November 26, 2013

Drug makers’ risks, patients’ hopes

Provided by The Boston Globe

By Steven Syre   |  GLOBE COLUMNIST  NOVEMBER 26, 2013

Bonnie Astroff was just the kind of medical patient scientists at Vertex Pharmaceuticals Inc. had in mind for many years.

Astroff, 66, long suffering from hepatitis C, didn’t respond to the standard treatment. That made her a potential candidate for Incivek, a new and more effective medication the Cambridge biotech spent many years and hundreds of millions of dollars to develop.

But Astroff held off when Incivek was launched in 2011, and now she’s waiting for a next generation of drugs around the corner that promise to be even better.

“I’m going to go for it like gangbusters,” says Astroff, a retired beauty salon esthetician who lives in the Boston area.

It turns out that there are lots of Bonnie Astroffs out there,waiting for the new drugs to make them better. And sales of Incivek, which became the most successful new drug ever in its first 12 months on the market, are now sinking like a rock. Last week, Vertex sold all its overseas royalty rights for the treatment (known by another name beyond North America) for a lump-sum payment of $152 million.

Incivek has become a kind of biotech shooting star, shining brilliantly for a short time and now quickly disappearing as a favored treatment.

Pharmaceutical companies like to talk about the big risks of their business — all the time and money it takes to develop a product. A majority of those medicines won’t make it to the market for one reason or another.

Even drugs that become real products face continuing business risks, from future medical complications to competition. The Incivek story illustrates how waves of innovation can quickly swamp the commercial prospects of what was once a cutting-edge treatment.

Business risk is one of the industry’s popular talking points, because it’s the principle justification for the high costs billed to patients, insurance companies, and governments for many drugs. Vertex took some heat about expected prices as soon as Incivek was approved by the Food and Drug Administration. Patient advocates complained the original wholesale acquisition cost for a 12-week course of treatment, amounting to $49,200, was exorbitant and might limit the ability of some people to get Incivek.

So how have the risks and rewards worked out for Vertex? Probably pretty well, but that conclusion depends on some guesswork.

Incivek sales of nearly $1.6 billion in its first 12 months qualified as the biggest drug launch ever (beating the old record holder, Celebrex, by a nose). Overall, total product sales amounted to about $2.5 billion by June 30 this year.

The profit margins on those sales are huge by some measures. The cost of producing drugs amounts to only 20 cents of a sales dollar at Vertex. That doesn’t include administration and overhead costs.

But the real expense of any drug is in the years of research and development required to create it. It’s hard to work up a figure for Incivek because Vertex doesn’t report its R&D expenses by products, and the company has a number of treatments in development.

So here’s one way of looking at it: Vertex spent a total of $3.3 billion on research from 2006 to 2011 — prime years in the development of Incivek.

Each year, that expense topped $500 million. Vertex had been spending between $200 million and $250 million on R&D annually before that time.

After examining those numbers, I would guess Vertex spent more than $1 billion just on research for Incivek. Now add on production costs and overhead. That might run the total expenses to about $2 billion.

If all those estimates were on target, they would prove Vertex made some money but no fortune on the drug.

It would be a relatively modest payoff for so many years of work and a big financial gamble. Soon, the new generation of drugs that Bonnie Astroff anticipates will arrive and Incivek sales could really slump.

The drug development competition that attacked hepatitis C has been challenging for companies like Vertex.

But patients have really benefited. Astroff is counting on a new drug that won’t require a companion dose of interferon and the serious side effects that can come with it, as Incivek does.

“I still have life ahead of me and I would like them to be good years,” she says. “That’s why it’s so important to get these drugs.”

Astroff already has a doctor’s appointment for Christmas Eve, and she’s hoping for an early present.

Steven Syre is a Globe columnist. He can be reached atsyre@globe.com.

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