[Ip-health] Wary of Backlash, Cancer-Drug Makers Weigh Price Limits

[Joana Ramos]

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Wary of Backlash, Cancer-Drug Makers Weigh Price Limits
By JOHN CARREYROU and GEETA ANAND
Wall Street Journal
May 10, 2006; Page B1
http://online.wsj.com/article/SB114723008884948630.html[1]

As high prices of cancer drugs spark the kind of patient outrage that high
AIDS-drug prices unleashed more than a decade ago, a few pharmaceutical and
biotech companies are weighing caps and other cost-containment measures,
before the outcry turns into a public-relations crisis for the industry.

ImClone Systems[2] Inc. and Bristol-Myers Squibb[3] Co., co-marketers of
Erbitux, one of the most expensive cancer drugs on the market, are "well do=
wn
the road" toward establishing an annual patient price cap for the drug if i=
ts
market expands, says Ronald Martell, senior vice president of commercial
operations at ImClone. Such a program would set an annual ceiling on
individual patients' drug-treatment costs, beyond which companies would
provide the drug free of charge or at a steep discount. Genentech[4] Corp.,=
 of
South San Francisco, Calif., is considering cost-containing alternatives fo=
r
Avastin, which is currently approved for treatment of early-stage colorecta=
l
cancer.

While the backlash against cancer-drug prices is nowhere near as big as the
one against AIDS-drug prices, ImClone's Mr. Martell says the industry shoul=
d
make changes in its policies now. "Otherwise, at some point there will be a
confluence of events -- social pressure, volume of dollars -- and something
will have to give," he warns.

Erbitux, priced at $10,000 a month, is currently approved only for patients
with metastatic colorectal cancer who have failed a certain kind of
chemotherapy. Their average total cost of treatment is currently about
$40,000: In most of these patients, the illness has advanced to the point
where they are only a few months from death.

But later this year, ImClone and Bristol-Myers, both based in New York, hop=
e
to win Food and Drug Administration approval to market Erbitux for patients=
 in
earlier stages of colorectal cancer, who have longer life expectancies.
Approval for these patients would result in a sharp rise in the average cos=
t
of treatment with Erbitux -- and a sharp rise in profits.

In the case of Genentech's Avastin, the current cost of treatment -- $4,400=
 a
month, or $52,000 a year -- could rise sharply if the FDA approves the drug=
 as
a treatment -- at double the dose -- to treat lung cancer and breast cancer=
.
Such approvals, expected over the next year, could result in thousands of n=
ew
patients paying, at current prices, more than $100,000 a year to take Avast=
in.

The Medicare Modernization Act of 2003, which extended prescription-drug
benefits to the elderly, has put financial pressure on elderly cancer
patients, the age group with the highest rates of the disease. Under the ol=
d
system, cancer patients receiving drugs intravenously at a hospital in
practice often weren't forced to make their 20% co-payment: The hospital wo=
uld
bill Medicare directly, and the Medicare reimbursement price -- as much as =
25%
above the drugs' market price -- provided a sufficient profit cushion so th=
at
hospitals often didn't collect co-payments.

But now, Medicare reimbursements are in line with drugs' actual selling
prices, and physicians and hospitals can no longer afford to forgive
co-payments. As a result, many elderly cancer patients without supplemental
prescription-drug insurance end up on the hook for thousands of dollars.

"There's a groundswell of patients who are outraged," says Jerry Flanagan,
health-care policy director for the Foundation for Taxpayer & Consumer Righ=
ts,
a Los Angeles watchdog group.

The Medicare overhaul has made a drug-price cap difficult to design. Medica=
re
drug reimbursement rates are now set at a drug's average wholesale price pl=
us
6%. Every time ImClone gives Erbitux free to patients, the government formu=
la
would count a sale at a price of zero dollars -- driving down the drug's
average price. "It would send the drug into a downward spiral," ImClone's M=
r.
Martell says. The more free Erbitux dispensed, the lower the price would go=
.

As a result, ImClone instead is considering directing patients who exceed t=
he
cap and meet income guidelines to an independent charitable program that wo=
uld
provide the drug free or at a fraction of the price. Mr. Martell says ImClo=
ne
and Bristol-Myers haven't agreed on the dollar value of the cap yet, and
pricing decisions ultimately rest with Bristol-Myers. Bristol-Myers decline=
d
to comment for this story.

"If we do a program like a cap," ImClone's Mr. Martell says, "it would not
only help patients but it would help the system as a whole" by limiting the
burden on government and private insurers.

Because most cancer drugs don't have competition, an increase in demand
usually drives prices up. A surge in patients taking a drug at higher doses
would substantially raise costs for private insurers and government.

