Niche blockbusters: the next drug cost crisis?

For quite a while –especially in the 1990s and early 2000s– rising drug costs were a major driver of medical inflation. Big pharma was rolling out lots of “me too” products in existing drug classes –such as statins (e.g., Lipitor) and COX-2 inhibitors (e.g., Vioxx)– that could be prescribed widely. In a normal market, having lots of competition might drive prices down. But not in health care, where third party reimbursement and the need to obtain a doctor’s prescription subvert the usual supply and demand relationship. What we saw was doctors writing more and more prescriptions for patients who could easily have done without, and health plans reimbursing for the drugs to the tune of high hundreds to low thousands of dollars per patient per year. Those blockbuster products –like Lipitor and Vioxx– now have generic competition or have been discredited due to safety concerns and are no longer placing a serious strain on health plan budgets.

But in the past decade specialty drugs –especially biotech products– have become hot. Companies like Genzyme have proved that health plans will reimburse to the tune of $100,000 or more per patient per year for rare but serious diseases like Gaucher’s, which means a product can reach $1 billion in sales on a very small base of patients. Now the big pharma companies are latching on to this business model, charging very high prices for biotech and traditional drugs to treat a small set of patients. The Wall Street Journal (Pfizer’s Future: The Niche Blockbuster) describes how Xalkori (crizotinib) is being marketed for $9600 per month compared to $160 per month for Lipitor. It works on a small fraction of lung cancers, but at $115,200 per year Pfizer doesn’t have to reach many patients to rake in big revenues.

Cirotinib was basically a failed drug in that it just worked on a few people. And it’s no cure. Even the poster child for the drug described in the Journal, Linnea Duff is going off the drug because it’s stopped working for her.

There are a lot of people with rare, serious diseases or mutations. If pharma companies target them allĀ  with $100K+/year therapies we’ll soon find that as a society we are paying a fortune for modest benefits. In the current policy environment where any mention of cost/benefit considerations leads to shrieks of “rationing” the trend toward pricey, niche drugs can continue for some time. But ultimately the business strategies of the pharmaceutical companies will lead the country to the realization that costs do in fact matter and that trade-offs must be considered.

With the right policy moves and entrepreneurial response, perhaps we can achieve the same level of benefits with lower cost, or settle as a society for less cost and less benefit. The main opportunity is to lower the cost of clinical development.

August 30, 2011

6 thoughts on “Niche blockbusters: the next drug cost crisis?”

  1. I am in the Crizotnib trial and it has definitely increased my quality of life. You are correct in stating that it is not a cure and I have already been told that I will probably develop a resistance. The cost seems cheap compared to the Chemo treatments I had at $75,000 per infusion and I had 10 of those and they didn’t really work very well.

  2. The issue you raise is an important one, but it only occurs in this fashion because health care is not treated as a private good.

    A wealthy nation may well choose to spend more on health care. The problem is that today we are being compelled to pay more for someone else’s healthcare rather than choosing to spend more of our private resources on our own care and it is this that is ultimately unworkable.

    Private markets allow for extraordinary spending. No one objects when Bill Gates spent millions on a high tech house – it was his money and he is allowed to spend on any legal toys he wants.

    A key question is whether a market can develop for such drugs paid for directly by individuals (like elective plastic surgery or Bill’s high tech toys).

  3. Hey, poster child here. I would like to argue with your characterization of Xalkori as a ‘failed’ drug with ‘modest benefits’. I was near death when I began taking Xalkori, and had hoped to have my life extended for a few months. I got almost three years out of it, with very mild side effects; certainly not a modest benefit. As someone who has a terminal illness, I am not looking for a cure, but rather to have my cancer managed.

    And as for the small numbers of patients who stand to benefit; crunch the numbers. If 4-6% of patients with NSCLC have an ALK mutation (and I have seen that figure as high as 9.6%) and you multiply that by the number of people worldwide diagnosed with lung cancer each year, it is not small potatoes.

    So please don’t be so quick to diss the ‘niche’, which is actually more of a chasm. Let’s hope this is just the start of more options for difficult to treat diseases.

  4. Crizotinib is NOT a failed drug. Yes, overall it may help by a small percentage of people, but it’s only approved for people with specific mutation. In people with this mutation, the drug helps 90% of people and extends life for longer than chemo (on the average) with minimal side effects. It also doesn’t cost any more than chemo. It is far more effective (for people with EML-ALK mutation) than chemotherapy.

    Cancer is a variety of diseases. There is likely never going to be a generic cure for cancer. Each mutation is like different disease. So 90% response isn’t that bad.

    Additionally, these new treatments move cancer research forward. They lead to better understanding of cancer, mutations, and why cancers develop resistance to the drugs. In future this can lead to better treatments.

    My mother was in clinical trials for crizotinib. For 6 months it kept her disease stable. If her lungs hadn’t already been in such bad conditions from failed pleurodesis before she went on crizotinib, it’s likely she’d still be benefiting from it. (She died from infection; she was on prednisone when she started the drug and had fluid in her lungs as well as past infection; it likely grew and prednisone suppressed her immune system). But the drug was still working, and she had ZERO side effects from it.

  5. Just to add. When one reads “a drug helps only a small number of patients” as in the post above, one tends to assume that the author meant that you need to give the drug to a lot of people and only a small number will benefit.

    This isn’t the case with crizotinib. In case with crizotinib, you give it to a small number of people, and you benefit 90% of them with minimal side effects.

    90% is a very effective response rate in cancer. Especially when you consider fewer side effects than any existing treatment as well as longer response.

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