Novartis could cut its Kymriah price to $160,000 and keep its profit margins: study

Novartis announced a $475,000 sticker price for Kymriah in August, but a new paper claims the price is three times too high. (Novartis)

There's been no shortage of ink spilled by analysts, market watchers, patient advocates and others to dissect CAR-T pricing. Now, a new analysis suggests Novartis could make a decent profit on Kymriah if the cost was just one-third its current price, but the drugmaker disagrees with some of the paper's key assumptions.

To arrive at the conclusion, the authors of a new Health Affairs article calculated that slightly more than 190,000 patients around the world will receive the drug over a decade as Kymriah picks up new approvals and indications, with about 88,500 living in the U.S. The authors include Patients for Affordable Drugs cofounder David Mitchell and three Harvard Medical School health economics and pharmaceutical experts.

The finding contradicts an earlier conclusion from the controversial U.S. drug price watchdog ICER. In a draft analysis of pricing for Kymriah and Gilead's CAR-T drug Yescarta, the group determined that "with the evidence available at this time, these therapies seem to be priced in alignment with clinical benefits over a lifetime time horizon." Ahead of Kymriah's approval, analysts thought Novartis could price the drug as high as $750,000.

RELATED: Novartis crosses FDA finish line with monumental CAR-T leukemia approval 

For their work, the Health Affairs team incorporated Novartis' stated development costs of $1 billion and Kymriah's $475,000 sticker. They estimated manufacturing expenses of $40,000 per treatment and considered that Novartis plans to refund the costs if certain patients don't respond, ending up with an 84% profit margin for the drug on average over 10 years.  

"After allocating 19% of revenue annually for Novartis’ historic reported level of research and development—enough to underwrite both its successes and failures—Novartis would still reap a net profit of 65%, almost 2.5 times what the company generates on its current product portfolio," the authors wrote.

With those inputs, the authors concluded that the drug could cost $160,000 and still cover Novartis' "historic margins" and future R&D spending. For the model, they assumed Novartis would price the drug the same around the globe to prevent "medical tourism" for the one-time treatment.

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RELATED: Seeking to expand CAR-T's reach, Novartis snags new regulatory milestones for Kymriah 

Novartis took issue with the analysis. A spokesperson said the drug is having a "profound impact on pediatric and young adults" with acute lymphoblastic leukemia and that Novartis prices to ensure access. 

Addressing a point in the paper that the National Institutes of Health spent $200 million to work on the drug in early stages, Novartis said that figure is "misleading." The company "assumed full financial responsibility" for the drug back in 2012, the spokesperson said. 

"None of the $200 million was used to develop the therapy for FDA approval and there was no direct government funding to Novartis," the company's spokesperson said via email.

Further, the company's representative said Novartis' CAR-T manufacturing costs have "never been made public and cannot be for proprietary reasons." In all, the drugmaker said it's "confident in the value of Kymriah, a one-time treatment," and is "committed to innovative pricing arrangements" such as value- and indication-based pricing.

RELATED: At $475,000, is Novartis' Kymriah a bargain—or another example of skyrocketing prices?

Novartis won FDA approval for Kymriah back in August to treat relapsed/refractory B-cell acute lymphoblastic leukemia. The drug uses a patient's own cells to fight cancer and the company is looking to expand its reach into other cancers and into other geographic areas.   

Citing the U.S. government's expenses for early-stage research into Kymriah, the Health Affairs authors argue public interest should go into pricing decisions for drugs that receive federal funding. They said the NIH could create an advisory committee to negotiate pricing or stipulate that licensees charge no more than the average price in six other wealthy nations. 

Despite its high price, Kymriah's cost as a one-time treatment comes short of other rare disease drugs that require ongoing treatment. Biogen's Spinraza, for instance, costs $750,000 for the first year and $375,000 for subsequent years.

Editor's note: This story was updated to reflect that the Health Affairs authors used manufacturing expenses of $40,000 per treatment in their calculations.