Something that likely went under most peoples’ radar this past week was that the FDA announced the approval of a new drug for multiple sclerosis, Tecfidera, from Biogen Idec. That’s pretty good news for a disease that generally doesn’t have a lot of good news associated with it. Here’s some disease-progression data for it compared to placebo. Looks pretty good.
After the approval, Biogen Idec also announced the price — $54,900 per year, which seems like a pretty big chunk of change to me. So what’s the deal? Is Tecfidera some sort of stem cell technology derived super-medicine? Maybe some sort of advanced gene therapy? Or a hard-to-isolate protein? No. Not really. Here is the structure of Tecfidera:
If you’re thinking that structure looks decidedly low tech, you’d be right. And if you got your degree in chemistry, you’re probably thinking, “Isn’t that just dimethyl fumarate?” — and you’d be right again. From Biogen Idec’s prescribing information, the yearly dose of Tecfidera is about 2 grams. Now, from that screenshot, you can see that I can buy 100 grams of dimethyl fumarate from a chemical supplier for about $56. That breaks down the cost-of-goods for a yearly prescription of Tecfidera to about a dollar. Yow.
Should you be surprised? Should you be outraged? Maybe. But probably not for the reasons you think.
First off, putting Tecdifera though clinical safety and efficacy trials probably cost Biogen hundreds of millions of dollars. Literally. Hundreds of millions. And that money is all spent before they found out whether the drug would even be approved. If the FDA had said “no”, then all that money is out the window (and I’ve been on that side of an FDA decision in my career — the aftereffects ain’t pretty). So yes, Biogen has a LOT of investment in the compound to recoup before they make a penny of profit on it. I think most people can understand that.
The other aspect is probably a little harder to comes to terms with — and that’s the fact that drugs are a commodity. Like oil. Like coffee. Like cars. Like smartphones. Like houses in a desirable neighborhood. As a seller, you charge the price the market will bear. Apple can charge $400-600 dollars for an iPhone. Why? Because people will pay it. The selling point for your house will be determined by comparisons to others like it nearby. Drugs aren’t really that different. For example, Biogen placed their yearly price for Tecfidera about $4000 below that for Novartis’ competitor drug, Gileyna. For better or worse, you could say that $50-60k per year is the market price for a front-line MS medication.
Of course, when you NEED medicine, you’re more likely to take a high drug price more personally than say that of an iPhone because you’re probably a lot more attached to your health than your phone. Though these days, I’m not so sure about that. And hearing prices like that, whether justified or not, always prompts a discussion among those of us that work in the drug industry: What is the appropriate profit for a beneficial or life-saving medicine?
And of course there is the justified finger pointing between the medical community, patients, insurers, and government about the high cost of healthcare, but that’s not what I’m talking about here. My question to you is: If you had spent $400,000,000 on developing a drug that you could sell to a small patient population and your nearest competitor is selling their product at $60000 per year, what would you charge?