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AFR Article on how CSL priced the world’s most expensive drug

CSL is one of Australia’s greatest business and technical success stories and its shares have provided one of the best returns on the ASX among listed companies over the past decade.

CSL has also been a very strong advocate of the R&D Tax Incentive and lobbied for maintenance of a strong and stable incentive to encourage local investment in R&D.

A recent article in the Australian Financial review has detailed the process around receipt of US regulatory approval for the most expensive drug in the world – CSL’s world’s first gene therapy for haemophilia B is priced at $US3.5 million ($5 million) per dose.

The company’s head of R&D Bill Mezzanotte told The Australian Financial Review that there are many factors that go into pricing a drug, including development costs. “The current estimate is that for every successful product you bring to market, you spend an average of $US1 billion to $US2 billion in R&D,” he said. CSL’s compound, Hemgenix, has been developed over 10 years, but the science of delivering gene therapy is more than 20 years old, and that needs to be taken into account.

For Hemgenix, the other major factor noted was healthcare savings. Haemophilia B is a rare, chronic bleeding disorder caused by a gene defect, with the current treatment being prophylactic infusions of a protein called factor IX, which people with the condition do not produce enough of naturally. Infusions are twice weekly or fortnightly, for the rest of a patient’s life.

“You can’t even measure the difference in a person’s life taking one treatment and not need to think about it for at least 10 to 20 years,” Dr Mezzanotte said. “It’s not just their convenience, it’s their sense of mental security, and of course, it saves the healthcare system a lot of money in both the cost of therapy, rescue therapies, the cost of treating a bleed and also the lost productivity of these patients.” Studies have found haemophilia B patients cost the healthcare system more than $US20 million over their lifetime, and that at $US2.5 million a dose, the health system would save more than $US7 million per patient.

Since the announcement, CSL’s share price has had no dramatic changes, with the market anticipating this approval after the company’s positive phase three trial data in February. However, analysts were expecting Hemgenix to cost around $US2 million, so with the $US3.5 million price it is expected the company’s market value will increase in the 2024-25 financial year.

CSL said they didn’t expect changes over night. At the company’s R&D day earlier this month, chief commercial officer Bill Campbell said, “we think gene therapy is a really important innovation … it’s been the hope and dream of haemophilia B patients for at least 25 years … but it will take a little bit of time for questions to be answered in the commercial space”.