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Drug Prices

Catalyst Pharmaceuticals And Their Business Plan

The orphan-drug model is a popular one in the biopharma business these days. But like every other style of business, it has something-for-nothing artists waiting around it. Take a look at this article by Adam Feuerstein on Catalyst Pharmaceuticals, and see what category you think they belong in.
They’re developing a compound called Firdapse for Lambert-Eaton Myasthenic Syndrome (LEMS), a rare neuromuscular disorder. It’s caused by an autoimmune response to one set of voltage-gated calcium channels in the peripheral nervous system. Right now, the treatments for the condition that seem to provide much benefit are intravenous immunoglobin and 3,4-diaminopyridine (DAP). That latter compound is a potassium channel blocker that allows calcium to accumulate intracellularly in neurons and thus counteracts some of the loss of function in the system.
DAP is not an FDA-approved treatment, but it’s officially under study at a number of medical centers, and the FDA is allowing it to be given to patients under a compassionate-use protocol. It’s supplied, free of charge, by a small company in New Jersey, Jacobus Pharmaceuticals, who got into the area through a request from the Muscular Dystrophy Association. So how well does Firdapse work compared to this existing drug? Pretty much the same, because it’s the same damn compound.
Yep, this is another one of those unexpected-regulatory-effects stories, such as happened with colchicine and with hydroxyprogesterone. The FDA has wanted to get as many therapies as possible through the actual regulatory process, and has provided a marked-exclusivity incentive for companies willing to do the trials needed. But if you’re going to offer incentives, you need to think carefully about what you’re giving people an incentive to do. In this case, the door is open for a company to step in, pick up an existing drug that is being given away to patients for free, a compound that it has spent no money discovering and no money developing, run the fastest trial possible with it, and then jack the price up to whatever the insurance companies might be able to pay. Now, pricing drugs at what the market will pay for them is fine by me. But that’s supposed to be a reward for taking on the risk of discovering them and getting them through the approval process. This Catalyst case is another short-circuit in the system, a perverse incentive that some people seem to have no shame about taking advantage of. A similar situation has taken place in the EU with DAP and Biomarin Pharmaceuticals.
The LEMS patient community is not a large one, and they seem to be getting the word out for people to not sign up for Catalyst’s clinical trials. Jacobus themselves have realized what’s going on, and are running a trial of their own, hoping to file before Catalyst does and pick up the market exclusivity for themselves, so they can continue to supply the compound at the current price: nothing.
It’s worth taking a minute to contrast this situation with Biogen’s Tecfidera. That’s another very small molecule (dimethyl fumarate) being given to patients with a neurological disease. It’s also expensive. But in this case, MS patients had not been taking dimethyl fumarate for years (to the best of my knowledge). It was not already in the medical literature as an effective treatment (the way DAP is already there for LEMS). Biogen bought the company with the rights (Fumapharm) and took on the expense of the clinical trials, taking the risk that things might not work out at all. A lot of stuff doesn’t. And they’re pricing their drug according to what the market will pay, because they also have to fund the many other projects they’re working on, most of which can be expected to wipe out at some point.
So how does a situation like Catalyst and DAP affect the drug companies who actually do research? Not too much, you might think, and they apparently think so, too, because I don’t recall any statements about any of these cases so far from that end of the industry. They may not want to take any stands that call into question the ability of a company to set the price of its drugs according to what it thinks the market will bear. But since we are not, last I saw, living in some sort of radical libertarian free-for-all, it would be worth remembering that the ability to set such prices is not some sort of inalienable right. It can be restricted or even abrogated entirely by governments all around the world. And one way to get that to happen is for these governments and (in the democratic states, their constituents) to feel as if they’re being taken advantage of by a bunch of cynical manipulators.

20 comments on “Catalyst Pharmaceuticals And Their Business Plan”

  1. Anonymous says:

    This is a sad reflection on the current state of the world: Too many companies devoted to taking value from each other, like monkeys stealing each other’s bananas to win in the short term, rather creating value through innovation to enable everyone to win in the long term.

