A $15 Million Drug

The hyper-rare Krabbe’s disease leads to the death of patients by two years of age. Patients’ nervous systems degenerate until they can no longer hear, see, eat or breath. As a hyper-rare disease, Krabbe’s has an incidence of 1 in 394,000 births — meaning there are between 16 and 20 people in the US with Krabbe’s disease.

The pharma company Passage Bio is developing a gene-therapy cure, called PBKR03, for Krabbe’s disease that will be the most expensive drug ever sold, likely costing upwards of $15 million.

The reason for this is simple and comes back to a pricing relationship I call the Inverse Price-Population Relationship — it’s not as complicated as it sounds.

Inverse Price-Population Relationship

This relationship recognizes that as the patient population (the number of people a drug can treat) decreases, the price of the drug must increase. The reason for this is due to the price the high price of drug development. The average cost of drug development from 2009 to 2018 was $985 million (Wouters, O. et al. 2020)¹. Below, Figure 1 displays the relationship between price and patient population.

Figure 1. Average annual treatment cost per patient categorized by prevalence groups (CAN$). (Richter, T. et al. 2018)²

In the case of Passage Bio’s Krabbe’s disease drug, the patient population is very small and the large costs of development must be spread out among what is the smallest population ever treated with a pharmaceutical drug — I mean treated with a drug that was specifically developed for said population.

Financial Analysis of the Drug

I will gloss over most details to appeal to the lay-reader.

The assumptions used in this model are that research and development expenses will be the same for BioMarin’s (BMRN) rare disease drug Brineura. All other assumptions can be more clearly seen in the graph below and the model linked here.

Figure 2. Values from financial model

Price refers to the one-time price of the gene therapy. NPV is the Net Present Value of a project; the net value of the expenses and all future earnings of the project. Maturity refers to the percent return year-over-year from the date of maturity, which, in this case, is the year of patent expiration. The rest are important but I will not explain them here, if you’d like to know more look here.

High Prices are Okay

When drug prices increase or are high, there is public concern about these prices making treatments prohibitively expensive, leading to death of patients. Pharmaceutical companies selling expensive drugs run assistance programs — this is especially the case for rare disease drug developers — that will provide the drug at little-to-no cost to at-risk, low-income, or otherwise disadvantaged peoples.

As I have covered in this article, Passage Bio’s drug NEEDS to be this expensive. Up until this point in time, no company had every developed or attempted to develop a drug for Krabbe’s or any disease like it. Thus, it is important that we encourage developments like this so as to not continue the industry trend of neglecting diseases with small patient populations.

[1] Wouters, O. Estimated research and development investment needed to bring a new medicine to market, 2009–2018. JAMA. 2020

[2] Richter, T. et al. Characteristics of drugs for ultra-rare diseases versus drugs for other rare diseases in HTA submissions made to the CADTH CDR. Orphanet Journal of Rare Diseases. 2018

Used But Not Cited:

Fisher, G. A solution for the treatment of a neglected subset of rare diseases. submitted to International Journal of Rare Diseases and Disorders. 2020