Novartis’s $48,000 Pill Spurs U.S. Price Increases for Older MS Treatments

The prices of multiple sclerosis medicines have risen as much as 39 percent since last year, even as competition intensified with the introduction of the first pill to treat the disease.

Teva Pharmaceutical Industries Ltd. (TEVA) said it raised the price of its MS drug, Copaxone, to about $42,300 a year, a 39 percent jump since January 2010. In September, Novartis AG (NOVN) won approval for Gilenya, pricing it even higher at $48,000, in part because it’s the first drug in pill form, while the other treatments must be injected or infused. As analysts say Gilenya will take a significant share of the market, charging more for the older therapies is a way to keep revenue steady when unit sales erode.

The cost of the MS drugs, which patients generally take for life, now rivals that of cancer medicines such as Roche Holding AG (ROG)’s $50,000-a-year Avastin. The MS treatments may be out of reach for patients who don’t have insurance or don’t qualify for help from the companies, at a time when governments worldwide are seeking to rein in health-care spending.

“It’s just a crazy situation,” said Brenda Lakatos- Shaffer, a 45-year-old MS patient in Dallas who counsels Medicare beneficiaries for the National Multiple Sclerosis Society, in an interview. “Not only is having MS absolutely horrible, and you have the crazy side effects and quality of life with these medicines, but then you see the prices go up.”

Teva and Biogen Idec Inc. (BIIB), which makes the Tysabri and Avonex drugs, responded with their own price increases as the companies sought to generate more revenue before Gilenya wins significant market share.

Gilenya’s Premium

Novartis, based in Basel, Switzerland, was able to demand a premium for Gilenya because it frees patients from injections, Fabian Wenner, an analyst with UBS AG in Zurich, said in an interview. The pill’s monthly cost was initially between $800 and $1,200 higher than existing drugs, according to prices from the website DestinationRx.com.

Gilenya’s pricing reflects the company’s research costs and the advance in treatment it offers patients, said Eric Althoff, a Novartis spokesman, in September. He didn’t respond to requests by phone and e-mail last week for additional comment.

Avonex, sold by Weston, Massachusetts-based Biogen, had a 6 percent price increase in December, according to a March 7 note by RBC Capital Markets analysts who cited IMS Health Inc. data. Total prescriptions for Avonex have declined 4 percent since Gilenya entered the market, the RBC analysts said.

Shannon Altimari, a spokeswoman for Biogen, said the company doesn’t disclose historical pricing information.

‘Competitively Priced’

Copaxone’s price rose 9.9 percent in January 2010, 9.9 percent in May, and 14.9 percent in January 2011, Teva said. The medicine costs about $3,524 a month based on the wholesale acquisition price, according to Petah Tikva, Israel-based Teva. That’s about $42,300 a year. DestinationRx lists the annual cost at about $45,046.

“Copaxone is competitively priced relative to other relapsing-remitting multiple sclerosis therapies,” Teva said in an e-mailed statement. “The current price reflects the product’s value.”

Biogen’s Tysabri costs about $3,566 a month, or $42,788 a year, while Avonex’s price is $37,544, according to Biogen. The U.S. company markets Tysabri with Dublin-based Elan Corp.

“Biogen Idec and Elan are committed to new and existing patients having access to Tysabri” for approved uses, Elan said in an e-mailed statement. The companies said they have programs to assist patients with their out-of-pocket costs for the medicines.

Further Increases

The wholesale price for Bayer AG’s Betaseron is $37,294 a year, according to the Leverkusen, Germany-based company. Merck KGaA (MRK), based in Darmstadt, Germany, said the wholesale cost of its Rebif drug is $36,825 a year. Both companies said they also offer patient assistance programs.

The prices may rise further, Leerink Swann & Co. analysts said in a Feb. 7 note to clients. A doctor Leerink interviewed “is unaware of the levels at which point the insurers may start to push back and sees room for additional increases,” the analysts said.

The MS treatments are part of a burgeoning category known as specialty drugs, which are designed for diseases that have enormous effect on people’s lives, such as MS or cancer, said Jacqueline Kosecoff, chief executive officer at Prescription Solutions, the pharmacy benefits manager owned by UnitedHealth Group Inc.

“Many have enormous promise but they are very, very expensive,” Kosecoff said in an interview. “How can society provide an opportunity for people to take advantage of them and not be buried by the cost?”

Injected or Infused

MS causes the immune system to attack the insulating tissue around nerve fibers. This stops nerve cells from sending signals, sapping patients’ energy, blurring their vision and slowly robbing them of mobility, balance and coordination.

