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WASHINGTON — No one asked Paul Hastings what he thinks about Speaker Nancy Pelosi’s major new drug pricing legislation, or how it might affect his company, Nkarta Therapeutics. No one asked Bassil Dahiyat, the CEO of Xencor, or Dr. Barbara Weber, who helms Tango Therapeutics, either.

But they’re all scared stiff.

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  • It should be understood that prices for new drugs are set by analysts in three-piece suits or tight skirts working for Lloyd’s. Take the likely number of patients in the US, divide into $1 billion and there is your annual price. That is why so many drugs for MS are priced at about $100K per year–if a drug can capture 10,000 of the 500,000 patients you get your $1billion.

    On the other hand, I do not understand the pricing for dimethylfumarate (Tecfidera in the US). This is an industrial chemical long off patent that has been used as an immunosuppressant for the treatment of psoriasis for 20 years in Europe. A limited clinical trial in the US demonstrated that the same mechanism works in MS. Highly pure powder can be purchased at about $100 for a year’s supply, but formulated into a controlled release pill costs wholesale $75,000. If one reads through MS patient web sites, the word “rape” appears right often. I cannot find any explanation for the pricing.

    Meanwhile, prices for drugs long available as generics have risen greatly in costs. Insulin is a classic case example and people are dying as they try to stretch their supplies.

    Biotech startups are another interesting area. Basically, the scientist(s) need to develop their concept to where there is reasonable expectation for a clinical result and then sell to VC’s. The VC’s will want to flip their investment within three years with the hope of tripling their money. Bring in the VC’s too soon, the scientists lose control, the product cannot be developed and the company dies. I have colleagues who have learned this lesson with their first attempt at a startup. But if you are developing a drug for a rare disease so that at most there will be 100 patients, then what do you charge in order to get $1 billion back each year and who pays? Interesting quandary. A drug (enzyme actually) for hypophosphatemia costs $6 million per year. If the insured is in a pool of 16,000, then everyone has to fork out an extra $375 per year (scenario from The Weekly) for the one family. The costs become unsupportable and the insurance collapses.

    Where are we going?

  • Right now there are no price controls on Orphan Drugs. The drug I received for free for 18 years received FDA approval when another company took the drug, added phosphate salt to it and is charging $500,000 a year for 80 mg. I took 90 mg. before but can’t because it wasn’t tested in the FDA trials. If I could add 10 mg. that would cost over $6000 more per year. The company didn’t add anything new to the medicine other than phosphate salt which had already been done in other countries and paid the costs associated with FDA approval. While costly, it’s clear the company will quickly make back the money it spent plus many millions/billions more. Tell me again why drugs shouldn’t be compared to the cost in other countries?

  • It is difficult for the public at large and for members of Congress, especially new ones to differentiate between large drug companies and biotech start-ups—especially since the industry is concentrated in only a relatively small number of geographic areas. This is a challenge that’s been going on for decades. Trade groups in DC can very very effective in telling the biotech story, but I have always thought there needs to be more grass-roots education at the state level.

  • I’m currently raising a series A, and ever VC keeps mentioning this to me. Also mentioned is competition for funding is now very high because everyone is trying to shore up funding before the nuclear winter

    • Dear Jimbo, as this hypothetical “nuclear winter” is at least 2-3 years away, let alone probably never happening. VCs are just using it as an euphemism/excuse to tell you: take a hike, we are not interested.

    • Trevor

      Not true. While there may be bad actors in every industry most innovators have programs for people who don’t have means. If you have insurance it’s the co pay that’s high and that’s determined by the insurance company. I am not in this industry, biotech, to exploit patients. I am a patient. I don’t like co pays either. If you do your research what’s important is to ha ve innovation which is then replaced by generics. With that formula and no rampant price increases or meaningless patent extensions the system will work , we can afford innovation and once patents expire we have the majority of drugs generic. THEN , watch the PBMs and make sure they put your generic on formulary even though their “ rebate” will be less

  • Take this dire warning with an aspirin and call me in a decade. These boys just want to protect their very huge cash cow. So, of course, they will predict that the sky is falling. It won’t, but their sky is falling, so vote for anybody bit Sanders and Warren.

    Pharma, like most US healthcare, is legalized extortion. “Pay me or die!” and “If you don’t die, we will still own you for the rest of your life.”

  • Folks who have built business models around high prices for specialty drugs would have a problem under these proposals. But one can legitimately question whether funding decisions have not been skewed by just this kind of approach. To take just one example: there is no disputing that new anti-fungal drugs are desperately needed and would help large numbers of people in both advanced and developing countries, but there much less investment in that area because of the high payoffs to specialty drugs. Do not forget that political risk is one of the risks investors and entrepreneurs assume.

