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Federal and Private Roles in the Development and Provision of Alglucerase

Therapy for Gaucher Disease

October 1992

OTA-BP-H-104

NTIS order #PB93-101723



F o r s a l e b y t h e U. S . G o v er n me n t P r i n t i n g O f f i c e

S up e r i n t e n d e n t o f Do c u me n t s , Ma i l S t o p : S S OP , Wa s h i n g t o n , DC 2 0 40 2 - 9 3 2 8

I S BN 0 - 1 6 - 0 3 8 1 2 9 - 0



Foreword

The effort to discover and develop new pharmaceuticals is a risky and costly enterprise.For diseases that affect few patients, the barriers to development maybe especially great, sincethe drugs’ small markets may make it difficult for firms to recoup their initial research anddevelopment investments. The Federal Government has sought to reduce these barriersthrough incentives first adopted in the Orphan Drug Act of 1983 (Public Law 97-414). Thetransfer of technology from Federal laboratories such as the National Institutes of Health tothe pharmaceutical industry can also reduce the cost and risk of drug development for firms.Although such incentives may result in important new therapies, their price to patients andinsurers may still be high.

As part of our assessment, Government Policies and Pharmaceutical Research and Development, requested by the House Committee on Energy and Commerce and itsSubcommittee on Health and the Environment and the Subcommittee on Antitrust,Monopolies, and Business Rights of the Senate Committee on the Judiciary, OTAcommissioned researchers at Stanford University to examine the development and provisionof alglucerase, an important new treatment for Gaucher disease. Gaucher disease is a rareinherited disorder in which the body lacks an enzyme necessary to break down fats. Thisbackground paper describes the development of alglucerase, illustrates the role that both theFederal Government and private sector can have in making new therapies available for orphan

diseases, and lays out some of the tradeoffs that can exist between developing new medicaltechnologies and controlling health care costs.

X2?A & -JOHN H. GIBBONS

U D i r e c t o r

Ill



OTA Staff—Federal and Private Roles in the Development and Provision

of Alglucerase Therapy for Gaucher Disease

Roger C. Herdman, Assistant Director Health and Life Sciences Division

Clyde J. Behney, Health Program Manager

Project Staff

Judith L. Wagner, Project Director,Government Policies and Pharmaceutical Research and Development

Michael E. Gluck, Study Director

Timothy Brogan, Research Assistant1

Arna M. Lane, Research Assistant

Administrative Staff

Marian Grochowski, Office Administrator

Eileen Murphy, P.C. Specialist

Kimberly Holmlund, Word Processing Specialist

1 From July 1991 to Februar y 1992.

iv



Federal and Private Roles in the Development and Provisionof Alglucerase Therapy for Gaucher Disease

Background Paper

This background paper was prepared as part of OTA’s assessment of Government Policies and Pharmaceutical Research and Development.

Prepared by:

Alan M. GarberPalo Alto Department of Veterans Affairs Medical Center

and Stanford University

Ann E. ClarkeStanford University

Dana P. GoldmanStanford University

Michael E. Gluck Office of Technology Assessment

U.S. Congress



Glossary of Abbreviations

BCBS —Blue Cross and Blue Shield HMO —health maintenance organization

CHAMPUS--Civilian Health and Medical Program IND —Investigational New Drug

of the Uniformed Services NDA —New Drug Application

DNA -deoxyribonucleic acid —National Institutes of Health

FDA —Food and Drug Administration ODA -Orphan Drug Act

HCFA —Health Care Financing R&D —research and development

Administration SSA -Social Security Administration

HCPCS —HCFA’s Common Procedure CodingSystem



Contents

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .DESCRIPTION OF GAUCHER DISEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Forms of the Disease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Prevalence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Diagnosis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ENZYME REPLACEMENT THERAPY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Mode of Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Clinical Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Conclusions Regarding Efficacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Conclusions Regarding Appropriate Dosing Regimens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

THE DISCOVERY AND DEVELOPMENT OF ALGLUCERASE . . . . . . . . . . . . . . . . . . . . . . . .History of Alglucerase Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Cost of Developing Alglucerase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Conclusions About the Discovery and Development of Alglucerase . . . . . . . . . . . . . . . . . . . . . .

