[Ip-health] WSJ: Novartis Backs Lutathera Pricing After Price-Gouging Accusations

Thiru Balasubramaniam thiru at keionline.org
Mon Feb 4 02:55:41 PST 2019


By Donato Paolo Mancini
Updated Feb. 4, 2019 5:24 a.m. ET | WSJ Pro

-- Novartis backs pricing strategy for orphan-drug Lutathera in the

--Move comes after Dutch politicians accused the drugmaker of raising
prices by more than 400%

--The drug was developed by hospital pharmacies in the 1980s and has been
available since at a fraction of that price

Novartis AG (NOVN.EB) plans to stand firm on the pricing of a cancer drug
in the Netherlands despite accusations that it has abused orphan-drug rules
to sharply raise the cost of the treatment, as the debate on drug pricing
flares up on both sides of the Atlantic.

The healthcare giant has attracted criticism in the Netherlands for
charging 92,000 euros ($106,000) per patient for a four-dose course of the
drug, Lutathera, despite the treatment already being made for years by
Dutch hospital pharmacies at a cost of EUR16,000, according to the Dutch
health ministry. In the U.S., the drug is priced at $190,000.

The Dutch health ministry has criticized the cost as “unimaginable and
unacceptable.” Health minister Bruno Bruins said he wasn’t willing to pay
the higher cost.

Novartis says the price, which it notes is still subject to discussions, is
justified because it has spent money on trials to market the drug and
invested to manufacture it commercially, which, it says, will increase
availability and access.

It says it will continue to supply the drug’s active ingredient to
pharmacies, which are legally authorized to make drugs in the Netherlands
even in the case of patented products.

In a recent interview, Susanne Schaffert, head of Novartis’s oncology
division, said the company doesn’t plan on changing pricing and will
continue supplying the drug as before. She noted the company’s main aim was
to increase access, and that price negotiations had already been successful

That means two differently priced versions of the drug will be available in
the Netherlands: a finished product from Novartis and a pharmacy-prepared
formulation. Novartis declined to comment on pricing for the active
ingredient it sells to those pharmacies. It is unlikely any exceptional
pricing situations in the Netherlands will move the needle financially for
the company in the immediate future, though they could stir up further
pricing discussion in other markets.

The Swiss drugmaker has been focusing on acquiring late-stage products that
have been through the research-and-development process--the company calls
them “bolt-on acquisitions”--while re-orienting its portfolio to
higher-value, lower-volume drugs. Last week, Novartis said it spent $15
billion on such dealmaking in 2018.

And it has high hopes for Lutathera, one of these drugs. The medicine is a
so-called radiopharmaceutical that carries a radioactive particle to cancer
cells to attack the tumor at close range. Novartis last week described it
as a potential blockbuster. The drug generated sales of $167 million in
2018. Bruno Bulic, an analyst at Baader Helvea, expects $2 billion in peak

Lutathera also has a special status for the Dutch: it is the branded
version of a compound developed in the 1980s by researchers at the Dutch
Erasmus Medical Center. However, it has since been sold on through a series
of deals, with Novartis gaining ownership through its $3.9 billion
acquisition of Advanced Accelerator Applications (AAA).

The drug was designated an orphan, or rare, medicine in the European Union
in 2017 because the number of patients who would benefit from it is low.
That gives Novartis exclusive rights to distribute it in Europe for 10
years. Lutathera also has orphan status in the U.S. Both designations came
before Novartis acquired AAA.

Meanwhile, activists say Novartis’s pricing of Lutathera is an abuse of the
orphan-drug framework, which is intended to foster the development of
medicines for rare diseases.

“Novartis can’t get away this time saying it costs billions to develop [the
drug],” said Ellen ‘t Hoen of Medicines Law & Policy, a European research
group. “[It] can stand by its high-pricing strategy only because it has a
market monopoly,” she added.

Dr. Schaffert disputes the accusation and notes that Novartis conducted a
Phase 3 trial that helped obtain marketing authorization, and still pays
royalties to the Dutch institution that first developed the drug. She
declined to comment on how much these royalties were.

Mr. Bruins has vowed to discuss the orphan-drug framework in Europe after
this year’s European election.

“So far, the cards are in Novartis’s hands, because most hospitals are not
able to finish the product on their own,” said Mr. Bulic at Baader. He said
that the different production processes explained the price differential,
though he said this premium also reflected the company’s market domination.

Novartis and the Dutch government are now in discussions to resolve the
dispute, they confirmed.

The Dutch Journal of Medicine first reported on the pricing issue in an
article published last month.

Write to Donato Paolo Mancini at donatopaolo.mancini at dowjones.com;

Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International
41 22 791 6727
thiru at keionline.org

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