Replies to post #151265 on Biotech Values

[poorgradstudent]

Drug costs:

To me it's pretty clear that the companies are ramping prices when they can, to the maximum amount that they can.

From the Ariad investor day slides, the annual price increases for the three CML TKI's were:

imatinib: $2448 to $5819 in 7 years, or 13.2% per year

nilotinib: $5701 to $8181 in 3 years, or 12.8% per year

dasatinib: $4986 to $8181 in 4 years, or 13.2% per year

I'm not certain what exactly rationalizes the 10%+ increase per year, but increasing the share of profit has to be considered.

Company explanations that the drugs are priced based on efficacy would only explain the initial pricing plus annual inflation +/- a few percentage points for the cost of running the business. It doesn't explain why prices increase 10%+ per year since the efficacy of the drug doesn't increase annually. One could even argue that it becomes worse.

And the efficacy argument also doesn't hold when you consider that the changes in imatinib pricing are likely representative rather than exceptional. Yet when looking at efficacy, it's fair to say that imatinib is exceptional and not representative.

Understandably the companies require a profit motive, and there is a burden on the successful drugs of the portfolio to buttress the necessary R&D spending (and all of the losers that it inevitably tests and discards). However, with 13% increases annually, I don't think it's unreasonable to see society test ways in which it can tame the trajectory of costs.

[DewDiligence]

The blurb in #msg-80998877, although nominally about OTC drugs, is apropos to the larger issue of whether sky-high US prices for (sometimes marginal) cancer drugs are sustainable. Regards, Dew

[DewDiligence]

Washington Post editorial on cancer-drug prices echoes the recent opinion piece in NYT re Zaltrap (#msg-80599468):

http://www.washingtonpost.com/opinions/making-cancer-drugs-less-expensive/2013/02/22/d8c8983e-7795-11e2-aa12-e6cf1d31106b_story.html

We believe that the price of cancer drugs is too high. Those already-high prices, which continue to rise rapidly, are an increasingly significant issue in U.S. health-care expenditures. The average monthly price of cancer drugs has doubled over the past 10 years, from about $5,000 to more than $10,000. Of the 12 new cancer drugs approved by the Food and Drug Administration last year, 11 were priced above $100,000 annually. Yet only three were found to improve patient survival rates and, of these, two increased survival by less than two months.

The authors are prominent oncologists at M.D. Anderson Cancer Center.

The Zaltrap editorial in the NYT, which was penned by doctors at Sloan Kettering, eventually caused SNY to cut the US price by 50% (#msg-81295132).

[DewDiligence]

Is cancer treatment headed toward an HIV-like business model? From John LaMattina’s blog:

http://www.forbes.com/sites/johnlamattina/2013/11/13/biopharma-alliances-will-be-needed-for-cancer-drugs-in-the-cost-conscious-future/