THE COST OF MANUFACTURING, DISTRIBUTING, ANDMARKETINGPLACENTAL ALGLUCERASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

POTENTIAL ADVANCES IN THERAPY FOR GAUCHER DISEASE . . . . . . . . . . . . . . . . . . .PAYING FOR ALGLUCERASE THERAPY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cost of Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Who Pays the Cost of Alglucerase Treatment? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Insurance Payment for Alglucerase Therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

POTENTIAL CONSEQUENCES OF FEDERAL SUBSIDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

FigureFigurel. Cumulative Per Patient Insurance Costs for Alglucerase Therapy

Dosing Regimens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TablesTable

l. Incidence of Gaucher Disease in the United States . . . . . . . . . . . . .2. Clinical Experience With Ceredase . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . .

1

3

3

3

46 6 7 7 7

11

1213131617

17

18191920212728 29

Page

Under Four Potential. . . . . . . . . . . . . . . . . . . . . . . . . 25

Page

. . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . .

3. Clinical and Experimental Evidence Supporting Low-Dose Therapy Unfractionated . . . . . . .4. Scientific Basis for Biweekly High-Dose Unfractionated Versus Low-Dose Fractionated . .5. The Development of Ceredase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6. NIH Contracts Pertaining to Alglucerase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7. Estimated Annual Per Patient Drug and Ancillary Charges for Alglucerase Therapy

Under Four Potential Dosing Regimens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8. Distribution of Alglucerase Patients by Primary Payer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9. Selected Insurance Characteristics of Full-Time Participants in Employment-Based

Plans at Medium and Large Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

58

1011

1315

2021

23

vii



Federal and Private Roles in the Development and Provisionof Alglucerase Therapy for Gaucher Disease

SUMMARY

The drug development and approval process istime-consuming, risky, and potentially costly enoughto preclude the development and marketing of treatments for rare disorders. The case of alglu-cerase, an expensive new therapy for the uncommoninherited disorder called Gaucher disease, illustrateshow the Federal Government can help manufactur-ers overcome critical scientific, financial, and regu-latory barriers to the development of such treat-ments. This paper analyzes public and privateinvestments in the research and development (R&D)of alglucerase. It also examines uncertainty sur-rounding the appropriate dosing of the drug and the

cost implications of alglucerase therapy for patients,their insurers, and the Federal Government.

Gaucher disease is caused by deficient activity of an enzyme necessary to break down glycolipids,substances produced by white blood cells. Theaccumulation of these glycolipids in the spleen,liver, bone marrow, and other organs can lead toabdominal and bone pain, anemia, and other severemanifestations of disease. Gaucher disease causessignificant disability and can be fatal. Between2,100 and 11,000 people in the United States arebelieved to have symptoms severe enough to warrant

medical intervention.

Alglucerase, marketed under the brand nameCeredase

tmby Genzyme, Inc., a Massachusetts

pharmaceutical firm, is a chemical derivative of themissing enzyme. Prior to its development, there wasno effective treatment for the disease. Although itsefficacy has been studied in few patients, existinginformation suggests that it can reverse some of thesymptoms and physical manifestations of the dis-ease.

The drug was developed after significant investment by both the Federal Government and the

private sector. Most of the scientific research thatled to the discovery of alglucerase had been spon-sored or performed by the U.S. National Institutes of Health (NIH). A critical step was the discovery, byNIH researchers, of the enzyme defect that causedthe disease. A second milestone was reached whenNIH researchers devised a method for harvesting the

enzyme from human placentae, for which theyreceived a patent in 1975. A third milestone was the

discovery by NIH researchers of a chemical modifi-cation that greatly improved the effectiveness of theenzyme. The modified form became alglucerase.

In addition to the research that took place in NIH’sown laboratories, the Federal Government investedalmost $1 million in contracts with the New England

Enzyme Center at the Tufts University MedicalSchool to supply NIH with sufficient quantities of the enzyme to continue the research process. In1981, Genzyme, then a new firm whose foundersincluded researchers from the New England EnzymeCenter, took over the contract to supply the enzyme.

