Good luck to those who want to shame Celgene

Celgene is getting unwanted attention for the high price of Revlimid, but its pivotal position in multiple myeloma could help the company resist a shame campaign.

As if Celgene did not have enough problems, suddenly it has found itself on the US government’s most-wanted list for the high price of its drugs.

The infamy is well earned: the company’s top-seller, Revlimid, both consumes billions of dollars of Medicare funds and also has a per-beneficiary annual cost of greater than $70,000 (see tables below). That is not the only unique thing about it: as the most effective drug in multiple myeloma it is the backbone of frontline therapies and maintenance settings alike, allowing Celgene to command a premium price and make the group resistant to a shame campaign.

The negative attention will not help Celgene’s lagging valuation, as it could put off some investors. On the other hand, this might at least help stave off predatory takeout bids, assuming bigger fish are concerned about reputational risk.

Pare your price if the dashboard cites

The data on Revlimid’s costs come from the latest Medicare part D drug spending “dashboard” released this week by the US government, the first time numbers through 2016 have been seen. As Revlimid treats a disease primarily of the elderly, it is not surprising to see a huge chunk of its revenue coming from the US government’s programme for people 65 and above.

Top 10 Medicare part D spend by drug, 2016
Brand name Company Total spending ($bn)
Harvoni Gilead Sciences $4.4
Revlimid Celgene $2.7
Lantus Solostar Sanofi $2.5
Januvia Merck & Co $2.4
Crestor Astrazeneca $2.3
Advair Diskus  Glaxosmithkline $2.3
Lyrica Pfizer $2.1
Xarelto Johnson & Johnson/Bayer $2.0
Eliquis Bristol-Myers Squibb/Pfizer $1.9
Spiriva Boehringer Ingelheim $1.8
Source: Centres for Medicare and Medicaid Services.

Revlimid was not alone in having both a large amount of total spending and high beneficiary costs. However, the number one drug for total spending, Harvoni, was already in decline in 2016 and will almost certainly continue to shrink as hepatitis C-infected beneficiaries are cured. EvaluatePharma data suggest that overall Harvoni sales fell 59% annually between 2016 and today, so in all likelihood Revlimid is currently the biggest budget line in Medicare part D.

Moreover, others currently in the billion-dollar plus club will likely fall out of the chart as they hit patent expiry dates – Lantus, Crestor and Advair are in this situation. But Revlimid’s intellectual property estate looks like it will stand until the early 2020s.

Revlimid and Harvoni are set apart from the rest of the field by their total budget impact as well as their per-patient costs. The following analysis ranks drugs used by more than 1,000 beneficiaries on their per-patient costs; Revlimid and Harvoni are the only two drugs in the top 10 that cost Part D more than $1bn in 2016.

Top 10 most costly drugs per Medicare beneficiary, 2016
Brand Company Total spending ($m) Avg spending per beneficiary Annual growth rate in avg spending per dosage unit (2012-16)
H.P. Acthar Mallinckrodt $636 $206,819 4.0%
Sovaldi  Gilead Sciences $933 $89,414 -0.2%
Harvoni  Gilead Sciences $4,400 $83,321 -1.1%
Jakafi  Incyte $537 $80,193 10.1%
Xenazine  Lundbeck $162 $78,266 21.1%
Tasigna  Novartis $308 $78,233 7.5%
Tagrisso  Astrazeneca $113 $76,942 4.3%
Revlimid  Celgene $2,662 $75,238 8.7%
Viekira Pak  Abbvie $90 $74,772 -0.7%
Gamunex-C Grifols $184 $74,291 0.6%
Source: Centres for Medicare and Medicaid Services.

Not necessarily a bad thing

Celgene’s recent corporate troubles have more to do with clinical and regulatory setbacks than the negative public relations surrounding its commercial tactics, so the latest furore will give investors something new to worry about. Shareholders would be dismayed if the company were pressured into cutting the price of Revlimid, certainly giving the executive team some incentive to hold fast on pricing.

The $9bn in Revlimid sales forecast this year accounts for most of Celgene’s valuation. While this could make the company vulnerable to any attack on its flagship product, its domination of the multiple myeloma space makes it difficult to put the group under payer pressure.

Indeed, while US President Donald Trump’s drug pricing blueprint discussed giving Medicare part D drug plans more power to set formularies, it seems unlikely that Revlimid would be subject to any exclusions.

However, the reputational damage to Celgene will be hurting. The group’s market valuation has now sunk below the net present value of Revlimid. And more damaging attention came today with the US FDA's release of a list of companies that have used risk evaluation and mitigation strategies to stave off generic competition (Vantage view – could big biotech succumb to the urge to merge?, May 8, 2018).

As Celgene’s share price continues to sink, this could be the one silver lining for the company – at least, for now, the negative headlines might be keeping the Pfizers of the world at bay.

To contact the writer of this story email Jonathan Gardner in Virginia at jonathang-us@epvantage.com or follow @ByJonGardner on Twitter

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