  2. barry says:

    Ray Vagelos (formerly head of Merck Research) spoke at a Gordon Med. Chem. Conference in 2005. He’s no fan of government regulation, but he foresaw that if the Pharmaceutical Industry went on charging whatever the Insurers would pay, it would incur federal regulation on itself to set prices.

  3. simpl says:

    The purpose of orphan drug support was to allow biotech drugs, and rare diseases (genetic and immune abnormalities)to move forward.
    Many of the rare diseases are cancers, now the FDA is moving these with fast-tracking and priority review. The true biologicals are less affected, as generic replacement has been stopped.
    Researching a new disease can be patented by disease, which is too expensive globally for research-on-a-shoestring organisations, and requires a partner to globalise and get full coverage.
    I’d actually be okay to say the orphan drug programme and fast-tracking has freed the log-jam, and see the research support fade away for slight twists on old chemicals, only remaining for antibodies, cell therapies, personalised therapies and other cutting-edge heresies. Maybe in a few years we could say the same about generic exclusivity, too.

  4. Jumbo says:

    Isn’t it just a little bit ironic that Jacobus had no motivation to do proper registration trials until the profit motive encouraged someone else to do so? Yes, the drug was free under compassionate use, but is it wrong that Catalyst took on the expense that would result in broader and much easier availability to the patients? Why did Jacobus wait 20 years to decide it was worth making it easier for patients to get access? I agree that costs for orphan drugs are out of hand. But I am far less sanguine about what a ‘good thing’ Biogen did to prove that fumarate has some ill defined salutory effect on MS. That drug bounced around for 10 yr in pharma circles before Biogen bought in. And Biogen bought in because they knew there was a mechanism in place to reap huge profits on a simple compound (I hestitate to even call it a drug).

  5. Brad Loncar says:

    I think it is even more ridiculous that FDA gave Catalyst breakthrough therapy designation for Firdapse. I’m pretty sure the original intent of BTD was to let underserved patients know there is finally some hope on the horizon for their condition. Seems like giving it out in this case tarnishes its meaning/value.

  6. SomeGuy says:

    Ampio Pharma is another one which falls into the something-for-nothing category. Nothing but “positive” press releases pumping up very questionable data. Feuerstein has also written a couple good articles on that one.

  7. David Young, MD says:

    In my opinion, that is how Azacitidine got on the market as Vidaza. All through the 90’s hematologists like myself were able to get Azacitidine free from the NCI to treat our myelodysplasic patients. The FDA must have received quite a bit of information on the safety of Azacitidine from that program, and some information on effectiveness. Azacitidine was picked up by a pharmaceutical company and put on the market at 4 thousand dollars a month, with just enough of a clinical study to get FDA approval. Just my opinion.

  8. cynical1 says:

    There is another thing to consider and I’m not disagreeing with the points of view expressed here. But when the drug does become FDA approved, regardless of who gets the exclusivity, it could and will be used off-label by doctors in the US for other neuromuscular disorders. I did a Scifinder search and it looks like it shows some efficacy in other disease states other than just LEMS. Right now, Jacobus is giving it away for free under a compassionate use plan to LEMS patients. They probably also give it away free to those investigator sponsored studies in the other disease states that I saw which were all very small trials. Would they give it away too for all the off-label use once approved? Maybe. It’s not like it’s going to be expensive to manufacture. But I do suspect that there will be a lot more use of the drug when it is approved other than just those 1000 patients or so with LEMS. And revenue from the LEMS sales might finance clinical trials in other (orphan) disease states where the data isn’t as extensive as with LEMS. If Jacobus gets the approval first, will they finance those other trials to prove efficacy and expand the labeling when they aren’t bringing in any revenues from drug sales? Clinical trials, even small ones, aren’t cheap. I think it’s something to think about anyway.

  9. Anonymous says:

    Additional background on Biogen’s dimethyl fumarate from what I understand: A less pure mixture of compound was originally brought to a compounding pharmacy in German by a psoriasis patient. So, it is true that Biogen did the heavy lifting to test the compound in MS.