NIH contracts with Genzyme over the next 11 years totaled nearly $9 million, a figure that represents roughly 20 percent of alglucerase)s measurable R&D costs. This figure does not include the costs of decades of research by talented NIH scientists or the work by researchers at universities and private research institutions whose efforts culminated in alglucerase.

Because the contributions of NIH included thediscovery of alglucerase, Genzyme could not obtaina patent for the drug. Therefore, had it not been forthe provisions of the Orphan Drug Act, Genzyme

could not be assured of the exclusive rights to marketthe drug. In 1985, Genzyme’s alglucerase receivedofficial designation as an orphan drug, entitling thecompany to 7 years of exclusive marketing, andgreatly enhancing the potential profitability of alglucerase.

On the basis of information supplied by Gen- yzme, we estimate that the firm spent approximately $29.4 million on R&D for placental alglucerase over the decade prior to its approval for marketing in 1991. These expenditures representcash outlays. They do not account for the time value

of the money tied up in the project or for thetechnical risks of failure along the way. AlthoughGenzyme claims that it spent about $48.6 million incash outlays, we include only actual expenditures forthe work, materials, and facilities needed for theconduct of R&D. The excluded payments are part of the purchase of the valuable asset that Genzyme’s

–l–



2 qFederal and private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

alglucerase had become by the time the firm decidedto buy back rights to it from its investors.

l

In addition to the large public and privateinvestment in the development of alglucerase, fur-ther revenues came from Gaucher patients and theirinsurers. Between 1989 and 1991, patients were able

to purchase the then unapproved drug under the U.S.Food and Drug Administration’s (FDA) TreatmentInvestigational New Drug (IND) program. Thisprogram provides patients not enrolled in clinicaltrials with access to experimental drugs for other-wise untreatable conditions. The FDA allowedGenzyme to charge a price to recover costs associ-ated with the R&D and provision of the drug.

Revenues to Genzyme under the Treatment IND program exceeded $5 million.

FDA approval of Genzyme’s placental alglu-cerase in April 1991 was based primarily on the

clinical experience of 12 patients studied at NIH.2

Their work indicated that a dose of 60 units/ kilogram (kg)

3administered biweekly for a year

resulted in rapid patient improvement. After varyingperiods of treatment at the initial dosage, researcherselsewhere have successfully decreased the “mainte-nance’ dose that some patients receive to as little as15 units/kg biweekly. Researchers at the ScrippsInstitute in California have used an even smallerdose, 2.3 units/kg, administered three times a week.Although patients in these studies had clinicalimprovements comparable to those of the NIHpatients, there is some uncertainty about whether

they were as severely ill as patients enrolled in theNIH study.

At the range of potential treatment doses studied thus far and the retail price of $3.50/unit, a year of therapy can cost between $71,160 (for 2.3 units/kg thrice weekly) to $552,760 (for 60 units/kg weekly).

Patients successfully treated with alglucerase willpresumably remain on the therapy all their lives(albeit at reduced maintenance doses). According todata supplied by Genzyme, 73 percent of patients onalglucerase in March 1992 had private health

insurance that covered their alglucerase therapy,usually with patient out-of-pocket expenses of lessthan $2,000. Another 21 percent were covered byMedicare or Medicaid.

4 Part of the reason for the

high price of alglucerase may be its high manufacturing, marketing, and distribution costs, which we

estimate to be $1.90/unit in 1992, based on figures supplied by Genzyme.

Because the vast majority of private healthinsurance policies impose a limit on total benefitspayable for each insuree, somewhere between one- third and one-half of all alglucerase recipients face a significant risk of exhausting or critically reduc-ing their available insurance benefits over time.Although Genzyme supplies the drug free to thosepatients who exhaust (or otherwise lack) insurancebenefits, for the rest of their lives such patientsremain uninsured for the cost of administeringalglucerase and any other medical expenses they

may incur.

Genzyme’s pricing arrangement means that insur-ers are typically obligated by contract to pay most

5

of the drug’s price for all FDA approved indications;patients without insurance or other resources, whowould often forgo therapy rather than pay the fullprice, pay noth ing for t he dr ug. Although t hecompany gains no revenue on each unit of drugoffered free of charge, the overall pricing strategycan be profitable. Genzyme's pricing is similar in its

consequences to a policy in which patients are offered a lifetime supply of alglucerase in ex-

change for the value of their remaining insurance coverage and associated copayments.

