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Dendreon's Provenge Costs the Same as Chemotherapy

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The price of the prostate cancer drug has been widely debated and is often wildly wrong.

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When Dendreon (DNDN) surprised Wall Street by choosing a price for Provenge of $93,000, it was inevitable much of the conversation about Provenge going forward would revolve around price.

When the Centers for Medicare Services (abbreviated CMS) dove in and launched a National Coverage Assessment (shortened to NCA) for Provenge, this really got the debate about Provenge's price moving. In retrospect, the NCA process makes sense as CMS most likely wants to make sure it's not paying for off-label use of the drug.

The outcome of the Provenge IMPACT trial was reported yesterday in the New England Journal of Medicine. As is usually the case with important new and/or first-in-class drugs, the publication included an editorial by Dr. Dan Longo, an immunologist working for the National Institute of Aging. The editorial had its positive parts, with Longo concluding a review of the IMPACT trial by stating:

"Thus, a 23% reduction in the risk of death in patients with metastatic disease is an important step."

However, Longo put forth three criticisms. The first two are trial/science geek stuff, which my firm (Biotech Stock Research) and I don't think hold water. The third criticism was related to Provenge's cost. Longo states:

"Another concern with sipuleucel-T treatment is the cost. The current cost of care for men with prostate cancer has been estimated to be about $1,800 per month. (Alemayehu, 2010) The manufacturer has set the cost of a 1-month course of sipuleucel-T at $93,000, or $23,000 per month [sic] of survival advantage."

The problem here is that Longo's math is wrong and the Alemayehu study he chose to cite used methodology that makes it unusable for drug-to-drug cost comparisons. (On a side note, Longo also errs in assuming Provenge has a 4.1-month survival advantage. It doesn't. It has a 4.1-month median survival advantage. The best way to understand the difference is to read Stephen Jay Gould's essay "The Median Isn't the Message".)

Let me explain to two big flaws in Longo's cost math:

The Alemayehu cost data come from a retrospective study of patients between 2001 and 2007. The lead author of the paper is an employee of AstraZeneca (AZN), a Dr. Berhanu Alemayehu. I note the cost estimates from his paper for the "treatment" of CRPC are far lower than other data I've seen. This made me dive into the study methodology. Here's what I found:

  • The methodology of the paper would have captured patients who chose no therapy for CRPC. While this isn't an incorrect methodology, data generated can't be used to compare the cost of drugs to one another because non-treatment is included.

  • The paper only covers pharmacy costs for Taxotere (Sanofi-Aventis' (SNY) chemotherapy that was approved in 2004 for prostate cancer) and hormone therapy drugs. Drugs used to treat side effects were counted only if prescribed by a urology or oncology practice. This ignores drugs used to treat acute side effects at the emergency room level. It also ignores radiation therapies.

  • The study ignores the fact that Taxotere wasn't even approved in three of the seven years he studied.

  • Costs, both from hospital visits and the pharmacy, were included only when cancer was listed as the primary treatment item. This serves to underestimate overall costs by emphasizing differences in coding practices and ignoring treatments a physician felt were related to cancer therapy, but cancer was listed as a secondary item.

The big problem is the first one. Anywhere from 50%-75% of men with CRPC choose not to use chemotherapy. By including that population in the cost figures, the Alemayehu paper is unsuitable for use for cost comparisons. Using it essentially means you're comparing the cost of no therapy to the cost of therapy.

That's hardly a fair comparison.
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