You probably don't need me to tell you this, but it bears repeating: prescription drugs are expensive.
According to a study conducted by AARP known as the Rx Price Watch Report, which covers prescription drug costs for older Americans, annual prescription drug expenses rose by 104% between 2006 and 2013. Additionally, a report released earlier this year by Truveris pegged prescription drug inflation in 2015 at more than 10%. This all-encompassing double-digit percentage increase affects everyone, regardless of age.
But an even bigger sticker shock could be right around the corner for a sizable number of Americans.
PCSK-9 inhibitors take the medical world, and wallets, by storm
In the first quarter of 2017, biotech blue-chip Amgen (NASDAQ:AMGN) is expected to report its top-line data from its long-term cardiovascular outcomes study (known as FOURIER) on Repatha, its PCSK-9 inhibitor. PCSK-9 inhibitors are a next-generation, non-statin, cholesterol-lowering injectable drug that helps filter the bad type of cholesterol, known as low-density lipoprotein cholesterol (LDL-C), out of the bloodstream. It does this by blocking the PCSK-9 enzyme from binding with receptors found on the liver, freeing them up to remove LDL-C from the blood.
Clinical trial results for both approved PCSK-9 inhibitors -- Amgen's Repatha, and Sanofi (NYSE:SNY) and Regeneron Pharmaceuticals' (NASDAQ:REGN) Praluent -- have thus far dazzled Wall Street. Repatha gained approval to treat heterozygous familial hypercholesterolemia (HeFH) patients, homozygous familial hypercholesterolemia (HoFH) patients, and patients with atherosclerotic cardiovascular disease (ASCVD) one year ago this August, while Praluent got the nod of approval from the Food and Drug Administration to treat HeFH and atherosclerotic cardiovascular disease patients in July 2015. In the FDA press releases signaling their approval, Praluent was noted for reducing LDL-C by 36% to 59% in patients, while Amgen's Repatha led to an average LDL-C reduction of around 60%.
The clinical trial with $119 billion in annual implications
What makes Amgen's FOURIER trial, which involves approximately 27,500 patients, so incredibly important is it could play an instrumental role in justifying the perceived-to-be-exorbitant current listing prices of Repatha and Praluent. Following approval of the injectable cholesterol-fighting medicines, Sanofi and Regeneron set Praluent's list price at $14,600 annually, while Amgen undercut its peers by $500 at $14,100 annually for Repatha. Compared to statins, which can cost 90% less for a full year (if not lower), this was a price too steep for some insurers, physicians, and consumers to bear.
Critics of Repatha's and Praluent's list price have been quite vocal since their appearance on pharmacy shelves, but the most telling report came out last week. As published in The Journal of the American Medical Association, a team of researchers estimated that if every person in the U.S. with HeFH or ASCVD were to take either Repatha or Praluent, it would increase prescription drug costs by $592 billion over the next five years. That's an average annual increase of nearly $119 billion.
Furthermore, the research team, which was made up predominantly of doctors at the University of California, San Francisco, determined that "adding PCSK9 inhibitors to statins in heterozygous FH was estimated to prevent 316,300 MACE [major adverse cardiovascular events] at a cost of $503,000 per QALY [quality-adjusted life-year] gained." Meanwhile, the 4.3 million ASCVD patients would have a cost of $414,000 per QALY. Typically, drugs are deemed to have an effective QALY if their costs come in below $100,000. The researchers calculated that both Praluent and Repatha would need to lower their list prices by 69% and 68%, respectively, to $4,536 annually to meet the $100,000 QALY threshold.
Long story short: these are highly effective drugs that are priced far too high, according to researchers.
Amgen and Regeneron fire back
For its part, Amgen's senior vice president Raymond Jordan fired back at researchers in an interview with FiercePharma. Jordan notes that the researchers' model overestimated the number of high-risk patients that would receive PCSK-9 inhibitors. He also points out that the researchers failed to take into account the gross-to-net discounts that insurers receive from list prices.
In the words of Jordan,
"Compared to other economic analyses, this paper appears to focus on a population at 3-4 times lower risk of CV events, uses list prices rather than the prices actually negotiated with payers after rebates and discounts, and inflates the cost estimates. In addition, the model over-estimates the number of patients who will receive PCSK9 inhibitors, intended for use in high-risk patients who have exhausted all other options."
Regeneron has been just as critical of the numerous reports about the cost of Praluent and its effectiveness. Regeneron CEO Len Schleifer has struck deals that offer insurers bigger rebates if the drug doesn't deliver as promised.
If FOURIER hits the mark -- meaing a statistically significant reduction in major adverse cardiovascular events relative to the placebo -- then it would go a long way toward justifying Repatha's current price point. It would also likely give Sanofi and Regeneron a boost since Praluent operates through the same pathway. If FOURIER does not, then we could possibly see a price cut from Amgen, and potentially also from Sanofi/Regeneron.
The big question going forward, other than the FOURIER results, is whether insurers will accept Amgen's and Sanofi's/Regeneron's list prices. Though they are getting discounts and rebates from the list price, insurers are presumably trying everything under the sun to avoid covering the high costs of PCSK-9 inhibitors. Whether FOURIER would change that view remains to be seen. If Amgen and Sanofi-Regeneron can't secure adequate insurer access to their drugs due to their high costs, it would be a disappointment for investors in these companies, but an even bigger disservice to the millions of high-cholesterol patients that could potentially benefit from the drugs.
The next step is Amgen's Q1 2017 top-line FOURIER release, so stay tuned.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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