HIV: Justifying premium pricing 

Roche’s recent announcement of an EU price point of $20,570 per year for its novel HIV fusion inhibitor Fuzeon has brought the issue of pricing HIV therapies to the fore. Roche's premium pricing strategy, which has already faced criticism from patient advocacy groups, could have ramifications for the future of HIV treatment. In the short term though, drug companies may have difficulty justifying such high prices.

The Market Brief 'HIV Pricing Strategies in the US and UK' focuses on pricing strategies for HIV in the US and UK, each representing contrasting systems: there are no restrictions on pricing in the US, whilst in the UK pricing is constrained by restrictions set by the Pharmaceutical Pricing and Regulation Scheme (PPRS).

The rising cost

The introduction of combination highly active antiretroviral therapy (HAART) during the mid 1990s revolutionized HIV therapy. Combination HAART allowed for novel treatment strategies, improved quality of life but most importantly, improved disease prognosis and lengthened life expectancy for sufferers.

Unfortunately, advancing HIV therapeutics has resulted in a significant increase in the cost of drug therapy. Increasingly, expensive therapeutics are being prescribed and drug regimens are becoming more aggressive, with larger numbers of drugs.

Pricing of drugs within the UK market is relatively constrained by guidelines set by the Pharmaceutical Pricing Regulation Scheme. However, drug manufacturers can still maximize profit from currently marketed products by setting tiered price points to target uncaptured niche patient populations.

The strategy of premium pricing is utilized when a product offers a significant advantage over its competition. This can be in terms of efficacy, side-effect profile, pill burden, ease of administration and cost-benefits over its competition. These products are deemed superior to existing products and are priced at a premium. Roche’s Fuzeon is the best example of this strategy within the HIV industry.

A new class of antiretrovirals

In March 2003, Fuzeon gained FDA approval for use in HIV-infected individuals after being the most eagerly anticipated HIV therapeutic since the launch of the first

NNRTI, Viramune (nevirapine) in 1996. The drug is indicated for the treatment of HIV-1 infection in treatment-experienced patients with evidence of HIV-1 replication despite ongoing antiretroviral therapy.

The drug represents a totally new class of anti HIV agents and employs a unique method of action. In two 24-week clinical trials, Fuzeon was found to be effective against HIV, and in combination with other drugs, reduced virus counts to almost undetectable levels.

Fuzeon's regulatory progression has also been particularly rapid. A New Drug Application was submitted to the US FDA under Fast Track rules, together with a parallel European filing, in September 2002. After just six months the drug was granted US approval, with the EU's Committee for Proprietary Medicinal Products recommending European approval less than a week later.

Facing the backlash

But, the high price point of over $20,000 a year per patient caught industry analysts and researchers by surprise. Currently, the most expensive HIV drug is less than half this price. Roche can therefore expect significant resistance from patient advocacy groups who will fight for price cuts and post-launch access programs that will allow individuals of lower socio-economic status to receive the drug.

The Swiss pharmaceuticals group has claimed that high manufacturing and raw material costs have resulted in such a high price point. Such prestige pricing strategies can be adopted by HIV companies with a truly novel compound, but this will only be accepted by the public if companies can provide evidence of clinical effectiveness and decreased pill burden.

Roche has already received significant criticism from AIDS groups over Fuzeon’s price point. The ACT-UP group in New York contends that the R&D costs for Fuzeon were actually about half the claimed $600 million.

Fuzeon has nevertheless gained a significant patient following during its development. Even though it is administered via injection, patient advocacy groups have fought for expanded access programs to allow individuals access to this drug before marketing approval.

Future pricing

Datamonitor believes that although many patients will be denied access to Fuzeon due to its high price point and Roche’s inability to meet current demand, the Swiss drugmaker is unlikely to decrease the price of Fuzeon significantly to make it more accessible. Roche recognizes that it can afford to set such a high price point as Fuzeon is a therapeutic within a new class of antiretrovirals.

One consequence of this pricing strategy will probably be the inability of the developing world to afford Fuzeon. Even priced at cost, Datamonitor believes that this drug will still be more expensive than current ‘profit’ price points set for other HIV drugs. From a commercial perspective, Roche will not be unduly worried, as its current manufacturing capabilities will only support around 3,000 patients worldwide.

On a more positive note for the future, it is unlikely that prestige pricing strategies will be used for all the pipeline HIV drugs, but HIV manufacturers will clearly be pricing them competitively to each other. Demonstration of drug efficacy in combinations containing two or more drugs from one manufacturer is the first step in obtaining physician advocacy.

The marketplace is set to become increasingly crowded with novel therapeutics within currently marketed classes and new classes. Although the HIV market is still significantly different to other diseases such as the antibacterials market, which has hundreds of different products compared to just 20, an influx of new products will require manufacturers to justify setting relatively high price points to sustain profitability in the face of increasing competition.

If you found this week's Expert View useful, you may be interested in the following Datamonitor reports:

HIV Pricing Strategies in the US and UK priced $1,600

Drugs of Tomorrow: HIV - Managing Portfolio Growth During Sector Slowdown priced $6,400

Treatment Algorithms: HIV 4th Edition - Current Treatment Strategies and Commercial Imperatives priced $10,800

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