The drug’s high cost to consumers, privateinsurers, and the Federal Government raises ques-tions about the extent to which NIH is acting in thepublic interest in providing significant assistance tosome medical technologies ultimately marketed bythe private sector. The actions of NIH can haveconsequences far beyond providing new therapies tocombat disease. As is illustrated by this case, such

deep involvement creates the potential for the

1 In exchange for fun ds to develop alglucerase, Genzyme had transferred rights to the dru g in 1987 to a limited partnership. Genzyme wa s th emanaging partner of the limited partnership.

2 Ge n z y m e i s c u r r e n t l y c o n d u c t i n g c l i n i c a l r e s e a r c h u s i n g a r e c o m b i n a n t f o r m o f t h e enzyme that it hopes will replace the placental form.

3 One kilogram e q u a l s 2 . 2 0 6 pounds.

4 Although Med icarepays only 80 percent of therapy, the cost of therapy, th e vast majority of these patients have s u p p l e m e n t p r i v a t e i n s u r a n c e t h a t p a y s

a t l e a s t s o m e p o r t i o n o f t h e r e m a i n i n g 20 percent. Medicare patients without such supplemental insurance are liable for the 20 percent copayment whichcan reach tens of thousands of dollars. Medicaid pays virtually all of the costs of alglucerase therapy.

5 Insured patients typically are obligated to pay a copayment and deductible out-of-pocket for insured medicines and services.



Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease q 3

Federal Government to pay for such technologies twice-once through support of the R&D process and once again as a health insurer. The Federal Government has no mechanism to ensure that theprices Americans pay for drugs and other technolo-gies reflect the public’s contribution to their devel-opment.

INTRODUCTION

The drug development and approval process istime-consuming and potentially costly enough topreclude the development and marketing of treat-ments for rare disorders. The Federal Governmentcan help potential manufacturers overcome criticalscientific, financial, and regulatory barriers to thedevelopment of such treatments. Many Federallaboratories, especially those at NIH, conduct drug

discovery research or develop other vital technologyfor the treatment of disease. The availability of thistechnology and Federal assistance in its transfer tothe private sector can significantly reduce the cost toa manufacturer of conducting drug R&D. Government-sponsored research can also reduce the risk that themanufacturer’s efforts to develop a drug will fail byconducting or sponsoring research that helps estab-lish approaches to the treatment of a disease that arelikely to be safe and effective.

Pharmaceutical regulation, so often seen as abarrier to innovation, is another means by which theFederal Government can help make the developmentof new drugs profitable. The Orphan Drug Act(ODA) (Public Law 97-414), enacted in 1983, is anexample of a set of pharmaceutical regulationsdesigned to promote, not impede, the marketing of new drugs. The act offers firms incentives to developtreatments for rare disorders. These incentivesinclude research grants, investment tax credits,assistance in negotiating the approval process, and,most importantly, exclusive license to market theproduct for a specific indication for 7 years. Drugmanufacturers can already exclude other producersby obtaining patent protection for their products, butthe period of exclusivity under the ODA does notbegin until the drug receives final approval from theFDA; as a result, the ODA may extend marketexclusivity after the patent has expired. Further-more, the ODA can confer market exclusivity evenwhen a patent is not or cannot be awarded.

Both types of Federal involvement were vital tothe development of alglucerase, a new and expen-

sive drug for Gaucher disease. Gaucher disease is aserious but rare genetic disorder that results frominsufficient activity of the enzyme glucocerebrosi-dase. Government-sponsored research conductedfrom the mid 1970s to the early 1980s led to thediscovery of alglucerase, an apparently efficaciouschemical derivative of the missing enzyme. Totranslate these scientific breakthroughs into betterpatient care required large-scale production of alglu-cerase, which could only occur as part of itscommercial development. Commercial development,in turn, built upon the scientific discoveries that ledto the discovery of alglucerase and it required theexpectation that the enterprise would be profitable.Product development might not have proceeded asquickly, if it proceeded at all, without orphandesignation.

