Tomorrow is shaping up as a big day in the biotechnology industry as we will learn whether or not Medicare will pay for Provenge, a recently approved drug for metastatic hormone resistant prostate cancer. Provenge has been called a vaccine, but that is a misnomer. It is an autologous treatment that uses the body’s own cells to stimulate an immune response to prostate cancer.
Several key factors are at play in this decision.
The first is cost. Provenge is very expensive at $93,000 per course of therapy. The reason is that each patient’s cells must be extracted, treated with Provenge at a lab, then returned to the patient.
The second is benefit. In clinical trials the median survival of patients on Provenge was slightly over two years, only a 4 month survival benefit compared to patients in the control group. Having developed a drug for metastatic brain cancer my former company faced this same issue and a 4 month survival benefit is considered to be marginal.
The third is politics. The term health care rationing reared its ugly head during the debates over ObamaCare. Complicating the issue is that of the patient population most likely to benefit from Provenge 70% are covered by Medicare. Believe what you will, but at some point the decision to cover or not cover a therapy comes down to a cost benefit analysis and included in that decision will be the age of the patient. This is already being done by private insurers when they decide what prescription drugs to cover in their plans. Medicare, however, has only done national reviews of four cancer related drugs so this is a big deal and may represent a litmus test of things to come.
The fourth is the impact on shareholders of Dendreon stock. Approval of Provenge added several billion dollars to Dendreon’s market capitalization which currently stands at $5.1 billion. In March 2009 the stock traded as low $2.61 and by April 2010 it was at $54. It has settled back into the $35 range. Limited reimbursement may have a significant negative impact on shareholders.
Provenge has been one of the lightning rods in the industry for many years now and the camps seem equally divided. Sooner or later Medicare needs to make a very tough call. Will this be the one?
Update: The Medicare review committee provided enough support (a score of 3.6 out of 5) for Provenge that Medicare will likely implement agency-wide reimbursement next year. The impact on the stock was minimal.