By Denise Roland
Novartis AG recently discovered that a drug it sells for a group
of very rare diseases could be used to treat a much more common
ailment. There is just one problem: its $16,000-per-dose price
tag.
The drug, called ACZ885, is already sold under the brand name
Ilaris for certain rare inflammatory disorders affecting a very
small number of people. But a recent clinical trial suggests it
could also reduce the risk of serious complications like strokes in
people who have suffered a heart attack.
If the drug does pan out with regulators, Novartis would have to
drastically cut its price to make it competitive with other
cardiovascular drugs. That would mean jettisoning a small, but
reliable, revenue stream on an uncertain bet that the drug could
become a top seller as a cardiovascular medicine.
"They've got a bit of a puzzle on their hands," said Bernard
Munos, a senior fellow at nonprofit Faster Cures who previously
worked at Eli Lilly & Co.
A Novartis spokesman said it is too early to discuss its pricing
strategy. "We will continue to fully analyze the data, plan to
discuss these with regulatory agencies and determine how it would
fit into clinical practice," he said.
Rare-disease, or orphan, drugs can command sky-high prices
because they are typically the only treatment option available. The
small number of patients also limits the overall bill to the
health-care system.
That isn't the case for drugs for common ailments. If approved
for use in patients recovering from a heart attack, ACZ885's
potential market would skyrocket: around 615,000 people in the U.S.
survive a heart attack every year, according to the American Heart
Association. Novartis estimates that the drug, which helps patients
who also suffer from inflammation in the arteries, could be
suitable in around 40% of those cases.
Novartis's revenue from ACZ885, at $283 million last year, is
modest. Adding heart-attack patients, even at a vastly reduced
price, could bring that figure to as much as $3.6 billion,
according to Jefferies analysts. Credit Suisse analysts put the
peak sales estimate at closer to $1.5 billion.
On paper, that seems an obvious gamble to take. But because of
the way drugs are priced in the U.S., Novartis would have to drop
the price it charges rare-disease patients as well, giving up most
of that revenue stream. Once the price of a drug is cut, it is
difficult to raise it again.
And there is no guarantee that the drug will be widely used if
the price comes down. Cardiologists can be reluctant to put their
patients -- especially those already on several medications -- onto
new drugs. That problem that has dogged several recently launched
heart drugs, including Novartis's own Entresto.
Another potential problem: ACZ885 is already late in its patent
cycle, making it uncertain whether Novartis could really get all
that additional business if it dropped the price now.
Credit Suisse analysts say they expect ACZ885 to lose patent
protection around 2024, at which point lower-cost versions can
enter the market and sharply erode sales.
To keep a lid on cost, insurers also tend to i mpose higher
copays or complex approval processes for patients to get access to
new, pricey drugs for common conditions. One example: insurance
plans are curbing access to a new class of cholesterol-lowering
drugs that cost around $14,500 a year before rebates or discounts,
in a bid to keep all but the most serious cases patients on
pennies-per-day statins, which work well for the majority of
people.
ACZ885 -- dosed every three months at its current pricing before
rebates and discounts -- would cost around $64,000 a year for
heart-attack patients. Novartis may need to drop the price by more
than 90% "to get close to palatable," according to Craig Granowitz,
chief medical officer at Amarin Corp., a small pharmaceutical
company that focuses on cardiovascular medicine.
Ilaris came on the market in 2009 to treat a group of rare
inherited conditions called cryopyrin-associated periodic
syndromes, whose sufferers have a genetic mutation that causes the
body to overproduce an inflammatory protein. Novartis has since won
further approvals for a few other rare diseases, but hasn't altered
the price as a result.
In 2011, Novartis hoped that a positive result in a gout trial
would sharply broaden the market for Ilaris, but the drug was
denied approval by the U.S. Food and Drug Administration over
safety concerns in these patients. At the time, the company's
then-head of drug development Trevor Mundel acknowledged that if
the drug had won approval in gout, it would have had to lower the
price to win coverage from insurers.
Setting a single price that holds for every use of the drug
discourages companies from exploring new disease areas for their
medicines, said Ed Schoonveld, a pricing and market access expert
at consultancy ZS Associates.
Novartis's spokesman said the trial that tested ACZ885 in
heart-attack patients "wasn't designed with any commercial
implications in mind at the time" and that its main purpose was to
discover whether inflammation played a role in cardiovascular
disease.
A big hurdle is how U.S. drugs are priced for federal programs.
Drugmakers must sell drugs to Medicaid at the lowest price they
have offered to any private insurer. And they must sell their
medicines to Medicare at the average selling price, plus 4%.
Under current legislation, there is no room to vary the price of
a drug based on its application. The lowest price would have to
apply to all uses, according to Mr. Schoonveld. Such dynamics could
discourage companies from investigating whether an approved,
rare-disease drug could have a much broader application, he
said.
"Should you keep [a rare-disease drug] off the market because it
treats common disease?" said Marlene Haffner, a consultant and
former director of orphan drug development at the Food and Drug
Administration. "Everybody would say no."
Write to Denise Roland at Denise.Roland@wsj.com
(END) Dow Jones Newswires
July 12, 2017 00:21 ET (04:21 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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