Market shows sensitivity to high priced drugs

With huge pressure on the federal government to control medical costs, drug companies have to be more sensitive about how they price their products. Uncertainty about reimbursements for Dendreon‘s $93,000 prostate cancer drug, Provenge, has led to substantially lower than expected sales of the product as Xconomy points out in an excellent article posted today. Consequently, Dendreon’s share prices has plunged to a third of its peak value.

Xconomy’s Luke Timmerman argues, persuasively, that many of the problems were the result of poor management, and that the problem does not reflect broader issues in the biotech sector.

But even some well-established biotech companies are facing pricing challenges.

Amgen’s Denosumab, originally developed by Immunex here in Seattle, is well-regarded as an effective drug for the treatment of osteoporosis. Yet sales of the drug have been far below expectations as many physicians continue to prescribe lower-priced alternatives. And while the company has projected billions of dollars in sales related to the application of the drug to certain cancers, an editorial by Howard West from the Swedish Cancer institute in Seattle in the Journal of Clinical Oncology recently noted that when the need to balance cost and benefits is taken into account the drug “falls short of a mandate for a new standard of care.”