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Biotechnology: will it break the health care bank?

Biotechnology products already in use on the market include erythropoietin (EPO), granulocyte colony stimulating factors, growth hormone (GH), human insulin, and tissue plasminogen activator (TPA). These biologicals are used to treat anemias, neutropenia, growth hormone deficiency, diabetes, and acute myocardial infarction, respectively. Their utilization, as measured in sales in the United States, is projected in 1993 to reach $1 billion for EPO, $500 million for colony stimulating factors, $400 million for GH, $250 million for human insulin, and $400 million for TPA. Treatment costs for recombinant products such as growth hormone or interferon are in the range of $15,000-30,000 per year for the drugs alone. At a recent heating of the Senate Judiciary/Antitrust Subcommittee, research and development (R&D) costs for individual recombinant products were contrasted with 1991 sales figures (see table on page 36). These figures indicate the potential for very rapid recoupment by a pharmaceutical firm of its upfront R&D investment. Indeed, the figures and the aforementioned pricing of individual products such as growth hormone and interferon raise the issue of appropriate pricing of biotechnology products.

Where the rubber will meet the road in this area is when the biotechnology industry starts to produce compounds that mimic or replace necessary endogenous chemicals that are either deficient or absent because of some genetic abnormality. These recombinant DNA products will provide great relief to patients suffering the consequences of the genetic aberrations. requirements for chronic lifetime administration of the products will have significant cost implications for our nation's health care system.

The nonrecombinant products ceredase and adenosine deaminase (PEG-ADA) illustrate the potential impact of chronic lifetime administration of drugs. These replacements for deficient enzymes carry annual treatment costs of $60,000-300,000. Ideally, the efficiencies of recombinant DNA technology will diminish the need for such pricing. Also, pharmaceutical firms will, ideally, adopt strategies in price-setting that aim for reasonable recoupment of their R&D investments and reasonable profits.

A second issue revolves around the need for the FDA to maintain the integrity and rigor of its scientific standards for the demonstration of the safety and effectiveness of biologicals. The recent proposal to provide for an accelerated approval process that may rely on surrogate endpoints "where appropriate" may be problematic. TPA provides a good example.

TPA's use as a thrombolytic agent for the treatment of acute myocardial infarction costs about $2,300 per treatment. Streptokinase provides similar results at a cost of about $300 per treatment. Studies have demonstrated that the compounds are therapeutically equivalent in terms of producing long-term survival. Notwithstanding the therapeutic equivalency and the price differential, TPA still commands 53 percent of the thrombolytic agent market. Obviously, this is due to effective marketing, but it may in part be due to suggestions that TPA may offer a slight advantage in terms of improving perfusion capacity. Suggestions that the intermediate outcome, perfusion capacity, may be improved have not translated into improved survival, but they have translated into very strong sales that may be expending $450 million a year that could be saved by use of streptokinase. Thus, increasing reliance on surrogate endpoints may get drugs to market more quickly, but it also may increase the likelihood that final health outcomes may not be meaningfully improved.

A final area of concern is the issue of use of drugs beyond FDA-approved labeling. It has been a strategy of pharmaceutical and biotechnology firms to have their compounds designated as orphan drugs under the provisions of the 1983 Orphan Drug Act, which provide government credit for R&D expenses for an orphan drug and marketing exclusivity for seven years. Most recombinant DNA products on the market have been developed and approved under the provisions of the orphan drug bill. For instance, interferon is approved as an orphan drug for the treatment of hairy cell leukemia, with a patient population of about 2,000. Once the drug is marketed, it begins to be used for a number of cancers well beyond the FDAapproved label, and with much larger patient populations. Additionally, reimbursement information systems are established to help physicians obtain coverage for uses beyond FDA-approved labeling.

In many cases, use for specific unlabeled indications may become widespread before data are published to substantiate the effectiveness of that use. If this practice persists for expensive biotechnology drugs, payers will demand the data to substantiate effectiveness. If the data are not forthcoming, adverse coverage determinations and rigorous utilization review will be used to ensure that only drugs of proven safety and effectiveness are paid for.

The biotechnology industry has great potential to improve the health of the people of this country and to stimulate economic growth. It also has significant potential for expenditure of significant amounts of health care dollars. The introduction and integration of biotechnology into mainstream medicine will proceed most smoothly and successfully if a rigorous FDA approval process is maintained, if marketing and promotional strategies do not have extensive use beyond FDA-approved labeling as an underlying goal, and if reasonable pricing strategies are adopted. Biotechnology can produce great benefits. However, a cooperative effort among all constituents of the health care community will be necessary to ensure realization of these benefits without breaking the health care bank.
COPYRIGHT 1992 American College of Physician Executives
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Copyright 1992, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:Health Care Technology
Author:McGivney, William T.
Publication:Physician Executive
Date:Sep 1, 1992
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