  • or, it could be a chance for both investors and big pharmas to more carefully invest in startups that are actually proposing worthwhile therapies, rather than throwing cash at so many worthless, or even fraudulent wannabes

    • Anonymous drug czar ( why are you anonymous btw) I welcome your scrutiny , investor scrutiny and big pharma scrutiny. Competition is good and will lead to lower prices No one wants fraudulent companies. No one. Investors and pharma know how to diligence that

  • I recently attended a patient advocacy summit, where hundreds of patient advocacy groups met with each other and legislators. A very courageous woman who happens to have sickle cell disease raised her hand in a session with Nancy Pelosi’s and Jeff Sessions staff economists on the panel. She asked of Nancy’s economist, Wendell, “Sir, have you or the speaker visited the UK, a country you are referencing for your pricing model, and SEEN YOURSELF how sickle cell patients are treated there????YOU want us to be treated like THAT?” He did not answer her question at all, but with political soundbites, much like Anna Eshoo’s comments in the story” OUR bill will not hurt innovation” the barve patient re-raised her hand and said, ” Im sorry, you did NOT answer my question. HAVE YOU BEEN TO THE UK to see how sickle cell patients are treated there, sir?” ” No” was the answer….do your homework speaker Pelosi. I live in your district, as do many many biotech entrepreneurs and patients who like me, are both entrepreneur and patient.

    • so, how are sickle cell disease (SCD) patients treated there? And as compared to the US? Just asking for a European friend

      Life expectancy SCD UK in the 60s

      Life expectancy SCD USA in 40s-50s

      My educated guess: a heckler paid by Phrma, or conservative lobbies, or both.
      As the song goes: all you need is brain …

    • Now, I am curious. How are patients treated there as compared to the US? Asking for a European friend!

      Life expectancy of SCD in UK, in their 60s (source: The Royal College of Pathologists; rcpathDOTorg)
      Life expectancy of SCD in USA, in their 40-50s (source: American Society of Hematology; hematologyDOTorg)

      As the song goes: all you need is brain ….. instead of hecklers paid for by lobbies spreading ignorance with no shame and no morality

    • As CEO of a non-profit, BioCT that supports the bio industry in CT, I am very concerned about what the solution is to this unsustainable situation. We must not add more risk to the ability of startups succeeding by having venture dry up. That said I am also a patient and need to have drugs affordable, not just for those that can afford the high prices.
      As a capitalistic society we reward share holders with enormous profits, which drives investment. Economics 101…supply and demand. It is fine for companies like Apple, Tesla, Amazon, etc to drive profits and try to make people “believe” they can’t live without their products. However in the health care world people truly can’t live without innovative medications, this is life and death. How in this capitalistic society, do we single out an industry and tell them they can’t make as much profit as possible? It goes against what this country was built on. This problem can’t be solved by making the pharma industry the “bad” guy. They are only doing what every other company on wall street does. Any solution will need to include every entity that touches a drug (the more “touches” the higher the pricing) which includes; pharma, PBM’s, payers, pharmacies, physicians, hospitals, legislature and patient advocates. It’s time for all the players to sit down at the table and find a solution. No action creates a vacuum which gives legislators the responsibility to come up with solutions…bad idea! In the end everyone is going to have to give up some of their bottom line, it’s the moral thing to do.

    • Dipthroat, check your anonymous numbers, life expectancy for sickle cell patients today is exactly the same for US and UK, but does not take into account QUALITY OF LIFE…patients are not hecklers, they are legitimate human beings with valid opinions like you. Have YOU been to the UK and asked SC patients about their quality of life?

    • Paul,
      Your first comment specifically relies on, as you said, “what’s important is to have innovation which is then replaced by generics. With that formula and no rampant price increases or meaningless patent extensions the system will work.” Unfortunately, we’ve seen that there are rampant price increases and meaningless patent extensions. How are we going to eliminate those?

    • Have YOU been to the UK and asked SC patients about their quality of life?
      and have you? Where are your respectable sources about such “quality of life” differences? You are the one making unsubstantiated claims, with the duty to prove it.
      Mine are are not anonymous at all! You have just not to be a lazy @ss and click on the links provided, or digit SCD and the websites provided.
      I am smelling a lobbyist with no credibility

    • Dawn Hoover,

      You stated – ” This problem can’t be solved by making the pharma industry the “bad” guy.” The pharma industry is making itself the bad guy, but the way it overprices its medications and raises the prices at will. As Eric Bender said – “Almost every expert I’ve interviewed about trends in drug pricing uses the same word: “unsustainable”.

  • Let’s hope that this is the start of discussion, not the end of the discussion. We all root for truly innovative small biotechs, but they need to understand the limits of the healthcare economy. Almost every expert I’ve interviewed about trends in drug pricing uses the same word: “unsustainable”.

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