Who will pay $93,000 for Provenge, Dendreon (DNDN)'s new vaccine-based treatment for advanced prostate cancer? The answer is you. And me. The taxpayer.
The drug is perfectly designed to extract as much money from taxpayers as possible. As advanced prostate cancer is found mostly in men over 65 years of age, Provenge will be covered by Medicare Part B (see page 37), which reimburses the cost of any FDA infusion or injection drug, such as Provenge. Only a small minority of patients under 65 (and therefore not Medicare recipients) will use private health insurance to pay for the drug -- and those insurers might, rightly, balk at the price.
Had Provenge been a pill, it would have fallen under Medicare Part D's new prescription drug coverage program, which makes patients pay at least part of the bill ($4,350 out of pocket). Scott Roberts, a vice president at PriceSpective, a drug-pricing consultancy in Philadelphia, told BNET:
You can charge $500,000 a year and Medicare, under current policy, can't do anything about it. They can't.The problem is compounded because of a new court decision from the District of Columbia Court of Appeals which rules that Medicare cannot reimburse at the rate of the "least costly alternative" drug. It must reimburse whatever price the drug company chooses to set. As long as the FDA has approved the drug, and it's an infusion, then Medicare must pay.
This is one reason the price of Provenge was set so much higher than analysts expected: Dendreon knew that patients were covered mostly by Medicare and not private insurance, and that the government's own rules prevent Medicare from negotiating prices.
Unsurprisingly, Dendreon stock is trading at $54.04 at the time of writing, up from $40.25 before the drug was approved yesterday.
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