Tecfidera for MS is $55,000 per year. Why?

Biogen Idec’s Tecfidera (dimethyl fumarate) has been approved by the FDA for the treatment of people with relapsing forms of multiple sclerosis (MS).  The wholesale acquisition price for Tecfidera is reported to be $54,900,  about 9% less than the first MS pill, Gilenya (Novartis) that lists for approximately $60,000 per patient per year, but more than Sanofi’s MS Aubagio pill, which costs approximately$48,000 per year. Assuming these prices are relatively close to the actual WAC prices, an obvious question is “Why?”  Should these products all cost about the same or more than the 2011 median household income in the US of $50,054?

US Median household Income

How sustainable are prices in this range? Can/will/should payers continue to pay no matter the price asked?

I am not selectively picking on these companies or on their products. The prices of these products are at a level that may lead people to ask questions related to  “How much to charge for health?”.  The answer to that question will not be in this blog but I will offer two  approaches to medicine pricing that some may find useful:

1. Price it at a +/- X% difference to existing medicines depending on the comparative/relative medical value delivered
2. Price it using the medical costs (cost-offsets) prevented or avoided by its usage

Both of these approaches assumes the medical value and/or cost-offsets can be measured and monetized.  Grand assumptions though these may be, they will be (if not arguably needed today)  fundamental to establishing medicine pricing and will be required data for registration (in some locales) and for pricing discussions.

Either of these two approaches offer a pragmatic and evidence-based methodology that should prove acceptable to both manufacturer and payer. Real world issues related to market life, ROI, social and shareholder responsibility, profitability, rationing, etc… will remain. Your suggestions for resolving these issue are welcomed and encouraged!