Dendreon’s Big Question: How Much Will People Pay for Provenge?

Xconomy Seattle — 

How much will people in the U.S. pay for a new prostate cancer drug that helps dying men live a few months longer? This is one of the tricky questions Seattle-based Dendreon (NASDAQ: DNDN) is wrestling with these days. The decision will have a significant impact on how successful Dendreon is for years to come.

The issue is all about how much to charge for an immune-boosting treatment for elderly men with terminal prostate cancer, called sipuleucel-T (Provenge). Dendreon showed last year in a clinical trial of 512 men that this drug helped men live a median time of four months longer than those on a placebo, with minimal side effects. Dendreon is seeking clearance from the FDA to start selling the treatment, and the agency’s deadline to complete its review is May 1. If approved in the U.S., the Dendreon drug would be the first in a new class of therapies that actively stimulate the immune system to fight tumors.

Most of Wall Street projects this drug will emerge as a billion-dollar blockbuster in a few years. JP Morgan analyst Cory Kasimov, for one, forecasts $1.49 billion in U.S. sales in 2014. But his model, and all the rest, are based on a lot of unknown factors at this time, like how much the drug will cost, and how many men will get prescriptions. Dendreon hasn’t said anything specific about its pricing plan, other than an often-repeated line about how the product will be priced similarly to “other novel biologic drugs that extend lifespan“—which is sort of a coded way of saying, “This drug will save your life, and it will be expensive like all the rest.” A spokeswoman for the company declined to comment for this article.

Analysts have reported on a wide variety of estimates on what Provenge will cost, between $40,000 and $100,000. While different analysts use different models, I found that the expected price is about $61,714, according to the average estimate of seven analysts surveyed by Xconomy. But this is truly a guessing game at the moment. While Kasimov uses $65,000 as his estimated price per patient, he says it could run as high as $75,000 to $100,000. You can see the estimates listed from all seven analysts in the chart below.

AnalystAffiliationEst. Provenge Price
Ren BenjaminRodman & Renshaw$40,000November 12 note to clients
Cory KasimovJP Morgan$65,000February 22 note to clients
Howard LiangLeerink Swann$60,000April 13 e-mail
David MillerBiotech Stock Research$72,000February 27 note to clients
Mark MonaneNeedham  & Co.$50,000April 13 e-mail
Christopher RaymondRobert W. Baird & Co.$70,000March 12 note to clients
Eric SchmidtCowen & Company$75,000February 1 note to clients

There are a lot of factors to consider as Dendreon makes the decision on the actual price of what would be its first marketable product. Set the price too low, and it would fail to recoup enough of the $783 million deficit the company has racked up since its founding in 1992. The company’s stock (NASDAQ: DNDN) would probably tumble. Dendreon also would probably struggle to keep up with demand from patients, leaving many of them frustrated at their inability to get a potential life-saving drug.

But setting the price too high is obviously a perilous thing to do as well. Insurers would probably set up all kinds of red tape to ensure the drug is being prescribed in precise accordance with the FDA-approved label, creating hassles for doctors that they might prefer to avoid. Competitors … Next Page »

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11 responses to “Dendreon’s Big Question: How Much Will People Pay for Provenge?”

  1. jerzee says:

    Eisenberg: “But I’m not sure I’d spend that much money for an average of four extra months of life. I’d rather give the money to my family.”

    Would recommend the first thing Dr. Eisenberg do before writing script #1 is familiarize himself with the study.
    Would then buy a dictionary to help distinguish the difference between terms “average” and “median”.
    Finally, would highly recommend speaking with clinic patients undergoing docetaxel treatment. Evaluate QoL.
    Then hit a Marin County golf club. Play a round with patient(s) treated with sipuleucil-t. Evaluate then compare QoL of the two observed sub-groups.
    Still don’t think its worth it Doc?

  2. Jan Manarite says:

    Because Provenge will be such big news when FDA makes its ruling, I think the advocates can really help in communicating concepts better for the general public. Cancer is emotional, and people will rush to their physicians if FDA approves this drugs.

    Here are a few important things that I’d like to comment on:

    1) “…dying men live a few months longer?” This is a misconception simply because it is almost impossible to interpret pure research data into what it means for an individual patient. Truth is – it usually means more. This article explains that challenge:

    2) “…elderly men with terminal prostate cancer…” This is a misconception because many men eligible for Provenge are in their 60’s, their 50’s, even their 40’s. So elderly is not accurate. Terminal? Truth is – no one knows. Many men outlive their “protocol prognosis” because they learn to research themselves and come up with small studies that give excellent treatment options. My husband is still alive, 10 years after a metastatic diagnosis with a PSA that was over 7,000.

    3) “…minimal side effects.” This IS accurate. In fact, this is probably understated. Most drugs are called “well-tolerated” with no real definition, but plenty of side effects. Provenge has almost NO side effects, which is one of the reason these men (with plenty of treatment effects already) want this drug. Who can blame them?

    4) “…how many men will get prescriptions.” Provenge will not be a prescription. In fact, it will be given by a process called pheresis – totally unique for these men.

    5) last point – PRICE. Keep in mind that Provenge will be a series of 3 pheresis treatments, given over about one month. Done. Most oncology treatments go on for months. Some indefinitely. That one unique variable will make the price of Provenge – in the big picture – end up costing less than many other oncology drugs.

    Hope this is helpful. I’d like to help get accurate information out to these men who have waited so long.

  3. Thanks for the comments. I also spoke this morning to Charlotte Arnold, a spokeswoman for the Genentech unit of Roche, which developed Avastin. Arnold pointed out that Avastin for lung cancer is actually $8,900 per month, not the outdated $8,800 per month figure I used in an earlier version of the story. I’ve fixed that in the story.

