NPS Pharmaceuticals, Inc. (NPSP), Eli Lilly & Co. (LLY), Alexion Pharmaceuticals, Inc. (ALXN): Three Justifications for the High Cost of Gattex

Justification 1: Current state of non-drug therapy
Before Gattex, every day SBS patients would intake nutrients and fluids through parenteral support, or PN — that is, through infusion other than the mouth. However, PN does not address the issue of malabsorption, which occurs at the end of the digestive process in the small intestine. It reduces the quality of life from continual intravenous infusion and frequent trips to the bathroom.

According to a National Institute of Health report (link opens PDF), PN therapy costs around $180,000 to $570,000 per patient per year. There are associated side effects including shortened life span, and life-threatening complications such as sepsis, blood clots, or liver damage. According to the STEP study done by NPS Pharmaceuticals, Inc. (NASDAQ:NPSP), using Gattex, 25% of patients have three infusion-free days per week, which reduces PN dependency by nearly six months. Many patients have complete independence from PN. This improves life of SBS patients to an extent, but it has yet to be thoroughly evaluated for complete elimination of patients’ dependency over PN.

Now, assuming that PN costs $350,000 on an average, a half-year dependency reduces this cost by $175,000. Add in the price of Gattex, and a patient is effectively paying $120,000 more for six months of normalcy, freedom from food infusion, and reduced chances of PN-related diseases. It’s no wonder why Gattex, launched this past January, is being considered as a major breakthrough.

Justification 2: No real competing drug in the market
There is no first line therapy for SBS, and available options only act as supplementary to the therapy process but can’t remove the associated complexity. There are two approved products: somatropin (rDNA origin) for injection (human growth hormone) and L-glutamine powder for oral solution. These products are largely unsuccessful in meeting their desired results despite being marketed as treatment options of SBS for four to 16 weeks.

Humatrope (somatropin [rDNA origin] for injection) from Eli Lilly & Co. (NYSE:LLY) is used for growth hormone deficiency in children. It is also used to address symptoms of SBS. Despite costing less than Gattex, the product does not resolve the problem satisfactorily. Humatrope only did $91 million in sales last quarter and saw a 9% decline year over year.