NPS Pharmaceuticals Chief: Why 250k-a-Year Orphan Drug is Worth It
Last month, the latest in a growing number of orphan drugs was approved by the FDA. And the Gattex treatment for short-bowel syndrome from NPS Pharmaceuticals (NPSP) was priced at $295,000, one of several in the past year that will cost $150,000 or more per patient per year. Although insurers regularly cover orphan drugs, particularly those in the so-called ultra-orphan category, the trend has raised questions about the ability of the rising price tags. We spoke briefly with NPS ceo Francois Nader about the decision making for Gattex, which cost $250 million to develop…
Pharmalot: Given the discussion about orphan drug pricing, tell me about the value proposition we hear about…
Nader: Frankly, it was on our mind from day one when we started developing Gattex. And it’s on the mind of any company in the orphan space. The model is not specific to any product. It could be applied to a number of possibilities… But the first criteria to answer is whether the indication we’re pushing for is truly meeting an unmet medical need – a market not satisfied by the absence of any alternative. That’s a fundamental equation that any of us in the pharmaceutical business, in general, should ask ourselves, but specifically, in the orphan case…
We don’t have the luxury of running broad and comprehensive and multiple epidemiological studies, though. It’s an art and a science. We talk to payers to estimate the burden of illness based on their data… The issue is what does the drug offer to mitigate the condition? Does it meet that unmet medical need? And does it help save money and help lower overall healthcare costs? Does it reduce the direct and indirect costs related to the social aspect of many conditions and improve quality of life and daily living?
…The final point is to determine the willingness to pay to serve a very small population… In this case, there are 3,000 to 5,000 patients for Gattex total in the United States. That’s a very small population. This is where the notion of being willing to pay kicks in. Beyond daily living improvements, is society willing to incentivize companies, like ours, to embark on a (drug development) program such as this?… This is a model we follow and, frankly, I recommend that others follow as well.
Pharmalot: So you’re saying, the case you’re making, is the drug can lower costs down the road?
Nader: There is this inaccurate assumption that orphan diseases are not costing anything and, therefore, new drugs are, in a way, adding to overall costs. I think it’s a misperception… There are about 7,000 orphan conditions in the United States, and about 20 million Americans who suffer from orphan conditions… These patients are costing society a lot of money. Most are debilitated and cannot really take care of their conditions. And so there is an expense from a direct and indirect perspective. Many cannot work and, therefore, contribute to society. And they have life expectancies that can lead to premature deaths.
Pharmalot: Initially, the pricing was to have been about one-third of the cost announced and the patient population is also much lower than what had been said earlier. Why did that change?
Nader: We did prevalence studies in which the sample size is extremely small and so there’s a risk of multiplying the error by extrapolating… We conducted three prevalence studies with three different vendors and all methodologies were accepted and numbers (of patients) were consistently (shown to be) between 10,000 and 15,000, until we started really counting patients from a bottoms up approach. One element that was important in the strategy was to count patients managed by the top five home infusion companies in the country. And they claim they have about 20 percent of the home infusion market. They were asked how many short-bowel syndrome patients they have and counted about 1,000.
It was very late in the game when we came up with this surprising number. At that point, we went to other companies in similar situations and found, unfortunately, it was not unusual for companies to rely on prevalence studies in their external communications until they were able to count patients… Gattex is not unique, because it’s not unusual to have a dichotomy between prevalence, which gives you 10,000 to 15,000, and an actual addressable population, which gives you 3,000 to 5,000… The lower number of patients puts us in the ultra-orphan space, which triggers a higher premium.
Pharmalot: How is this conveyed to payers?
Nader: Our overarching concern with payers was not to take payers for granted. We didn’t believe they would automatically cover (Gattex) because it’s an orphan drug… Our drug is a pharmacy benefit and home infusion is a medical benefit, so it was important to bridge that… Medical directors have the clinical part of the equation and pharmacy have the drug and cost part of the equation…
To read the remainder of this article, go to Pharmalot.
Ed Silverman, a contributing editor of YCharts, is the founder and editor of Pharmalot. He previously reported on the pharmaceutical industry and other business topics for the Star-Ledger of New Jersey, New York Newsday and Investor’s Business Daily. He can be reached at email@example.com.
Read more articles about: Company Analysis
- stocks that look cheap
- pharma stocks
- tech stocks
- stocks that look pricey
- money managers
- value investing
- retail stocks
- dividend growth
- income investing
- stock buybacks
- energy stocks
- growth stocks
- earnings season
- warren buffett
- bank stocks
- stock screener
- dividend yields
- short sellers
- dividend yield
- healthcare stocks
- interest rates
- junk bonds
- entertainment stocks
- federal reserve