What drives profits for a new pharmaceutical? Price. Optimizing the profits of a pharmaceutical brand demands an effective pricing strategy that is developed with the indication launch sequence well in mind. We have seen several markets where the price that matches the product’s value differs for each indication. Pricing a brand across multiple indications requires careful planning that starts long before approval of the first indication.
AVASTIN: GOOD MOVE IN THE FACE OF UNCERTAINTY
Avastin’s price was set upon approval of its first indication in metastatic colorectal cancer; it was later approved in breast cancer at a higher dose. Accordingly, breast cancer patients pay more for their Avastin therapy than do colorectal cancer patients, simply because they require more of the drug. To help with this inequity, Genentech capped the price of therapy for breast cancer patients receiving Avastin. Recently, the clinical value of Avastin in breast cancer has been questioned after the FDA pulled its breast cancer indication following results of four clinical studies showing that Avastin does not prolong overall survival in breast cancer patients or provide a sufficient benefit in slowing disease progression to outweigh significant risks. Genentech is contesting the FDA’s attempt to revoke Avastin’s availability in breast cancer.
In pricing Avastin for its launch in metastatic colorectal cancer, it appears that Genentech chose not to consider the full potential of future indications. The first Phase III trial of Avastin was in breast cancer—with negative results; success in ongoing trials in lung cancer and other indications was uncertain. These future indications would require higher dosing; at the price established for colorectal cancer, the cost of therapy could well exceed the clinical value delivered by Avastin in these cancers. If Genentech had priced Avastin with future indications in mind, it would have risked leaving money on the table if the later indications failed. Rather, Genentech chose to maximize the opportunity for Avastin in the launch indication and address price versus clinical value inequity later, when the future indications were obtained. Ultimately, Genentech capped the price of therapy for breast cancer patients receiving Avastin. Avastin’s pricing strategy is a good example of the challenges that manufacturers face when multiple indications are envisioned but uncertain.
MAKENA: CAN THEY REALLY GET AWAY WITH THAT?
KV Pharmaceutical’s Makena (progesterone caproate), a drug to prevent preterm birth in high-risk women, caused an uproar when it recently launched at $1,500 per dose. Injectable progesterone has long been prescribed and inexpensively compounded extemporaneously by pharmacies for use in preventing preterm birth, but KV took on Makena’s clinical development (although it was funded by the government) and obtained exclusive rights to market Makena under the Orphan Drug Act. Other progesterone products are indicated for fertility support and other conditions. Reimbursement for progesterone in fertility support varies a great deal depending on the insurance plan; many patients pay the entire cost of fertility support out of pocket. Progesterone brands indicated for fertility support are priced well below Makena.
The reaction to Makena’s launch pricing was swift, intense, and widespread. The American College of Obstetricians and Gynecologists (ACOG) refused to accept any advertising from KV regarding Makena, and the March of Dimes announced that it would sever all ties with KV. Bowing under pressure, KV reduced the price of Makena from $1,500 to $690 per dose. Manufacturers who develop other progesterone brands for prevention of preterm birth can learn from Makena’s launch and consider how re-pricing for the preterm birth market may be accepted by a wide range of stakeholders.
IPILIMUMAB: ONE TO WATCH
Ipilimumab (trademark Yervoy) was approved for second-line treatment of advanced melanoma in March 2011. Overall survival with ipilimumab in this indication is 10 months, however, ongoing complete responses in a small percentage of patients can continue past six years. A biomarker for these complete responders has not been found. Bristol Myers Squibb’s launch price of $120,000 for a complete course of ipilimumab treatment was eye-catching, even in this indication with substantial unmet need. Future indications for ipilimumab include prostate cancer and lung cancer. It is possible that ipilimumab may ultimately end up priced beyond its value in prostate cancer and lung cancer, however, we can anticipate that BMS will look to price caps and patient assistance programs in the United States (or conditional pricing arrangements in Europe) to diminish price sensitivity rather than reduce the price of ipilimumab when these later indications are launched.
THREE KEY QUESTIONS
Product managers (PMs) faced with the challenge of pricing a brand across multiple indications must understand the strength of the product’s value proposition and the role of patient assistance programs for each potential indication. Companies that consider aggressive pricing strategies should also have a good understanding of the strength of their corporate image and likely stakeholder response. Price planning must start early in the product development cycle, especially when indication approvals will be staggered.
What value does my brand deliver in each indication?
It has never been more critical for brands to deliver real value to the healthcare system. Physicians, patients, and payers may very likely have different value propositions; the reimbursement needed for success depends on the brand’s ability to demonstrate and deliver value to each. The key to developing pricing strategy is to understand how the influences of multiple stakeholders are linked.
To what extent will stakeholders accept or limit the price the brand can support? While physicians, patients, and payers are the typical triad of stakeholders for pricing decisions, PMs should consider other audiences: caregivers, advocacy groups, and policymakers are also important influencers in commercialization. Listening to all of these groups is essential as PMs try to gain insight into the constellation of elements, including price, that impact a brand’s success. The more aggressive the pricing strategy the more PMs should have a handle on the extent to which their corporate image can hold up under pressure.
What role can patient assistance programs play in removing price as an obstacle for prescribing? Patient assistance programs, such as out-of-pocket caps and co-pay cards, allow brands to maintain a price that matches the value of their launch indication while simultaneously sheltering patients from costs that are shifted on to them. For physicians, such patient assistance programs can help remove price as an obstacle to prescribing. Patient assistance programs, however, do not exist in many European countries and brands must look for other ways to navigate.
Answering these three questions early in the brand’s lifecycle will facilitate the development of a pricing strategy and pave the way to commercial success.