The disease affects about 2.1 million people worldwide, many of whom have trouble sticking with injected or infused therapies because they’re difficult to use or have side effects, according to the MS Society, a New York-based patient group.

“People are frustrated, hoping for medical treatment that will really help, and yet everything is just out of reach,” said Kathleen Wilson of Eugene, Oregon, who founded MSWorld, a patient message board with more than 45,000 members, in an interview.

Some MS patients qualify for coverage through Medicare, the U.S. health insurance program for the elderly and disabled. Medicare enrollees may pay about $600 a month out of their own pockets for an injection that costs $1,600 to $2,400 a month, said Lakatos-Shaffer, the Dallas-based patient counselor. Most Medicare patients she advises have limited incomes, keeping disease-modifying drugs out of reach even with government help.

$700 a Month

“I would talk to clients who would be getting, let’s say, $700 a month from Social Security because they couldn’t work,” Lakatos-Shaffer said. “They’d have $700 a month for living expenses and their drugs.”

Doctors predicted that Novartis’s Gilenya will imperil sales of all MS drugs in the coming 12 months, Citigroup Inc. analysts including Yaron Werber said in a Feb. 8 note to clients, which was based on a survey of neurologists who treat MS patients.

The doctors expected Biogen’s Tysabri will be hurt more than Avonex will, probably because those with a severe form of MS wouldn’t be put on Avonex, Werber said in an interview.

Novartis booked $13 million of Gilenya sales last year, the company said in January. The medicine may earn between $60 million and $70 million in the first quarter of this year, according to Michael Yee, an analyst with RBC.

Market Leaders

Copaxone, Teva’s best-selling drug, brought in $3.3 billion last year. Avonex had sales of $2.5 billion, while Tysabri generated $900 million.

Gilenya is set to lead the market in 2017, Leerink estimates, with $2.9 billion in global sales, and Copaxone would be in second place at $2.7 billion. Total sales of MS drugs will grow to about $15 billion from $10 billion now, Leerink said.

Under Novartis’s patient assistance program, the company pays out-of-pocket costs for those who aren’t on Medicare. The Swiss drugmaker pays as much as $800 monthly in co-payments for Gilenya, and helps patients navigate testing and monitoring recommended by U.S. regulators, paying as much as $600. Patients need to be monitored for six hours after their first dose of Gilenya, along with checks of the liver, eyes, blood and heart.

Teva provides assistance and support programs, according to Denise Bradley, a Teva spokeswoman, who didn’t elaborate on eligibility requirements and the percentage of Copaxone patients involved in the programs.

Company Assistance

Biogen spent $230 million on its patient assistance programs and charitable donations, Biogen’s Altimari said. The company will help patients better understand what their insurance will cover and determine out-of-pocket costs, as well as assist with co-payments and other services.

“Our belief is that patients should have access to the therapy they need to treat their disease, regardless of their financial situation,” Altimari said in an e-mailed statement.

Dean Kramer, 60, doesn’t qualify for such programs because of her retirement fund.

Diagnosed in 1984, Kramer started taking Teva’s Copaxone in the late 1990s and recalls the drug cost $1,100 a month then. She had to pay $100 of that out of her own pocket each month. Then a job change forced Kramer to switch to a less generous insurer. After a year’s subsidy from a charity program, the Maryland resident faced a choice between dipping into her retirement fund or quitting her MS therapy. She chose to quit.

‘Desperate’ People

Kramer relies on diet, exercise and two cheap medicines to improve her mobility. Gilenya is intriguing because it’s more effective than the older therapies, Kramer said. She’s waiting to see the side effects, aware that her personal cost-benefit calculation may change if her symptoms worsen.

“People get desperate and look for anything that will make them feel better,” she said in a telephone interview.

The price increases may not be sustainable for the older drugs, said Trung Huynh, a London-based analyst with Datamonitor, a business information and market analysis company.

“In the past they’ve been able to get away with that because of limited competition, but not with Gilenya,” Huynh said in an interview. “This will help them in the short term, not the long.”

The market will soon get more competition. Three oral drugs are in late-stage testing and may be available within the next one to two years, according to UBS’s Wenner. They are Teva’s laquinimod, Biogen’s BG-12 and teriflunomide from Sanofi-Aventis SA of Paris. A fourth medicine, Merck KGaA’s cladribine, was rejected by European regulators last year and failed to win U.S. approval this month.

“The oral drugs are the bright shining star for us, but it’s no closer than not having an oral drug at all, with Gilenya priced so high,” Lakatos-Shaffer said.

To contact the reporters on this story: Eva von Schaper in Munich at evonschaper@bloomberg.net; Naomi Kresge in Berlin at nkresge@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net.

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