Healthy Skepticism Library item: 7987

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Bullmarket.com Staff.
Insurers Balk at Covering Expensive Biotech Drugs
Indie Research 2007 Jan 25
http://biz.yahoo.com/indie/070125/585_id.html?.v=1

Full text:

Although the medical insurance establishment has shown a willingness to cover the high cost of drugs to fight cancer and other life-threatening or debilitating diseases, biotechs are finding that there is less appetite for reimbursement when treating conditions that are viewed as less serious.

A recent New York Times report outlines this dilemma as it pertains to the treatment of psoriasis, a skin disease. In this market, expensive drugs developed by biotechs Amgen (Nasdaq: AMGN – News), Genentech (NYSE: DNA – News), and Biogen Idec (Nasdaq: BIIB – News) compete with cheaper drugs offered by Johnson & Johnson (NYSE: JNJ – News) as well as other low-cost treatments. In addition, new drugs to treat psoriasis are in development at other pharmaceutical companies.

While the cost effectiveness of the biotechs’ treatments has been debated — they can cost ten times as much as other treatments — the crowded market has helped keep Genentech’s psoriasis drug, Raptiva, from generating much sales momentum. In the most recent quarter, sales of the drug totaled just $24 million, a fraction of the revenue brought in by the firm’s other drugs. Amgen, meanwhile, has had a tough time generating momentum for Enbrel in this market. This was in part due to problems with its ability to advertise for that indication, but it would seem that health insurers’ reluctance to pay up for the drug is also a meaningful factor.

This speaks to challenges in the market for psoriasis treatments, but it also points to a larger unwillingness of insurance companies to cover the costs of expensive drugs. Insurers often require that patients try low-cost treatments before approving more expensive ones. As a result, biotechs may face increased challenges in targeting diseases that are considered less serious, especially if lower-cost treatment options exist, even if they are less effective. While this is one of the hurdles that biotechs face, not too much should be made of it. Genentech not only has one of the strongest drug portfolios in the industry, but it has focused the bulk of its commercialized drugs and its R&D on diseases that everyone considers serious and life-threatening. Price, therefore, isn’t a major factor that determines overall use.