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TAXOL PRIVATE SECTOR COSTS WILL RANGE BETWEEN $3,000-$6,000 PER PATIENT; BRISTOL NOTES GOVT. DISCOUNTS WILL BRING AVERAGE COSTS DOWN TO $2,000-$4,000

Executive Summary

A two-to-six month drug treatment for refractory ovarian cancer with Taxol (paclitaxel) will cost private-sector patients between $3,000-$6,000, Bristol-Myers Squibb indicated Dec. 29 at a post-approval briefing in Washington, D.C. The NDA for the product was approved earlier that day, culminating an accelerated development and regulatory review period (see preceding story). The price to wholesalers for each 30 mg vial of Taxol will be $146.10. The average three-week cycle of treatment will cost $986.18. About half of the refractory patients are expected to be treated with two or three cycles of therapy; the other half of patients will have five or six cycles. Taking into account the standard multiple cycles of treatment establishes the $3,000-$ 6,000 range for the cost of treatment. At its highest price, Taxol is being positioned near (but not beyond) the top-price end of the spectrum for existing treatments. The $986.18 single-cycle drug cost for Taxol is roughly equivalent to a one-month treatment with the second-generation platinum compound carboplatin (Paraplatin). The wholesale cost of that existing ovarian cancer therapy has been estimated by the National Cancer Institute at $1,030. To emphasize its pricing restraint to the media, Bristol calculated a "net effective weighted average cost" for Taxol. That average cost figure is significantly less than the wholesale cost: $103 per 30 mg vial compared to $146.10 wholesale figure. A treatment cycle at the net weighted cost is calculated by Bristol at $695.25. At the net effective weighted cost, a full treatment would cost between $2,000-$4,000. That average cost is close to the low-end of the current therapy spectrum: cisplatin (Platinol) has been estimated at $680 for a one-month supply. Bristol's calculation of a net effective cost takes into account various mandated discounts (such as the prices to Medicaid, public hospitals and the Veteran's Affairs Department), Bristol's indigent assistance programs and a commitment by the company to maintain free supplies of the drug to NCI for clinical supplies. By openly describing its various price levels, Bristol fashioned an adroit argument that its pricing for Taxol is close to the median for existing therapies. Most patients and private insurers will be paying for the product at the wholesale price -- i.e., near the top of the existing price spectrum. Making the price for Taxol appear to fall within the range of existing therapies was important for Bristol and puts the company on a more solid political foundation for upcoming reviews of Taxol pricing. For the last several months, the company's government partner in the development of the product, NCI has enunciated a preference for an initial price for the product near the median of existing therapies. NCI has been required to consult with the company over the pricing for Taxol because of its charge to seek a "reasonable price" under a cooperative research and development agreement (CRADA) signed in January 1991. "Despite our company's huge investment, the high production costs, [and] the limited period of exclusivity [for Taxol]," Bristol-Myers Squibb Pharmaceutical Group Senior VP Bruce Ross told the media briefing, "the projected cost of Taxol per treatment cycle is well below that of many other recently approved cancer therapy agents and is in the mid-range of other agents currently used in the treatment of ovarian cancer." Bristol carefully courted NCI's approbation for Taxol pricing. In addition to holding monthly meetings with the institute since mid-summer to discuss pricing philosophy, the company supplied the institute in mid-November with a document outlining the various factors that would be considered in the Taxol price decision. A contingent of senior Bristol-Myers Squibb pharmaceutical execs, headed by Ross and Senior VP-worldwide clinical research Stephen Carter, MD, and Oncology Medical Director Isadore Pike, MD, met with NCI officials on the morning of Dec. 29 immediately following FDA approval to explain pricing for the product. The initial informal reaction from NCI on the Bristol pricing was favorable. NCI officials were impressed by the indigent care programs, the continuation of donations to patients who are already enrolled in protocols through the NCI treatment referral center program and the company's commitment to continue supplying the drug free to NCI for clinical use. Because of the severity of refractory ovarian cancer and the drug's relatively short duration of effectiveness (an average response by a refractory patient is five to seven months), Bristol's commitment to continue supplying existing patients is a finite donation program. NCI officials were presumably relieved that, even at its top range, the Taxol price is within the realm of existing treatments. NCI knows that its role in the development and pricing of Taxol will be scrutinized in two upcoming hearings at the beginning of the next congressional session: Rep. Wyden (D-Ore.) has scheduled a hearing for Jan. 25 in his House Small Business/Regulation