Praluent’s Price Cut: Testing The Tech Model For Drug Pricing

It may be more accident than design, but Sanofi and Regeneron are applying a tried and true pricing model to Praluent. Just ask tech companies. 

Thirty-five years ago, consumers were offered the chance to buy something new, called a cell phone. It could make phone calls. No videos. No apps. It didn’t even text.

And it cost $4,000.

Today, everyone owns a cell phone that doubles as a personal computer, tape recorder and camera. And no one spends anything like $4,000 to get one.

In fact, that is how American consumers expect new consumer technology to work. Some revolutionary new gadget comes along, priced at a rate that only the wealthiest can afford. But, over time the price comes down – even as the new technology gets smaller, faster and does more things.

At the risk of understatement, that is not how the prescription drug market works.

New advances do often debut at very high prices. But, at least when they are successful and add new features, the price usually goes up over time.

To take just one example: the first TNF inhibitor for arthritis (Amgen Inc.’s Enbrel) was launched at a list price of $110 per injection (or $10,400 per year) in 1998. Twenty years later, list prices are about six times higher.

True – no one pays that list price, especially not the consumer. And Enbrel (etanercept) has been substantially “improved” since launch, with better dosing devices and much more data to demonstrate clinical benefit. But that only underscores how far the prescription drug market is from behaving like consumer tech when it comes to pricing. The iPhone 6 is a vastly superior device compared to the original iPhone – and it costs half as much as the first iPhone did in 2007.

All of which makes the price cut announced by Sanofi US and Regeneron Pharmaceuticals Inc. for the PCSK-9 inhibitor Praluent (alirocumab) all the more interesting. At the same time the sponsors announced positive results from a large, cardiovascular outcomes study of the LDL-lowering agent, they also announced plans to offer Praluent at deeper discounts.

That pricing decision is appropriately drawing attention as an early test of collaboration between sponsors and a third-party organization in defining a “value-based” price. Sanofi and Regeneron shared the ODYSSEY outcomes study in advance with the Institute for Clinical & Economic Review to determine an appropriate price point of $4,500-$8,000 for high risk patients.  (Also see "Praluent Pricing: Collaboration With ICER Sets A New Standard" - Pink Sheet, 12 Mar, 2018.)

But it is also a test of a fundamentally different approach to pricing of new therapies over time: one championed by Express Scripts Holding Co. Chief Medical Officer Steve Miller specifically for the PCSK-9 marketplace. During a meeting hosted by the Cleveland Clinic in 2016, Miller noted the pending outcomes data for the class and argued that it would trigger demands for lower prices from payors.  (Also see "The Next PCSK-9 Pricing Debate: PBM Says Outcomes Data Should Mean Deeper Discount" - Pink Sheet, 9 Dec, 2016.)

That model is definitely not what most drug companies mean when they talk about “value-based pricing.” Biopharma sponsors generally still want to be able to increase prices as they demonstrate greater value. After all, 19,000-patient outcomes studies aren’t cheap.

In this case, the price reduction experiment is probably driven as much by the reality that Praluent uptake has been very slow, in part due to payor resistance to the high initial price relative to generic statins. Nevertheless, it will be an interesting test case of a very different definition of “value-based” pricing for medical advances.

From the editors of the RPM Report