisone is anywhere from $0.08 per tablet to $1.50 per tablet.
The negative sentiment isn’t sitting too well with the investment community, which has driven PTC’s shares down by 10% so far today.