In this paper, we describe the development of

Ceredase tm, a brand of alglucerase marketed byGenzyme, Inc. of Massachusetts, and the roles of theFederal Government in this process. We then focuson the provision of this drug-its availability and itscost implications for patients, the Federal Govern-ment, and private health insurance. The case of alglucerase dramatically illustrates the challengesthat Americans face in devising policies to controlhealth care costs without deterring the developmentof efficacious new technologies.

DESCRIPTION OF

GAUCHER DISEASEGaucher disease is an inherited metabolic disor-

der characterized by the accumulation of compoundscalled glycolipids, substances ordinarily brokendown by the enzyme glucocerebrosidase (8,18,19,20,33,78). A set of genetic defects in Gaucher patientscauses decreased activity or absence of this enzyme.Consequently, glycolipids, which are primarily de-rived from white blood cells, accumulate in thespleen, liver, bone marrow, and other organs. Theclinical manifestations of glycolipid deposition in-clude abdominal enlargement, low blood counts,and severe bone pain. Less frequently, the glycolip-ids can accumulate in the brain, lungs, heart, kidney,and Skin.

Forms of the Disease

The clinical severity of Gaucher disease variesdramatically, but the severity may not be closelyassociated with the specific genetic defect. Several




genetic mutations cause this enzyme deficiency(22,26,51,63,75,80,1 10,111) but, according to sev-eral researchers, the same mutation may lead toheterogeneous disease presentations, and patientswith similar clinical manifestations do not necessar-ily have the same genetic abnormality (8). Other

researchers claim that there is a strong associationbetween genetic abnormality and disease severity(20,22,26,61,108,124). As a group, these studiessuggest that there is a link between the twocharacteristics, but the strength of this link may beinfluenced by environmental conditions and otherunknown genetic factors.

Gaucher disease is classified into three categoriesbased on its clinical presentation. Type 1, the adultform, is usually the least severe. Although the namesuggests that this condition is present only in adults,it may manifest itself at any time. Its presentation isvery heterogeneous; some patients may be asympto-matic or have only minimal symptoms, while othersmay suffer severe and chronic life-long disability.This chronic condition affects the spleen, liver, andbone marrow. The enlarged spleen is thought toaccumulate and destroy platelets and red and whiteblood cells. The bone marrow, the normal site of production of blood cells, maybe unable to replacethe destroyed cells because it is also infiltrated withglycolipid. The patient consequently develops ane-mia, resulting in fatigue and shortness of breath. Alow platelet count causes excessive bruising andbleeding. The macrophages, cells which eliminatedebris and other contaminants from the blood andother tissues, become congested with unmetabolizedglycolipids and restrict blood flow to the bones,thereby decreasing the oxygen supply and causingthe bone pain experienced by many Gaucher pa-tients. This pain can be debilitating, resulting infrequent confinement to bed. The bones are alsomore likely to deteriorate and fracture, sometimesleading to deformities that restrict the patient to awheelchair. Although rare, breathing problems canbe severe enough to warrant oxygen therapy. Childdevelopment can be affected as well; the onset of puberty may be delayed, and the growth of teeth and

bones may be impaired. It was thought that Type 1disease tended to follow a progressive downhillcourse, but some investigators now believe thatwhen these patients reach early adulthood, thedisease course stabilizes (20).

Four genetic mutations are responsible for about97 percent of the cases of Type 1 Gaucher disease in

the Ashkenazi Jewish population (22,25,26). Threeof these abnormalities, designated by geneticists as1226, 1448, and IVS2+1 result from a singlesubstitution within the patients DNA (deoxyribonu-cleic acid). The fourth, 84GG, is due to an insertionin the DNA template. The 1226 mutation accounts

for 77 percent of the genetic mutations in theAshkenazi Jewish population but for only 25 percentof the cases in non-Jews. It is thought to cause a lesssevere form of the disease. The 84GG mutationcauses about 13 percent of the genetic abnormalitiesin the Jewish population and much less in thenon-Jewish segment. The IVS2+1 mutation, whichwas very recently described, accounts for about 2.5percent of the mutations in Jews and a much smallerpercentage in non-Jews. Persons with the 84GG andIVS2+1 mutations do not produce the enzyme andhave severe forms of Gaucher disease. The 1448abnormality, which is thought to be responsible for

more serious disease and for brain involvement,occurs in about 40 percent of the non-JewishGaucher population but in only 3 percent of theJewish Gaucher patients. These four genetic defectsaccount for only about 65 to 75 percent of the casesof Gaucher disease in the non-Jewish population.Remaining mutations are either unidentified orsporadic and restricted to a few families (51,63,80).

