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UK Panel: Bristol's Skin Cancer Drug Yervoy Costs Too Much


Even though it extends patient lives, the drug's $120,000 price tag is too costly for England's single-payer system, health care watchdog says.

A UK health care watchdog just fired another shot at high drug prices -- recommending that England's public health system not use a breakthrough melanoma treatment.

Bristol-Myers Squibb's (BMY) Yervoy isn't worth the price tag (an average of more than $120,000 a patient) even though it extends lives, according to the National Institute for Health and Clinical Excellence. The authority, known as NICE, made its remarks as a draft prior to receiving public comments. A final recommendation will go to England's National Health Service, the largest single-payer health care system in the world.

But the message was sent to drug makers who are sometimes charging six-figure prices for life-saving treatments. Governments are serious about halting the high cost of health care. It's an issue in the EU and it's a concern in the US. (See What's a Cancer Drug Worth?)

Yervoy is expected to be a blockbuster product and Bristol describes early sales as robust -- the drug delivered $95 million in sales for three months ending June 30, its first quarter on the US market. The drug, approved in the US in March and the EU in July, extends lives of people with advanced melanoma, which is something no other existing treatment can do. Melanoma is the most deadly form of skin cancer. In the US, the market appears -- at first blush -- to accept the big price tag. The average cost in the US also is around $120,000 per patient.

For drug makers, it takes a decade and $1 billion or more to produce some of these new and improved treatments. The companies have to recoup their costs. But governments around the world, shouldering huge health care payouts, are only going to get more militant about prices. In September, NICE said Human Genome Sciences (HGSI) and GlaxoSmithKline's (GSK) drug Benlysta, the first new treatment for lupus in a half century, shouldn't be used by the UK's national health care system. Earlier this month, it made a similar recommendation for Sanofi's (SNY) prostate cancer drug Jevtana. Dendreon (DNDN) has blamed disappointing sales of its prostate cancer vaccine Provenge on skittish doctors who are afraid they won't be reimbursed by Medicare. (Some analysts have questioned whether doctors are simply skeptical of the treatment. See Dendreon's Stock Plunges on Low Provenge Sales.) Provenge costs more than $90,000 for a course of treatment, while Jevtana is around $35,000 per regimen and Benlysta is priced at about $35,000 per year.

Pricing has become a crucial piece of information for drug and biotech investors. The most important announcement following US Food and Drug Administration approval is how much a drug is going to cost. Will a high price lead to a belly flop at launch, which can be hard to overcome?

In addition to the time and money it takes to develop a drug, there's a high failure rate -- 90%, according to biotech industry consultant Michael Becker.

Becker says it's difficult to price drugs lower given the factors -- so it's unlikely that companies will slash the amounts they charge.

"If it takes $1 billion and 10 years to develop a drug and product candidates will fail 90% of the time during the process, it isn't realistic to expect lower prices from the pharmaceutical industry," he says.

That means the companies have to work harder to convince the government folks of the value of their drugs or work toward lower regulatory costs associated with FDA and other countries' marketing approvals.

For its part, Bristol says it will work very hard to convince the UK folks that Yervoy is a real value for the money. The final recommendation isn't expected until next year.

The initial ruling "comes in spite of acknowledgement by NICE that (Yervoy) is a significant innovation for the treatment of advanced melanoma in an area of high unmet clinical need and is supported by robust clinical evidence," the company says in a statement.

Twitter: @brettchase
No positions in stocks mentioned.
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