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VIDEX MARKET ACCEPTANCE WILL BE MADE EASIER BY MEDICAID ACCESS PROVISIONS; BRISTOL SETS DDI PRICE BELOW AZT: IMAGE-ENHANCING MOVE THAT MAY PAY OFF LATER

Executive Summary

State Medicaid programs will be obligated to pick up reimbursement of Videx (didanosine/ddI) for at least six months, according to the open access provisions of the 1990 Medicaid rebate law. In an Oct. 9 letter to physicians who previously have treated patients with ddI, Bristol Labs prominently reminded them that the approved product quickly would be picked up for patients qualifying for Medicaid assistance. The rebate law, Bristol noted, provides "that any new drug approved after the date of enactment must be covered by the state Medicaid programs without prior approval or other restrictions for the first six months from the date of approval." The company pointed out to physicians that "prompt Medicaid coverage is assured." The Medicaid coverage is important to Bristol because many of the first Videx patients are likely to come under the government assistance program. As a second-line treatment, Videx will be used initially by the more advanced AIDS patients whose income and medical costs probably qualify them for Medical coverage. HCFA estimates that at any given point about 40% of the AIDS population is on Medicaid. The current figure is about 24,000. The immediate access to Medicaid allowed Bristol more freedom to consider a lower price and more room to work on transition plans for current Treatment IND (free-use) patients and the development of an indigent care program. Bristol did not have to worry about an extended period of continued free distribution of the product while states decided whether to pick up coverage. Videx will cost patients $ 1,900 annually, the company estimates, calculating a 14% markup on top of the direct-to- wholesaler price of $ 1,745 annually. The price is based on an average daily dose of 400 mg. The dose, however, is adjusted according to each individual's body weight. Therefore, for adults, the cost of Videx therapy will range from $ 760 to $ 2,100 per year. By comparison the annual cost of AZT therapy is anywhere from $ 2,500 to $ 4,000. For children the cost of Videx therapy will be between $ 350 and $ 785 annually. By pricing Videx below Retrovir, Bristol is making it easier for third-party payers, and particularly the financially strapped Medicaid programs, to accept switches from AZT treatment to ddI. In fact, it may add an economic incentive to those programs to encourage treatment switches that could help the expansion of the product and help overcome the lack of supporting clinical data from the abbreviated development period. The Videx trade price will be the same when Videx is distributed directly to retailers, chain drug stores, hospitals, clinic pharmacies and physicians. "This is the most efficient way to distribute the drug," BMS Pharmaceutical Group President Bruce Ross said at an Oct. 9 media briefing, "because it will reduce inventory tied up in distribution pipelines and make the drug available when and where it is needed." Bristol-Myers Squibb said that its decision to set a moderate price for Videx was influenced by public opinion and the company's desire to be favorably considered in future bids for licensing technology from the federal government. "Our overriding consideration in establishing a price for Videx was to establish a reasonable and responsible price that would make this unique collaboration with the government withstand public scrutiny and lead to further collaboration in the future," Bristol-Myers Squibb's Ross said. With other major non-AIDS products near marketing or in development (such as the lipid-lowering agent Pravachol and the anti-cancer agent taxol), Bristol may be creating a responsible- pricing image ina limited, but highly-visible, market which can give it more pricing flexibility in some of the larger markets. Bristol is treating Videx as if it may be an important AIDS incremental advance but not as if it is the centerpiece of the company's pharmaceutical line. Under a January 1988 licensing agreement with the National Institutes of Health, the company agreed to establish a "reasonable price" for ddI or forfeit license to the product. National Institute for Allergy and Infectious Diseases Director Anthony Fauci, MD, said at the HHS press conference that "there is satisfaction with the arrangement that was made with regards to the price." The government will receive 5% in royalties on the sale of Videx. At the media briefing following the HHS press conference, Bristol-Myers Squibb outlined its plans for transition from expanded access to the marketplace with the announcement of two reimbursement assistance programs. The company's transition plan calls for a six-week period of continued free distribution to permit patients to arrange for third-party sources of payment and/or to locate other sources of payment. The company anticipates that it will take about 10 weeks to change current Videx Treatment IND patients to payment programs. The six-week minimum supply will permit patients to fulfill the first requirements of a changeover to the new distribution. The first step of the reimbursement process will be for the patient's physician to contact a reimbursement intermediary group established by Bristol-Myers Squibb. The physicians are being asked to provide the age and financial status of patients without providing patients' names. Bristol-Myers Squibb, which has extensive experience with reimbursement issues through its cancer drug programs, will then provide information from a company database on potential sources of reimbursement. If the patient is rejected for reimbursement and Bristol-Myers Squibb is not able to locate satisfactory sources of third-party payment, the company said it will act as the payer-of- last-resort for patients who cannot afford the drug. The Bristol-Myers Squibb transition provisions are not unusual in the AIDS treatment field. Astra Pharmaceuticals recently has established a three-month transition period for its recently approved product, Foscavir. What is unusual is the large size of the Bristol-Myers Squibb program: the company will be transferring approximately 8,000 patients from free use of the drug to payment between now and the end of the year; Foscavir was being used by 1,500 Treatment IND patients at the time of its approval.
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