Boston nonprofit playing big role in drug pricing

Nov. 04, 2019 1:44 PM ETSanofi (SNY), REGN, AMGN, NVS, GILD, BIB, IXJ, BIS, XLV, IDNA, KMED, JNJ, PFE, MRK, LLY, BIIB, VRTX, RHHBY, ABBV, NVO, TEVA, TAK, BHC, AZN, BMY, AGN, GSKSNY, REGN, AMGN, NVS, GILD, BIB, THW, ARKG, IXJ, BIS, XLV, IDNA, JNJ, PFE, MRK, LLY, BIIB, VRTX, RHHBY, ABBV, NVO, TEVA, TAK, BHC, AZN, GSK, BMY, AGNBy: Douglas W. House, SA News Editor14 Comments
  • The Institute for Clinical and Economic Review (ICER), a Boston-based nonpartisan nonprofit with no policy-making role, has emerged as a major influencer on pricing by drugmakers.
  • Examples include Sanofi (SNY +0.6%) and Regeneron Pharmaceuticals' (REGN +0.3%) high cholesterol med Praluent initially priced at $14,600/year, now $4,500 after rebates (heavily influenced by Amgen's (AMGN -0.8%) Repatha, though), Amgen's migraine med Aimovig (erenumab-aooe), $6,900 from $10,000 and Novartis' (NVS +0.6%) SMA gene therapy Zolgensma, $2.1M from estimates as high as $5M.
  • The pricing moderator appears to be ICER's economic model aimed at determining the fair price for medical care based on a concept called QALY or quality-adjusted life-year. It puts a dollar figure on a year of healthy life, calculates how much health a drug restores to a sick patient, then determines the fair price for the value delivered up to a maximum of $150K (based on how much Americans are willing to pay for healthcare and how much healthcare expenditure compares to per-capita income around the world).
  • The QALY concept has been used for over 50 years in various countries but, unsurprisingly, not so much in the U.S. since drug firms have long-opposed such models due to the perception that such pricing systems could lead Medicare to refuse payment for pricey meds.
  • Praluent's net price is consistent with ICER's recommended range for high-risk patients ($4,500 - 8,000) as is Aimovig with its recommended price for migraine sufferers.
  • Countries use a wide range of QALY thresholds, however, from Belgium's ~$190K to Thailand's, a small fraction of Belgium's.
  • ICER's initially focused on pricey procedures, like new radiation therapies, but switched to drugs when Gilead Sciences (GILD +0.7%) launched hepatitis C med Sovaldi in 2013 at $1,000 per pill.
  • Selected tickers: BIB, THW, ARKG, IXJ, BISXLV, IDNA, JNJ, PFE, MRK, LLY, BIIB, VRTX, OTCQX:RHHBY, ABBV, NVO, TEVA, TAK, BHC, AZN, GSK, BMY, AGN
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