NPS Pharmaceuticals (NPSP)

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Orphan Drugs & Value Propositions: Randy Explains
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By Ed Silverman // January 17th, 2013 // 11:16 am

Earlier this month, NPS Pharmaceuticals announced that the price for its Gattex treatment for short-bowel syndrome would cost $295,000 a year, roughly three times what Wall Street had expected. This marked the fourth time in the past year that an orphan drug was approved and the price per patient was set at more than $200,000 annually. The move highlighted a growing debate about the calculations used for developing new medications designed for small patient populations and the ability of the healthcare system to afford these treatments and accommodate patients. We spoke with Randy Vogenberg, a principal at the Bentelligence consulting firm, which specializes in benefits consulting and strategic decision making, about the implications for drug makers and payers…

Pharmalot: Why are we seeing this kind of pricing?
Vogenberg: I think part of the reason is that we’re dealing with smaller patient populations than in the past and that’s the typical situation. There are hundreds instead of however many tens of thousands of patients and then we’re spreading cost among a smaller group. So unit costs rise dramatically. And there’s a Catch 22 around pricing – which is a little unique around specialty (drugs). You have a smaller number (of patients) and charging a higher price, so there’s a higher percentage of patients who can’t afford it. This means there’s greater need for unrestricted grants and patient assistant programs. So as a company, you end up paying more for your own product than in the older, traditional marketplace.

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