Celgene to Price
Cancer Medicine
At $6,195 a Month
By GEETA ANAND
July 1, 2006; Page A4
In another example of an aggressive pricing strategy for cancer drugs, Celgene Corp. said it will sell Revlimid for $6,195 a month, more than $74,000 annually, for patients with multiple myeloma.
Wall Street analysts said the high price was widely expected in the current atmosphere in which companies bring new cancer treatments to market at premiums over existing treatments.
"Every time a drug is priced, it's higher," said Sapna Srivastava, a biotechnology analyst at Morgan Stanley who covers the company. "Right now it's sustainable, but it's not sustainable in the future."
The Summit, N.J., company's shares, which had risen in recent days in anticipation of aggressive pricing, rose 20 cents to $47.43 in 4 p.m. composite trading Friday on the Nasdaq Stock Market.
The Food and Drug Administration approved the drug late Thursday for use in combination with dexamethasone in patients with multiple myeloma, a cancer of the bone marrow. The drug was already on the market for a rare blood disorder called myelodysplastic syndrome at a monthly price of $4,600, or about $55,000 if used for a year. The recommended dose for multiple myeloma is 25 milligrams, 2½ times the 10-milligram capsule typically prescribed for patients with the blood disorder. The price for the 25-milligram version, which the company announced in a conference call Friday, is about 30% higher than the 10-milligram dose.
Morgan Stanley estimates Celgene stands to make a 97% gross margin -- the profit excluding marketing and corporate costs -- on Revlimid, Ms. Srivastava said. Unlike some expensive cancer drugs, which are injectable proteins and expensive to manufacture, Revlimid is a pill taken orally and relatively inexpensive to produce, she said. A Celgene spokesman said Morgan Stanley's estimate was inaccurate, but he declined to provide the company's gross-profit margin on the drug, citing competitive reasons.
Celgene said it has established free drug programs and made contributions to independent charities to try to make sure patients could get treatment regardless of their ability to pay or their insurance coverage.
Ms. Srivastava said Celgene's strategy of pricing aggressively and establishing a safety net for the underinsured and uninsured would maximize profit in the short run. But as cancer drugs are increasingly used in combination and on bigger patient populations at higher doses, the pressure on the Medicare and Medicaid budgets will eventually lead to Congressional scrutiny, she predicted. She said Revlimid is already being tested in combination with another cancer drug, Velcade, marketed by Millennium Pharmaceuticals Inc., and when used in combination, the annual treatment cost would be about $100,000. |
