http://www.nytimes.com/2008/03/31/opinion/l31drug.html?_r=2&oref=slogin&pagewanted=print&oref=slogin

Nice to see a company chime in on an official basis, if only to point out one of its own links. As you note, companies do need to make their views more broadly known and accessible. So I would encourage all the folks at Genzyme - and elsewhere - to participate in these conversations. After all, if you don’t participate, your voice can’t be heard. So come back soon.

Cheers
ed

It looks like your link is broken. I think you meant to link to this?

Good point. I didn’t think about adjusting for inflation.

Even so, $300K in ‘08 amounts to only a 28% or a 54% discount relative to an ‘expected’ price of either $416K or $658K. That’s not such a big discount. Especially since Genzyme argued early on that Ceredase was so expensive because of high manufacturing costs. The first link I posted suggests that was probably true, but the manufacturing cost for Cerezyme is certainly much, much lower.

Ordinarily, it would be reasonable to argue that the high price is mainly due to development costs. In this case, however, it really does seem to be true that Genzyme’s development costs were relatively modest, due to significant gov’t contributions.

I agree we need incentives to promote development of new drugs. Patents, orphan exclusivity periods, etc., are all appropriate in my view (though one can argue how long they should last). But in this case, I think the rules worked too much in Genzyme’s favor at the public’s expense.

So let’s back-calculate and assume it was raised 3% to its current price of $300k, instead of raised from $300k by 3% (it makes little difference).

x*1.03=$300k
x=$291k

So let’s assume it went from $291k in 1994 to $300k in 2008.

$291k in ‘94 equals $416k in 2008 using US inflation rates during that time
(http://data.bls.gov/cgi-bin/cpicalc.pl)

Using a healthcare based inflation rate (6%/year) it should cost $658k in 2008, if the price relative to healthcare inflation remained constant.

In essence, raising the price only once, by 3%, over 14 years, amounts to a substantial price decrease.

How would you feel if your salary only went up once, by 3%, over the past 14 years?

This report from 1992 shows that the money Genzyme spent to develop Ceredase is a very small fraction of the subsequent revenues.

Manufacturing cost at that time was actually quite high - estimated at $1.90/unit (versus a sales price of $3.50/unit). However, that was for Ceredase, which was purified from human placentas. I couldn’t find a robust estimate for the cost of Cerezyme, but as a recombinant protein produced in mammalian cells, it is certainly very much cheaper to make than Ceredase was.

Related to that, I also found this interesting press release from 1994, as Genzyme was switching over from Ceredase to Cerezyme:

Initially, the cost of Cerezyme will be the same, because the manufacturing cost at the pilot plant remains high.

“Once we have the new plant running and approved, we will start to see some economies of scale,” the chairman, president and chief executive of Genzyme, Henri Termeer, said in a telephone interview. Then, he said, “we can start to pass on some of these economies to the marketplace while at the same time improving the financial results of the company.”

I guess they changed their minds….