Elelyso is among a growing number of costly entrants in the high-priced specialty drug market, where the drugs to treat life-threatening, chronic or rare diseases can run $300,000 to more than $400,000 a year. Annual price hikes for existing drugs for these small-population diseases and other specialty drugs are easily outpacing both inflation and the price increases in other segments of the retail drug market.
For the drug industry, price increases on specialty drugs have largely offset revenue losses from the growing use of generics. And industry analysts say the large number of specialty drugs in development will accelerate spending in the subsector in the years ahead.
Manufacturers defend the high prices in the niche—comprised of drugs for diseases with at most 200,000 patients or treatments for cancer or other complex diseases—by saying their development demands hefty investment and involves significant risk. Drugs are priced accordingly.
Yet the strategy has its limits. Specialty drugs' rapid price escalation is prompting pushback at some hospitals and physician offices, and has prompted debate over whether the manufacturers' price points are justified.
“They are coming out priced literally at what the market will bear,” said Anne Jacques, vice president of pharmacy markets for Highmark, a Pittsburgh-based insurer with 4.1 million enrollees.
Manufacturers see a lucrative opportunity in the specialty market, which lacks the price-lowering effect of competition. The companies appear to be testing “who can be more ridiculous with the price,” Jacques said.
Spending for specialty drugs will increase 20% annually between 2012 and 2014 with price increases driving two-thirds of the growth, the pharmacy benefit-management company Express Scripts estimates.
Drugmaker Sanofi, which recently purchased Genzyme, the maker of Cerezyme, told the New York Times in November it would discount its new colorectal cancer drug Zaltrap by half after doctors at Memorial Sloan-Kettering Cancer Center in New York denounced its $11,063 per month price tag on the newspaper's op-ed page. The oncologists, noting it provided scant improvement over existing therapies, said it was “no longer tenable” to overlook cost.
“Soaring spending has presented the medical community with a new obligation,” they wrote. “When choosing treatments for a patient, we have to consider the financial strains they may cause alongside the benefits they might deliver.”
Sloan-Kettering is not alone in rejecting drugs whose value doesn't justify their cost. In Arizona, Banner Health last year added an economic review to its clinical appraisal of formulary drugs. “As more and more expensive drugs come out, you have to look,” said Denise Erickson, clinical pharmacy program director for Banner, which owns and operates 22 hospitals across seven states.