Seattle Genetics: The Next Litmus Test for High Priced Cancer Drugs

8/22/11Follow @xconomy

[Update: 9:20 am ET] Dendreon ran into a buzz saw of opposition last year when it priced its new prostate cancer drug at $93,000 per patient. Genentech has loads of critics who say it has overreached on price with its antibody drugs for cancer, especially in cases where the data supporting the drug is controversial, as with bevacizumab (Avastin) for breast cancer. But despite all the pressure from insurers, elected officials, patients, and doctors, drugmakers are showing no signs of backing off.

Many times, I’d say the critics are right to complain about excessively high drug prices. But in a few cases, the drugmakers are right to stand firm, and today we’re going to see an interesting test case.

Today, we’ll see a new player emerge in the great cancer drug price debate: Seattle Genetics (NASDAQ: SGEN). The company won FDA clearance on Friday to start selling its new antibody drug for Hodgkin’s disease and another rare lymphoma. [Updated 9:20 am ET, with pricing info] Seattle Genetics revealed the price of this new drug, called brentuximab vedotin (Adcetris), on a conference call with analysts this morning. The company set the price at $13,500 per dose, given intravenously every three weeks. If patients get eight infusions on average, consistent with clinical trial experience, then it will cost $108,000 per patient. Wall Street was expecting it to cost about $109,800 per patient for a course of treatment, based on the average estimate of five Wall Street analysts I surveyed last week.

Most Americans will never make that much money in a single year of their life, so this could be an easy target for critics of high drug prices. But this is one case in which a drug is worth a six-figure price tag.

Here’s why: For starters, the Seattle Genetics drug is being aimed at a small group of patients. About two-thirds of the 8,500 patients diagnosed in the U.S. with Hodgkin’s disease are successfully treated with chemotherapy, leaving about one-third who eventually get relapsed, treatment-resistant forms that make them candidates for the Seattle Genetics drug. The other group of anaplastic large cell lymphoma patients who are eligible is even smaller. Insurance companies do most of their watchdogging on price with much more common medicine. They usually, or at least should, have better things to do than mess with a tiny handful of customers in their risk pool.

Those who are afflicted with this disease aren’t just dealing with some minor annoyance, or theoretical risk. Many patients with relapsed Hodgkin’s disease are in their primes (their 30s and 40s), and are being threatened with an illness that offers a life expectancy of just two to three years. These patients have no other options left. The Seattle Genetics drug is bringing innovation to a moribund field of cancer drug development. It is the first product approved for Hodgkin’s disease since 1977, and the first ever for anaplastic large cell lymphoma.

And most importantly, the data to support this drug’s approval was simply superb. About 75 percent of patients with Hodgkin’s disease had significant tumor shrinkage, and 86 percent did that well with anaplastic large cell lymphoma (ALCL). About a third of the Hodgkin’s patients and more than half of the ALCL patients went into complete remissions. These are the kinds of tumor shrinkage rates that you rarely see in the cancer drug business.

There’s no major rub here in terms of side effects, which are pretty typical for other compounds in this drug’s class. Patients get depletion of infection-fighting white blood cells, nerve damage in the fingers and toes, fatigue, nausea.

One big question here is still about survival. Nobody knows … Next Page »

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