Drugmakers Try a Rare Tactic to Boost Sales: Cutting the Price

(Bloomberg) -- Drugmakers tried just about every move under the sun to nurture sales of its products -- pharmacy coupons for patients, exclusive deals with insurers, even selling a medicine’s patent to a Native American tribe to shield it from a legal challenge.

What’s far rarer is the step two drugmakers announced Saturday: a price cut.

Regeneron Pharmaceuticals Inc. and Sanofi said they would deeply discount their $14,000-a-year cholesterol treatment to $4,500 to $8,000 for some patients in order to loosen insurer restriction on the drugs, which so far have sold poorly.

The announcement “will set an important precedent in the ongoing drug pricing debate here in the U.S.,” said Spencer Perlman, an analyst with the Bethesda, Maryland-based investment advisory firm Veda Partners. “This will send a ripple effect across the industry and crowded therapeutic categories will likely face additional pressure.”

Sanofi and Regeneron’s treatment, Praluent, belongs to a relatively new class of drugs known as PCSK-9 inhibitors that were thought to be potential blockbuster successors to Lipitor, Crestor and other statins taken by millions of Americans. The PCSK-9 drugs mimic a genetic variant found in less than 3 percent of the population that stops the accumulation of “bad” LDL cholesterol. High LDL levels are tied to greater risk of heart attacks and strokes, and people with the mutation have a dramatically lower risk.

High Hopes

Sanofi and Regeneron, along with Amgen Inc., brought their new drugs to market with the hope that their powerful effect on bad cholesterol would reduce the world’s leading cause of death, and warrant the higher price.

But a key trial of Praluent released over the weekend showed that the injections reduced cardiovascular complications including heart attacks and strokes by 15 percent, less than the 20 percent benefit that Wall Street analysts predicted would force wider insurance coverage for the drugs.

So far, they’ve sold far below the billion-dollar blockbuster mark. Amgen’s drug Repatha sold $319 million worldwide last year, and Praluent sold $195 million, according to a Regeneron securities filing.

In the Praluent trial, a far narrower group of high-risk patients showed much more benefit, and Regeneron and Sanofi said the price would be offered to insurers who agree to more readily pay for the treatment in those patients.

“Maybe price before was for an aspiration of benefit that did not materialize,” Harlan Krumholz, a Yale University cardiologist and the director of the school’s Center for Outcomes Research and Evaluation, said on Twitter. The “benefit for this population for the class of drugs seems clearer. Now for the proper pricing. And coverage.”

Industry Critic

Regeneron has tried to set itself apart from its competitors by criticizing many of their practices. During a 2016 debate about drug costs at a conference, Chief Executive Officer Leonard Schleifer told Pfizer Inc.’s CEO that he wasn’t “entitled to a fraction of the GDP.” Last year, he told Allergan Plc’s chief that the company’s attempt to protect a patent by transferring its rights to a native American tribe was “nuts” and looked “desperate.”

Regeneron shares were up 1.1 percent at 1:07 p.m. in New York. They’ve lost about 12 percent in the past 12 months as of Friday’s close, compared to a 14 percent gain in the Nasdaq Biotechnology Index.

George Yancopoulos, the chief scientific officer of Regeneron, said he doesn’t worry about day-to-day stock moves.

“How do I deal with Wall Street? Largely, by ignoring them in the short term and hoping over the long term, by doing what we do -- delivering the important life-saving drugs to patients -- that it will all work out in the end.”

Smaller Market, Bigger Sales?

There are about 300,000 to 400,000 Americans each year who enter the high risk category, and another 3.5 million to 4.5 million already vulnerable, said Umer Raffat, an analyst at Evercore ISI. If the companies get coverage for just 10 percent of the patients at a $6,000 price tag, the market will hit about $2.5 billion in the U.S., he estimated.

Drugmakers have blamed insurers and pharmacy benefit managers, or PBMs, for shutting off access. They’ve also said that insurers and drug plans benefit from high list prices, since they keep a slice of the deep rebates they negotiate.

“The payers are hiding behind the bad behavior of some biopharma companies to do even worse things,” said Yancopoulos. Regeneron says it has never raised the price of a drug. “You don’t have a big, bad biopharma company here.”

Access Problems

Earlier this month a study from Amgen found that only 35 percent of patients prescribed the new cholesterol drugs were able to get them. Amgen said in an email that it’s “delighted” that another long-term study showed the benefits of the class of drugs and has talked with insurers about discounts in return for access. Neither company discloses how much it currently discounts the drugs.

“Relatively few doctors are using them, and the few that are trying are getting shut down by third-party payers,” said Deepak Bhatt, executive director of interventional cardiovascular programs at Brigham & Women’s Hospital and one of the Praluent trial’s researchers. “We have to concede that the drugs are expensive and it does make sense to use expensive drugs in patients with the highest absolute risk.”

A spokeswoman for Express Scripts Holding Co., one of the U.S.’s largest PBMs, said the company would review the new data and reevaluate its coverage policies if needed, but was encouraged by the move. Officials from CVS Health Corp. and UnitedHealth Group Inc., which run the U.S.’s two other major PBMs, weren’t immediately available to comment.

Regeneron decided on the new price by working with the Institute for Clinical and Economic Review. ICER says it provides independent analysis of the cost effectiveness of medical care, and in the past has been a thorn in the side of drugmakers.

“The drug pricing landscape and companies’ approaches to it is very different than it was a few years ago,” said Steven Pearson, founder and president of ICER. “They think true strategic success for the pharmaceutical industry is going to mean that they will have to master value-based pricing.”

--With assistance from Robert Langreth

To contact the reporters on this story: Rebecca Spalding in New York at rspalding@bloomberg.net, Michelle Fay Cortez in Minneapolis at mcortez@bloomberg.net.

To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Cecile Daurat

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