Genentech says it is also weighing the use of an independent charity, among
other options, for giving away Avastin to patients who exceed a certain ann=
ual
spending limit. "We're trying to balance the interests of patients, the
interests of society and the company's interest -- and our desire to innova=
te
for the best drugs," says David Ebersman, Genentech's chief financial offic=
er.

A spokeswoman for the Centers for Medicare and Medicaid Services says
companies can provide free drugs to charities without affecting the average
sales price. But Walter Moore, vice president of government affairs at
Genentech, says hurdles remain, including Medicare reimbursement, which pay=
s
oncologists for infusing a drug only in conjunction with paying for the dru=
g.

Cancer drug prices, always considered high, have skyrocketed in recent year=
s.
Patient outcry was muted when few patients shouldered the cost of drugs
directly. But now, some private insurers and employers are requiring patien=
ts
to pay 10% to 50% of the cost of expensive pills and infused drugs, such as
Erbitux, adding up to annual drug bills in the tens of thousands of dollars=
.

Fears about the price of the cancer drug Revlimid prompted the Internationa=
l
Myeloma Foundation, an advocacy group, earlier this year to seek a meeting
with the manufacturer, Celgene[5] Corp., of Summit, N.J. Celgene had priced
the drug at around $4,600 a month, or $55,000 a year, after the FDA approve=
d
it in December for a rare blood disorder called myelodysplastic syndrome.
Early this year, patients with a different disorder, multiple myeloma, bega=
n
to worry they wouldn't be able to afford the drug if it were approved for
their disease, which investors expect in June. The dose for treating multip=
le
myeloma is 2=BD times the dose required for treating the approved disorder.
Patients did the math and envisioned drug costs of $135,000 a year.

Susie Novis, the myeloma foundation's president, says Celgene executives in
February assured her the price increase would be limited but declined to be
specific. A spokesman for Celgene says the company will price the higher do=
se
at less than 2=BD times the price of the lower dose.

Protests over AIDS-drug prices peaked in the U.S. in the late 1980s. Activi=
sts
in 1989 staged demonstrations against Wellcome PLC, now part of
GlaxoSmithKline[6] PLC, which makes the AIDS drug AZT. In one protest, five
activists chained themselves to a balcony inside the New York Stock Exchang=
e
holding a banner that read, "Sell Wellcome." Wellcome lowered the price of =
AZT
several times from $10,000 a year in 1987 to $4,000 by 1998.

Today, AIDS drugs remain much cheaper on average than cancer drugs. To avoi=
d
antagonizing AIDS activists, Celgene priced the drug thalidomide at $6 a
50-milligram pill in 1998. But when doctors stopped prescribing the drug as=
 an
AIDS-wasting treatment and started prescribing it primarily for cancer,
Celgene gradually raised its price to $63.50 a pill. Celgene says it raised
prices because the value of the drug increased.

Cancer-drug prices raise eyebrows even on Wall Street. Steven Harr, a Morga=
n
Stanley biotech analyst, estimates oncology drugs will make up 22% of U.S.
drug spending in 2007, compared with 16% in 2004. He expects government and
private health insurers to push back.

Fred Hassan, chief executive of Schering-Plough[7] Corp., maker of Temodar,=
 a
drug for brain tumors, says the controversy over escalating cancer-drug pri=
ces
is creating "a healthy debate." "These prices are high, $100,000 a year is
high," he says. Still, he adds, high prices are partly justified by the hig=
h
cost of cancer research and the high rate of product failure.

Write to John Carreyrou at john.carreyrou@wsj.com[8] and Geeta Anand at
geeta.anand@wsj.com[9]

--
Joana Ramos, MSW
Cancer Resources & Advocacy
7303 23rd Ave. NE
Seattle, WA  98115
206-229-2420
http://ramoslink.info/[10]

=3D=3D=3DReferences:=3D=3D=3D
  1. http://online.wsj.com/article/SB114723008884948630.html
  2. http://online.wsj.com/quotes/main.html?type=3Ddjn&symbol=3Dimcl
  3. http://online.wsj.com/quotes/main.html?type=3Ddjn&symbol=3Dbmy
  4. http://online.wsj.com/quotes/main.html?type=3Ddjn&symbol=3Ddna
  5. http://online.wsj.com/quotes/main.html?type=3Ddjn&symbol=3DCELG
  6. http://online.wsj.com/quotes/main.html?type=3Ddjn&symbol=3Dgsk
  7. http://online.wsj.com/quotes/main.html?type=3Ddjn&symbol=3Dsgp
  8. mailto:john.carreyrou@wsj.com
  9. mailto:geeta.anand@wsj.com
 10. http://ramoslink.info/