    Arnold also added, in an e-mail, that “we limit the annual cost of Avastin to approximately $56,000 for any FDA approved indication (once a person receives 10,000 milligrams of Avastin, which Genentech sells to wholesalers for approximately $56,000, Genentech will provide Avastin free for the remainder of the year). This is available to patients regardless of insurance, and the income limit to receive free medicine is $100,000 per year — almost 85% of households in the U.S. earn less than $100,000.”

  4. Paul Jones says:

    While it is interesting to speculate how much Provenge could be sold for, if approved, and thus how much revenue Dendreon may make, the other side of the coin is how much it costs to manufacture Provenge, and to keep the infrastructure going which is needed to do so.

    Provenge is a patient-specific product which uses the patient’s own cells in its manufacture. This involves collecting the cells (leukapheresis), shipping these to a processing center, purifying out and ‘activating’ the cells of interest, and mixing them with the prostate antigen-GM-CSF conjugate before performing release tests relating to identitity, purity, safety, and activity, shipping them back to the hospital and giving them to the patient.

    This will be very EXPENSIVE. It seems very unlikely that these costs would be less than 10’s of thousands of $ per patient, fully absorbed, which needs to come off the top of the revenues earned before any calculation as to how much Dendreon will actually make can be done.

    With all these costs, will it actually be financially viable for Dendreon to sell Provenge, or at least such that Dendreon make anything other than a very modest (in pharma terms) bottom line, unless Provenge is VERY expensive indeed?

  5. Saumitra says:

    Agree with Paul. That’s the underlying reason Provenge has minimal side effects! DNDN might also consider doing Provenge trials for newly diagnosed (early stage) Prostate Cancer patients – which could expand their pie. Probably Phase IV ?

    Well 4 months life extension is a big deal with QoL that Provenge claims to provide.

    Once again great article Luke !

  6. SaulK says:

    Good story, but as Jerzee has pointed out your cancer doc was way off on his interpretation of the Impact study. Pretty shocking that a cancer doc doesn’t know the difference between “median”–the halfway point in a ranked series of numbers–and “mean”–the average of those numbers. The exact reason making that distinction is so important is the exact trap your doc fell into: There is not just a tiny benefit spread across the patient population–causing the doc to say “It’s not worth 75,000”–but in fact half the guys had a survival benefit GREATER than 4.1 months. Many lived years and years longer than their expectancy at the time they were diagnosed. One who allowed the company to tout his results–Eduardo Garcia–lived 9 years after he was told he had a year left to live and he got to meet his grandchildren instead of dying as predicted–pretty clear that’s worth more than $75,000. You also could, as David Miller of Biotech Stock Research suggests, instead of median survival advantage look at the prostate cancer patient’s likelihood of dying from something other than cancer after treatment with Provenge vs. placebo and see that there is a tremendous advantage in the Provenge group. And this is not even to mention that the 4.1 median advantage was not versus pure placebo, but versus later given frozen Provenge and looking at subgroups shows frozen Provenge also gives its own survival advantage–so the true Provenge advantage at median is even more than 4.1 months. All in all, not too eager to have the “cancer doc” you interviewed be advising me whether to try Provenge or not. I hope he’ll look more closely at the study and at Provenge before he presumes to advise patients–but I guess I shouldn’t hold out too much hope since he was OK with appearing in your article as an “expert” when he obviously hasn’t done his homework as to the effectiveness of Provenge.

    Dr. Ferrari, one of the Provenge investigators, has actually opined that Provenge given in earlier stage prostate cancer may well turn out to be a cure for prostate cancer–since it works by boosting the patient’s immune system and the study necessarily used guys whose immune systems were already severely compromised.

    It’s shocking to write, but Dendreon might really have invented/discovered a cure for cancer. For sure it holds the promise with the technology used in Provenge to render many cancers chronic, treatable diseases as protease inhibitors have done for HIV.

  7. rob m. says:

    Another way to look at Provenge pricing would be to compare it to the only other approved drug for end stage prostate cancer with a proven survival advantage: Taxotere.

    Taxotere has shown a median survival advantage of 2.9 months compared to 4.1 for Provenge.

    If you do a google search for “taxotere label fda” you will see daunting list of side effects.

    Dendreon’s management (if my memory serves) has given an estimated total cost of Taxotere treatment to be $55,000. This includes the cost of the drug plus the average cost per patient from hospitalizations due to side effects.

    With greater efficacy and a dramatically improved side effect profile, Provenge certainly deserves a premium to the costs associated with Taxotere.

  8. akcje says:

    The answer is [almost] always the same. It will cost as much as they can get insurance companies to pay for it.

    The way our medical research works, the price of the treatments, the missed opportunities in unpatentable treatments, going for “minor” improvements rather than early treatments because of the poorly designed rules and exorbirant costs of longer studies, the inflexible brain damaged FDA rules, the market which can destroy promising new companies/treatments, etc…

    We console our self by comparing our free market system with total failure of the past communist/socialist states. But why doing better than the worse is good enough?!

    It is possible to preserve what’s good in the free market, harness people’s greed and drive to make money and yet change the rules enough to encourage more research, more long term studies, picking best cure candidates, rather than those that would pay most, allow for flexible FDA treatments of fully informed patients, esp those with few other options, etc…

    But the changes can not be done the way our legislators come up with their 50,000 page proposals, of which they check only if pork is going their way, barely know what is in the rest, and have no clue to what side-effects they unleash.

    OK, enough for Monday, I feel better now.

  9. Molly says:

    I see a lot of talk about pricing, but I don’t think anyone can put a price tag on the value of even 4 months of life unless you are the person facing death. Provenge seems to be a big step in the right direction, so lets keep working!