Subcommittee; Sen. Pryor (D-Ark.) similarly is planning a February hearing on NIH's role in pricing decisions for drugs developed under CRADAs ("The Pink Sheet," Dec. 21, p. 24). The late December approval allowed Bristol to dominate the initial media response to Taxol's clearance for marketing. There was no immediate response from Capitol Hill about the pricing of the product. For Bristol, this is the second high-visibility approval (following 14 months after the Videx (ddI) approval in October 1991) developed under an agreement with the government to set a "reasonable price." In both cases, Bristol has been sensitive to the price of existing products and therapies for the approved indication. While Bristol voluntarily has foregone a premium price to existing therapies, the company has avoided having to supply detailed cost-of-development and cost-of-production information to NIH to defend its pricing. At a Dec. 29 press conference announcing the approval, Bristol maintained that its commitment to Taxol development has exceeded some benchmarks on spending for the drug development. Bristol exec Ross noted that the company "has invested several times the $32 mil. spent on Taxol by the government." The firm spent "far in excess of the $114 mil. required by the CRADA," Ross declared. While the CRADA required the company to commit 125 staff-years to the development of the drug. Ross said Bristol exceeded that figure by spending 205 staff-years. Bristol's Carter noted that for the last two years Taxol has been the "number one" R&D priority at the company "with many of those [researchers] working on Taxol pulled away from other important projects to devote themselves to this urgent priority." The company's experiences with Videx and Taxol appear to be important models for the rest of the industry of dealing with a public price-negotiating procedure. Several other companies, including Warner-Lambert and Carter-Wallace, are developing highly touted products under agreements with NIH. While the specific contracts that they are operating under may not include "reasonable price" clauses, because of the government involvement in development the firms can expect a more public process for their pricing decisions. Bristol has stressed that it does not have patent protection on Taxol and that competition is likely within two years from Rhone-Poulenc Rorer's Taxotere. The company portrayed that competitive threat with a note of corporate xenophobia at the Dec. 29 press conference, emphasizing that Rhone-Poulenc Rorer is a French company. Under the Waxman-Hatch Act, however, Bristol has five years of protection from products approved on the basis of abbreviated new drug applications. The company may be able to supplement that exclusive position if it is successful in developing a synthetic version of Taxol before the ANDA protection expires. Bristol originally projected that it would take from five to eight years from the signing of the CRADA to develop semi- synthetic and synthetic sources of the drug. The company now states that "significant amounts of Taxol will be produced by semi-synthetic means in 1993." Bristol plans to submit a supplemental NDA on the semi-synthetic version during 1993. The company further expects "to eliminate the need for Pacific yew bark completely by the end of 1995"; 1993 will be the last significant bark harvest, Bristol execs say. That progress toward a synthetic version should help quiet concern of environmentalists. It should also help erect a cost barrier to follow-on competitors. The company has an agreement with an Italian firm, Indena, to derive Taxol from the needles and twigs of European and Asian yews. Bristol also has exclusive rights to a semi-synthetic method developed at Florida State University for processing ("The Pink Sheet" June 29, In Brief). That method is protected under a process patent. As Bristol describes the current bark extraction method, it takes 50 processing steps from collection of the bark to the preparation of material for final formulation. If the company has a patent-protected process for semi-synthetic production by 1995, it will have a clear cost/manufacturing advantage over potential direct competitors for Taxol. It will still probably have to face competition from Taxotere. The patient population and price continue to indicate a potentially strong commercial product. Bristol estimates that about 13,000 patients are diagnosed each year with refractory ovarian cancer. At an average per patient treatment cost of $2,000-$4,000, the market potential for Bristol is about $25-$50 mil. from the first approved indication. The company expects that response rates for ovarian cancer will improve with earlier treatment, which would extend the patient pool. The product is being studied for first-line ovarian treatment and breast, lung, and head and neck cancers. If the drug's patient population expands over time, it will be important to watch whether the company lowers the price. NCI officials have indicated that that is the pricing pattern they expect -- mimicking the Burroughs Wellcome experience with Retrovir (AZT). To keep NCI's approbation, Bristol may be obliged to follow that pattern. Chart omitted.
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