Type 2, the infantile form, is the most severe of the3 types. It usually becomes apparent before 6 monthsof age and is fatal within 2 years. Central nervoussystem involvement distinguishes this form of thedisease from Type 1. Infants with Type 2 diseasehave abnormal movements and postures, along withdifficulty handling oral secretions, and seizures.

Type 3, the juvenile form, is of intermediateseverity. Its manifestations are similar to those of Type 2, and include abnormal eye movements,seizures, and dementia, but it involves the neurolog-ical system later in its course.

Prevalence

The prevalence of each type of Gaucher diseasedepends on both its incidence (rate of new cases per

year) and the longevity of patients. The mostcommon form is Type 1, which affects AshkenaziJews at a greater rate than the general population.The other two types are rare; they appear to affect nomore than one of 50,000 births (8). The incidence of Type 3 disease is greater among people from theprovince of Norrbotten in Sweden than the popula-



6 qFederal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

United States (107,107a). As described later in thispaper, clinical researchers are currently investigat-ing the potential of alglucerase to benefit lessseverely affected patients (10) and sufferers of Type3 disease (21), as well as to provide prophylaxis toasymptomatic patients whose disease might other-

wise become symptomatic (32,61). The results of this research could lead to a growth in the potentialmarket for alglucerase.

Diagnosis

The disease is diagnosed by documenting theenzyme deficiency in various tissue sources. Whiteblood cells, which can be obtained from a sample of blood drawn from a vein, provide a convenient andreliable specimen. People with the disease havesubstantially less enzyme activity than normalsubjects, and thus there is no overlap between the

two groups. Measuring enzyme levels is not areliable test for the detection of carriers (i.e., peoplewith one abnormal gene) since their level of enzymeactivity is similar to that of normal people. Althoughassessment of the level of enzyme activity has beenestablished as a useful and dependable test for thediagnosis of Gaucher disease, some physicians stillresort to bone marrow examination. This is a morepainful, time-consuming, and costly procedure. Itrequires removing a sample of the patient’s bonemarrow either from the hip or sternum with aspecially designed needle and examining the mar-row for the presence of certain cells that are

characteristic of Gaucher disease. Bone marrowtesting is imperfectly sensitive, since the abnormalcells are not distributed uniformly throughout themarrow and may be absent from one or moresamples. In addition, cells found in other abnormali-ties may mimic these “Gaucher cells, ” leading to afalse-positive diagnosis (29).

Genetic analysis has improved detection of carri-ers, facilitating prenatal counseling and diagnosis(25,26). Since 95 percent of the genetic mutationscausing Gaucher disease in the Ashkenazi Jewishpopulation can now be easily identified (i.e., 1226,1448, 84GG

6), there is only 1 chance in about 1

million that a Jewish couple in which one of thesethree genetic defects is not found would be at risk forhaving a child with Gaucher disease. This risk decreases to about 1 in 1.6 million if both members

of the couple are examined for all the geneticmutations currently known to cause Gaucher dis-ease. If one but not the other parent has one of thesethree mutations, the risk is 1 in 1,000 that they willhave a child with Gaucher disease (25). If a parent isa carrier of a Gaucher gene and the other parent tests

negative for these three mutations plus all currentlydiscovered genetic defects, this risk would fall to 1in 1,300. For the non-Jewish population, carriertesting is less sensitive because only 65 to 75 percentof the genetic defects responsible for the diseasehave been characterized.

DNA analysis can be supplemented by measure-ment of enzyme activity in the potential parent. If theenzyme level is normal, it is even less likely that asubject who has no genetic abnormality will be acarrier. However, this method does not completelyexclude carrier states since, as previously men-tioned, the enzyme levels of normal people andcarriers can overlap significantly.

