It was a symbolic act that spoke volumes. On stage with other pharmaceutical executives to talk about drug pricing at the Forbes Healthcare Summit last December, Regeneron cofounder, chairman and chief executive Leonard Schleifer physically moved his chair away from those of his peers.
“If you look at the prices of drugs, they have gone up, sometimes double digits, twice a year as a very efficient way of increasing profits without being coupled to any innovation,” Schleifer said then. “It’s ridiculous.”
So what does Schleifer, whose Regeneron stake has made him a billionaire, do when the time comes to price his own new drug? Today the Food and Drug Administration approved Dupixent, a medicine made by Regeneron and its partner, Sanofi, to treat severe itching known as atopic dermatitis in patients whose symptoms are not controlled by topical steroids. And Schleifer says that he has made peace with some of the industry’s biggest critics to arrive at what he says is a fair list price: $37,000 per patient per year, a price that he admits is still expensive, but is cost-effective.
“This is really a great example of how it should work,” says Steve Miller, the chief medical officer of Express Scripts, the pharmacy benefit manager, and one of the loudest critics of high drug prices. “Our plans would obviously like a lower price. [Regeneron’s] shareholders would like a higher price. I think the fact we disappointed everyone probably means this came in where it should have.”
The drug was approved based on three placebo-controlled clinical trials with a total of 2,119 adult participants. They were more likely to have clear or almost clear skin if they received Dupizent, an injection, not a placebo. (For more on the drug, read this.)
Miller and Schleifer, who talked with Forbes ahead of the FDA approval, say that their early conversations have led to a situation where patients whose drug benefits are managed by Express Scripts will be able to get Dupixent. Patients will not need special documentation to prove they meet the criteria for taking the drug.
Express Scripts, for instance, chose not to restrict the drug based on what percentage of a patient’s body is covered with broken, itchy skin, even though it could have. “As a clinician, I can tell the number of patients who have this just on their hands, and they have sores and bleeding cracks on their hands,” Miller says. “It’s not a huge body surface area. But it’s debilitating for those patients.”
Biotechnology investors hearing those words from Miller are likely to ask: What happened to Steve Miller? Miller admits he “raised a ruckus” about previous medicines, particularly new treatments for hepatitis C like Sovaldi and Harvoni, from Gilead Sciences. Sovaldi cost $1,000 a pill, or $86,000 per course of treatment, when it launched in 2013.
“Gilead claimed they talked to a lot of payers,” Miller says, using industry jargon for health insurers. “I don’t know any of the payers they talked to. Here you had a unique product, a really outstanding drug, yet no one in the marketplace really understood the pricing at all.”
A more recent example likely weighed on Schleifer’s mind, and on the minds of his partners at Sanofi: that of their cholesterol drug, Praluent, which was expected to be a blockbuster. Instead, sales of the $14,000 drug last year were just $116 million, a major clinical disappointment. Elias Zerhouni, the head of research and development at Sanofi, says Dupixent represents a new frontier in drug discovery, because it is a single antibody that works on multiple chemical targets. Neither Sanofi nor Regeneron can afford to have Dupixent turn out like their last drug.
Regeneron reached out not only to benefit managers like Express Scripts, but also to the Institute for Clinical and Economic Review (ICER), a nonprofit partly funded by insurers that releases independent judgements over whether drugs are worth the money. A draft report released Friday says that Dupixent is cost-effective, and may be underpriced.
Schleifer points out that Dupixent costs less than drugs for psoriasis, which cost $50,000 per year. But the $37,000-a-year list price of the year is more than the $20,000-to-$30,000 price range expected by analysts at RBC Capital Markets, an investment bank, in their financial models.
It’s not clear that other drug benefit managers will be as ebullient as Express Scripts. CVS Caremark, the other big pharmacy benefit manager, acknowledged that it met with Regeneron, but warns “the drug will be expensive.” CVS says: “As we prepare for the approval of this medication, we are developing programs for our clients to ensure this new therapy is available for those patients with a demonstrated medical need for the drug, based on its indications as approved by the FDA.”
For Regeneron, the stakes are high. Brian Skorney at Baird Equity Research notes that the $200 million in 2017 sales Wall Street analysts expect from Dupixent are higher than the first-quarter sales of Humira or Enbrel, rheumatoid arthritis medicines that are among the world’s best-selling drugs. Can Schleifer’s deal-making really insure Dupixent will be a big hit, and generate more than $3 billion annually within two years, as Wall Street expects? Not everyone believes.
“Len is a classic ‘golden throat’ but the PBMs are careful bean counters and no one dies from [atopic dermatitis],” wrote Ronny Gal, a pharmaceuticals analyst at Bernstein Research on February 9. “We would love for him to be right, but a level of skepticism is appropriate.”
But Schleifer is sure he got the deal right, and, more than that, this this can serve as a model for other companies launching new drugs.
“I think this should be a new paradigm,” Schleifer says. “We have to stop saying that we can’t keep this finger-pointing and chest-beating, where the industry beats its chest at how terrific it is, the payers about how greedy the industry is, the patients get squeezed and then government wants to step in. We have to break this cycle.”