Sanofi and Regeneron's Price Gamble Is Worth It
When drug companies talk about the Institute for Clinical and Economic Review (ICER), an independent organization that gauges the value of prescription drugs, it's usually to push back against it. After all, the ICER often suggests drugs are priced substantially higher than their clinical and economic value.
But Sanofi and Regeneron Pharmaceuticals Inc. made a surprising overture of friendship to the ICER on Saturday. The companies announced they would discount their cholesterol drug Praluent to levels the ICER suggested in a recent analysis for some patients. The announcement came alongside new data showing the medicine substantially reduced the risk of cardiovascular events in high-risk patients.
The gesture highlights how tough it's been for Praluent and Amgen Inc.'s similar drug Repatha to gain market traction. And its success will reveal how much compromise it will actually take for these drugs to be used widely.
Declaration of Price War
Investors see the news that Regeneron and Sanofi are dramatically dropping the price of a cholesterol drug as bad news for Amgen's competing medicine
Source: Bloomberg
Both drugs launched in 2015, and both have been disappointing -- even though they're more effective than older treatments. Millions of people take medicines to lower their cholesterol. Insurers, nervous that large numbers of patients might switch to these new and much costlier options, have made the drugs exceptionally difficult to obtain.
The drugmakers hoped longer-term studies of the drugs' effectiveness in preventing heart attacks relative to older drugs might change insurers' minds.
But Amgen released Repatha trial results last year that suggested dramatically lowering cholesterol doesn't have quite the impact on heart disease many expected. The just-released Praluent results are broadly similar. The drug did appear to reduce the risk of death for patients in its trial, which Repatha didn't. But the numbers likely won't dramatically shift how payers perceive these medicines. Giant price cuts don't come on the heels of game-changing data.
Failure to Launch
Early sales of a new class of cholesterol drugs have been much lower than initially expected, and long-term forecasts have come way down
Source: Bloomberg
Sanofi and Regeneron appear to have reached the conclusion that a breakthrough with insurers isn't forthcoming. Praluent's list price is around $14,000 a year, while ICER suggests it's worth between $4,500 to $8,000 for high-risk patients who don't respond adequately to high doses of older drugs. The drugmakers plan to offer discounts to bring the drug's net price within that range.
The discount will only be provided if payers increase access to the drug. Essentially, Sanofi and Regeneron are trying to trade some per-patient income for access. This sort of negotiation happens all the time; this is just more public and dramatic.
The move is also likely motivated by the fact that Praluent is trailing Amgen's Repatha in the market, both in sales and reporting results. There's also a broader competitive context -- Esperion Therapeutics Inc. recently released late-stage data for a less-potent but potentially much cheaper drug. Alnylam Pharmaceuticals Inc. and The Medicines Co. are working on potential competitors. It will be harder for these new entrants to compete on price now.
Though this is a sensible move for Sanofi and Regeneron -- which have so far failed in every attempt to make much of a dent in the market -- that doesn't mean it will actually work. If payers aren't willing to make major access concessions, then there may not be major price cuts. The price gap between Praluent and older drugs will remain very high even after these discounts. A retaliatory price cut from Amgen seems likely, and the resulting price war may hurt profitability.
But the entire history of these drugs suggests manufacturers misjudged their value. This is a worthwhile step toward correcting that.
To contact the editor responsible for this story:
Mark Gongloff at mgongloff1@bloomberg.net