The company drew public ire when it priced the hepatitis C drug Sovaldi at $84,000 after buying its developer for $11 billion. Last week, it agreed to pay $11.9 billion for Kite Pharma, whose non-Hodgkin lymphoma treatment will sport a price tag above $500,000.
Don’t let the wow factors behind this new drug—personalized medicine, a one-time treatment course, potentially curative—mask what’s actually driving its price. It’s Wall Street, not the cost of developing the drug or its medical value.
Since its creation in 2012, Kite Pharma spent just $304.3 million in developing CAR-T (chimeric antigen receptor T-cell) therapies, which work by genetically modifying a cancer patient’s immune cells to fight a specific cancer. The company was formed by Dr. Arie Belldegrun, a former National Cancer Institute employee, who will clear $600 million in the deal. He licensed two of the four key technologies behind the new drug from the National Institutes of Health or NIH-funded institutions, and signed a cooperative research and development agreement with NIH-funded scientists to conduct the clinical trials.
Gilead/Kite will recoup its R&D investment after treating just 600 non-Hodgkin lymphoma patients (about 20,000 terminally ill patients will be eligible for treatment each year). Insurers, health systems and taxpayers (who already funded the research) will continue paying the return on Gilead’s $11.9 billion investment until the last government-funded patent runs out in 2027.
Merrill Goozner served as Editor of Modern Healthcare from December 2012 to April 2017. As Editor Emeritus, he continues to write a weekly column, participate in Modern Healthcare education, events and awards programs and provide guidance on coverage related to healthcare transformation issues. Over the course of his four decades in journalism, he served as a foreign, national and chief economics correspondent for the Chicago Tribune and professor of journalism at New York University. He is the author of The $800 Million Pill: The Truth Behind the Cost of New Drugs (University of California Press, 2004), and has contributed articles to numerous publications. Goozner earned a master’s degree in journalism from Columbia University and a bachelor’s in history from the University of Cincinnati, where he received the Distinguished Alumni Award in 2008.
Editorial: Taxpayers paying twice for drugs