Can the price of eculizumab be justified?

Article No.

4 March 2017

( See also article on affordability of Ravulizumab at this LINK )

       Severine of Carpentras, Provence France 

asks:

“How does the laboratory justify the exhorbitant price of eculizumab making it inaccessible for many people?”

Eculizumab was once described by Forbes as the most expensive drug in the world.

It is very difficult to find out what the price of eculizumab is.  A search of the internet finds the price of a 30mL/300mg vial, the basic unit of supply to be revealed a few years ago at $6830 or £3150 or €4557 per vial. This would be the list price.

The actual price to the buyer would be  dependent on the discount on list price agreed with Alexion. The discount varies between buyers whether health insurance companies or government health care departments. These discounts are in commercial confidence, and there is no transparency as a result. The discount price however will be lower than list price.

The actual cost of treatment is dependent on the number of vials used and the interval between doses for the length of time treatment is needed.This will vary between patients but the average cost per patient will be much lower than all patients at high dose list price. Even less transparent than the list price of eculizumab is the true cost of treating an average patient.

So the question becomes can the average cost of treatment  per patient be justified?

The usual justification is that drugs for rare diseases incur research and developoment costs, which are almost the same as research costs for common diseases ( typically between $1 – 2 billion per drug) ;but have much fewer potential patients to market a successfully developed drug to.

While the drug is being developed, for companies like Alexion there is no sales. So billions of dollars have to be borrowed  to fund the company in that period which could take several years. Those funds are at risk until the drug is sucessfully approved and sales begin. If it does not get approved all the money invested is lost, although some maybe recovered from the Government as a tax rebate.

Eculizumab is designated as orphan drug by the Food and Drugs Agency in the USA( and other countries); and its research and development was supported in a number of ways. In the USA Alexion could :

  • offset the costs of clinical research against its tax bill
  • get an annual grant to defray the costs of qualified clinical testing expenses
  • have assistance in clinical research study design
  • have seven-year period of exclusive marketing after eculizumab is approved
  • have Prescription Drug User Fee Act filing fees  waived  (worth about $1 million per application).

Even so, once sales begin,  an element of the price is set to recover the accumulated investment in research.

But the price also has to cover the cost of producing the drug, cost of distributing it safely , cost of running a company to provide a pharmaceutical service and also profit. This profit in turn being used to reinvest into the company , or reward those who took the risk of putting money into the company, Some of it also goes to the Government as tax.

The nearest, and admittedly crude,  approximation about how much of the price of eculizumab overs these costs, is by looking at the Alexion sales revenue as reported in its company accounts. According to the latest analysis provided by NASDAQ the price charged by Alexion roughly covers:

9 %   for producing its drugs

25% used for research

44%   used to distribute the drugs and run a business, including paying royalties on patents

22%  for profit, of which 6% is paid in tax.

(note of  caution this mix % covers all drugs in Alexion’s product portfolio,not just eculizumab)

A few years back when asked by the Canadian Broadcasting Company for an interview to talk about why the drug costs so much, Alexion refused; but in a statement said  “pricing depends on a “unique decision-making framework” that takes into account of 

  • “the rarity and severity of the disease,
  • the absence of effective alternative treatments,
  • indirect medical and social costs,
  • and clinical data that demonstrate the impact of the drug on patients who desperately need it.”

No mention of research costs but some indirect reference to the small market ( “rarity”).

The focus is on “no competition”  ( it has market exclusivity ); and the health benefits and value to patients and society. To patients affected it is “priceless”.

This is all the justification that can be found easily in the public domain, Severine.

It is not known how many  PNH and aHUS patients currently have a met need for access to eculizumab, probably less than 10,000, out of a combined prevalent population of over 100,000 worldwide. That is potentially a much bigger market with an unmet need by some margin.

Aadhyan and others asked the question about how the unmet need can be met.( click here)

The market exclusivity that ophan drug designation gives eculizumab is about to run out. Will that have an effect on price from, potentially, increased competition?

That is another question.