  10. Samuel71 says:

    If Catalyst were to get the exclusive rights, wouldn’t it be perfectly legal for patients to order this from a chemical supply company?

  11. Fat Old Man says:

    Does anybody remember KV Pharmaceuticals and Makena? They tried a similar strategy with hydroxyprogesterone caproate. They were undone when the FDA refused to back up their cease and desist letters to compounders making it for about 1% of their MSRP. Will history repeat itself?

  12. Fat Old Man says:

    oops. I just reread Derek’s post and he of course remembered the hydroxyprogesterone story. My bad.

  13. petros says:

    It’s Biomarin who actually picked up the rights then licensed the US rights to Catalyst. Their formulation was approved in December 2009 in Europe providing 10 years market exclusivity.
    The pricing has proved highly contentious as per the discussions highlighted by Derek

  14. David says:

    i think anyone reading this blog would prefer that all companies engage in de novo discovery and ‘real R&D’ and to benefit only if the science and hard work yield novel products. on the other hand, i wonder if this is not a matter of the ultimate price of the drug, which is how the progesterone story seems to be playing out. i think there is value in running a well-controlled clinical trial of a drug that has been used ad hoc and has only presumed benefit. the question really is what is that value vis-a-vis what is known about the drug. in the case of 3,4-DAP quick literature search indicates good clinical trials have not been done. if catalyst does the trial and proves the drug’s efficacy and safety, i don’t see why they can’t be rewarded as they are taking risk and providing value. additionally, anyone with any experience with the compassionate use IND procedure for obtaining a drug know this is far from optimal. many clinics won’t do it because of liability issues and most community clinicians don’t participate, so many if not most patients do not have access.
    The key question boils down to what is the value of doing a pivotal study with all of the CMC and tox that go along with that in an NDA. as we are learning with progesterone, there is a price threshold that the market and users will bear for that.

  15. Dan says:

    I am extremely new to drug discovery so if I’m way off base please let the verbal rocks fly; however, wouldn’t this kind of system be expected for these kinds of drugs? Since R&D is so costly in time and money, wouldn’t the only way for a drug that serves (relatively) few people and has the potential to make (relatively) little revenue only be attractive to a company if (relatively) little investment was required? As a med. chemist, I am sensitive to the current industry climate but at the same time this just makes sense from a business standpoint and there’s even an added bonus (as 14. David stated): more patients will have access once the drug is no longer under compassionate use.

  16. Anonymous says:

    I agree with #4. The regulatory framework is not a secret, and regulatory approval application by a company like Catalyst should have been forseeable for years. This is the result of market forces working completely as they would be expected to.

  17. Anonymous says:

    I agree with #4. The regulatory framework is not a secret, and regulatory approval application by a company like Catalyst should have been forseeable for years. This is the result of market forces working completely as they would be expected to.

  18. David says:

    The question is: how many of the 2000 LEMS patients havve exces to the jacobus drug today? All? If not, and if only 1 is not, Catalyst is doing the right thing. Jacobus should have done this 20 years ago. And if you say that jacobus will give away the drugs after fda app, you are a liar. Look what they did with dapsone. Catalyst will be first and get FDA approval.

  19. Ginny Boynton says:

    I have used Jacobus’ DAP for over 12 years successfully and for free. The question many of you should be asking is what, if anything, did Biomarin or Catalyst do to change the formula used in DAP for over 20 years, and how much did that cost them? Not purchasing the formula from Huxley Pharmaceuticals but their own costs of the change? There have been numerous trials with the use of DAP for many years, and it has found to be beneficial to many LEMS patients. And no, I don’t believe DAP will be given away for free after FDA approval. They’re having to make an investment to get approval. However, I also feel certain that what they charge will be in relation to the amount it costs for them to produce it plus a reasonable amount of profit. Biomarin/Catalyst has already shown that is NOT their intention.

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