[Ip-health] Why does Alexion's Soliris cost $500K-plus? U.K. gatekeepers want to know

Aidan Hollis ahollis at ucalgary.ca
Sun Jul 20 16:13:43 PDT 2014


GK Fellows and I have a recent article on the potential for using a cost-based measures to reward these ultra orphan technologies. The underlying story is that companies justify their prices based on the rarity of the treatment and hence the high cost per patient. But when they go down this road, they are really asking for cost-based — or rate-of-return — pricing models. That is, if a company says that they need a high price because there are few patients, they are in effect justifying the price based on the cost. But if that is the case, then we need a way of setting price based on cost. Insurers can’t simply agree to pay anything just because there are few patients...

See http://www.ojrd.com/content/8/1/180

There are certainly dangers in going down this road, but there is also a problem when prices become unhinged from the reality of costs. 

Aidan Hollis
Professor of Economics
University of Calgary
ahollis at ucalgary.ca
+1 403 220 5861

http://econ.ucalgary.ca/profiles/aidan-hollis

Incentives for Global Health
http://www.healthimpactfund.org

On Jul 19, 2014, at 4:37 PM, Jamie Love <james.love at keionline.org> wrote:

http://www.fiercepharma.com/story/why-does-alexions-soliris-cost-500k-plus-uk-gatekeepers-want-know/2014-03-04

Why does Alexion's Soliris cost $500K-plus? U.K. gatekeepers want to know
March 4, 2014 | By Tracy Staton

It's fairly routine for the U.K.'s cost-effectiveness watchdogs to ask
companies for more data to support approval for use by the country's
National Health Service. Clinical data, price modeling, the works. But
asking for information on R&D costs? That's something different altogether.

The National Institute for Health and Clinical Excellence (NICE) directed
that question at Alexion Pharmaceuticals ($ALXN), whose sole marketed
product, Soliris, is the most expensive drug in the world. Used to treat a
handful of rare diseases, Soliris could run £340,200 per year in the U.K.,
or about $569,000, according to the agency's pricing examples.

NICE says there's no question that Soliris is effective. It works, and very
well. The question is whether its price is justified. New drugs often find
themselves in this position at NICE, and drugmakers often follow up with
discount offers. The agency's cost questions could be a prod in that
direction.

"Before we can make a confident recommendation for routine use, we need
more information," NICE chief Sir Andrew Dillon said in a statement. For
instance, "clarification from the company on aspects of the manufacturing,
research and development costs."

The agency's briefing documents state the question more bluntly: "Is the
preferred 'total cost' reasonable in the context of R&D and manufacturing
costs for this technology?" That's a departure from NICE's usual
calculations, which typically focus on quality-of-life years and the like.

It's the latest development in a three-year review of Soliris at NICE, and
the drug's halting progress through the cost agency has Alexion disturbed,
VP of medical affairs Jon Beauchamp told pharmaphorum. The company takes
issue with some of NICE's cost estimates as well. Plus, the company has
already handed over "a significant amount of data" about its investment in
Soliris, Beauchamp told the website. NICE's request for information about
development and manufacturing costs is a new one.

As pharmaphorum points out, Soliris is the first drug to be reviewed under
a new process designed for drugs treating "ultra-orphan" diseases. NICE's
decision here stands to set a precedent for other super-rare disease
treatments--all of which are extremely costly. In fact, Soliris' aggregate
cost apparently prompted NICE to not only question Alexion, but also the
NHS. Should NICE consider the NHS's budget when making these drug
recommendations, and if so, how?

NICE predicts that some 170 patients would be treated in its first year of
U.K. use, and that the bill to the NHS would be some £58 million ($97
million) a year at first--and would reach £82 million within five years.
Soliris is used indefinitely, often for a lifetime.

Alexion insisted upon keeping information about the drug's exact treatment
costs confidential, so the agency's price quotes are illustrations, rather
than exact amounts. Typically, drugmakers reveal pricing up front, but keep
any discount offers private; Alexion refused to publicly disclose the
starting price. "We're disappointed about this decision, for which we have
not had an adequate explanation," NICE said.

Soliris brought in $1.55 billion last year, and it's expected to hit $3.4
billion by 2018. It's up for review at NICE as a treatment for atypical
hemolytic uremic syndrome, but it's also FDA-approved for paroxysmal
nocturnal hemoglobinuria.

- see the NICE statement
- get more from pharmaphorum

Special Reports: Top 20 orphan drugs by 2018 - Soliris | 20 highest-paid
biopharma CEOs of 2012 - Leonard Bell, Alexion

Related Articles:
BioMarin's $380K price tag on Vimizim is high, but far from the highest
Orphan drugs join the price-squeeze club in Europe

-- 
James Love.  Knowledge Ecology International
http://www.keionline.org, KEI DC tel: +1.202.332.2670, US Mobile:
+1.202.361.3040, Geneva Mobile: +41.76.413.6584,   twitter.com/jamie_love
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