Why a $158,000 Drug With Unclear Benefits Hurts Whole Health System

Now that the drug combining those two known compounds has been approved in the U.S., the official list price is going to be $158,000 for a year’s supply, or over 20 times more than he was spending.

While that may be excellent news for

Amylyx,

AMLX 5.24%

which makes the drug and whose shares are up 159% over the past 6 months, the exorbitant price tag is bad news for the U.S. healthcare system. Patients won’t be footing the entire bill themselves—insurers pick up most of the tab, which is finalized after rebates are made by pharmaceutical companies to get the drug covered. And of course making the drug available through the proper channels will be a more affordable and more reliable way for patients to take the medication, especially those who can’t afford the out-of-pocket costs Mr. Oliff was able to pay for his unorthodox, but doctor-supervised method.

But the jarring price difference underscores just how out of whack drug prices have become in the U.S. Each time a drug is priced up in the stratosphere, it sets a precedent for the next manufacturer to do the same, sending drug costs in an upward spiral with no real ceiling except for public outcry.

Josh Cohen

and

Justin Klee,

co-chief executives of Amylyx, said in a written statement that Relyvrio “is the first approved drug for ALS to demonstrate a statistically significant benefit in function in a clinical trial.”

They added that the company has extensive plans to address out-of-pocket expenses for people with ALS, including by providing financial assistance to people with commercial insurance and by providing the drug at no cost for those who are uninsured or underinsured and “have exhausted all other options.”

Amylyx is pricing its therapy below the $171,000 annual price tag for another already approved ALS drug, Edaravone, whose effect was found to be modest. Amylyx received approval based on data from a small Phase 2 trial, even though the FDA itself has acknowledged the lack of certainty over the drug’s benefits. During a meeting in March, a panel of FDA advisers had initially found the data to be insufficient, but a rare second panel last month decided to back approval due to the dearth of available treatments.

“This is just an extreme example of a lack of a connection between a drug’s price and its purported effect,” says Aaron Kesselheim, a Harvard University professor who quit an FDA advisory committee last year over the controversial approval of an Alzheimer’s drug. Mr. Kesselheim wasn’t involved in the Amylyx review.

That isn’t to say that Amylyx shouldn’t profit from the innovation, which could extend patients’ lives by several months. Mr. Oliff, who uses a wheelchair, says the drug combination he has been taking has been helping him stick to his exercises on a rowing machine.

But the innovation could be rewarded at a much lower price: the Institute for Clinical and Economic Review says an appropriate price for Relyvrio would be between $9,100 and $30,600 a year.

At the price Amylyx is asking for, the harm to society will outweigh the benefits, says David Rind, chief medical officer at ICER. The exorbitant price of drugs forces insurers to raise their premiums, which can then push the economically weak off insurance. That means less care for some and medical bankruptcy for others.

This helps explain why the U.S. ranks far down among nations in life expectancy, even though it is number one in healthcare spending. It also raises the cost of health coverage for those who can afford it, sucking out the value from the rest of the economy.

Amylyx, which now has approval to market its drug in the U.S. and Canada, is seeking approval in the European Union and eventually other countries too. Based on past practice, governments outside the U.S. are very likely to demand major price cuts to cover it.

U.S. insurers, patients and taxpayers, though, will have to pay a top price for a drug conceived and developed in America by two college students from Brown University, effectively subsidizing the care of ALS patients worldwide.

“It’s probably not the patients with ALS that you’re harming directly from this,” says Dr. Rind, “but you’re harming a whole bunch of other people in the system.”

Mr. Oliff, who used to work as a pharmacist himself, says he hopes to be able to get the drug through Medicare now that it is approved, though he says sometimes restrictions are put in place. If for whatever reason he can’t get it through his insurance, he says, he will stick to his DIY method.

Write to David Wainer at [email protected]