If both members of a couple are known to becarriers of Gaucher disease, the likelihood that theirchild will have the disease is one in four. Prenataldiagnosis can be performed through determinationof the fetus’s enzyme levels and DNA analysis of cells cultured from the mother’s amniotic fluid.Those researchers who claim that there is a strongcorrelation between genetic abnormality and clinicalseverity believe that genetic analysis of the fetus willenable them to advise the parents on potentialdisease course.

Treatment

Prior to the introduction of enzyme replacementtherapy, the goal of medical care was amelioration of the symptoms of the disease. Physicians sometimesrecommended splenectomy, surgical removal of thespleen, either because they believed that it hadenlarged enough to cause symptoms directly, or ithad trapped enough platelets to depress the plateletcount. Splenectomy is now reserved for unusuallysevere symptoms, because removal of the spleenincreases the risk of infection, and because un-

metabolized glycolipid may accumulate more rap-idly in other organs after the spleen is removed. Theanemia of Gaucher disease has been treated withblood transfusions; the bone pain with pain medica-

6 The recent ly d i scovered IVS2+l muta t ion ment ioned ear l i e r expla ins an addi t iona l 2 to 3 percent of genetic mutations causing Gaucher disease in

the Ashkenazi Jewish population. It is not yet known how this mutation alters the statistics on risk of Gaucher disease presented in this section.




tions, oxygen therapy, and bed rest; and otherskeletal problems with surgery.

Treatment of the underlying enzyme deficiencywas formerly a difficult and risky procedure. Untilthe development of enzyme replacement therapy,

the only form of treatment that actually corrected theunderlying disorder was bone marrow transplanta-tion, a process in which the cells of a patient’s bonemarrow are destroyed by radiation and chemother-apy and replaced by marrow from a normal donor(50,71,74,78,79,81,99,105,109). Because the cellu-lar elements of the transplanted marrow contain anormal gene for glucocerebrosidase, transplantationshould enable the patient to produce cells thatcontain normal levels of the enzyme. This procedurerequires a genetically matched donor, and even thenit remains a potentially lethal treatment for afrequently nonlethal condition. Fewer than 20 such

procedures have been performed successfully. Hopesthat transplanted spleens and kidneys would simi-larly serve as a permanent source of the enzymeproved fruitless (66,67).

ENZYME REPLACEMENTTHERAPY

The lack of success of these therapies for Gaucherdisease led to further efforts to replace the missingenzyme. Since the mid 1970s, investigators at anumber of institutions had been attempting to extractglucocerebrosidase from human tissue. Researchers

at the NIH and Scripps Clinic independently devel-oped methods to harvest the enzyme from humanplacental tissue (44,96). In 1975, a patent was issuedto two NIH researchers for their method (Applica-tion no. 451,300). However, initial efforts to treat atleast 18 patients with the enzyme were unsuccessful.Investigators were unable to produce sufficientquantities to administer adequate doses, and itbecame clear that the native enzyme would need tobe modified in order to ensure adequate absorptionby the cells in the body needing it most (17,23,24,34,35,37,64).

During the early 1980s, researchers made signifi-cant progress toward overcoming these obstacles(2,39,45,48,56,57,62,88,90,94,104,106). After de-vising a more efficient placental harvesting proce-dure, they developed a modified form of the enzymethat was preferentially absorbed by macrophages,the cells that utilize the enzyme to break downglycolipids. They also designed a more effective

dosage protocol (14). Alglucerase infusions werefound to have therapeutic potential in the treatmentof Type 1 disease. Even now, it is not known whetherthis treatment influences the forms of Gaucherdisease that affect the nervous system.

There is a great deal of controversy about the besttreatment regimen to use. It is very difficult todistinguish the efficacy of alternative regimensbecause there are no direct comparisons of theregimens in randomized clinical trials. Furthermore,it is difficult to ascertain whether the patientpopulations in different studies are truly compara-ble. Finally, in part because Gaucher disease is anuncommon condition, the number of patients inmany of the studies is too small to confer adequatestatistical power.

Mode of Administration

The modified enzyme is packaged as a liquid in a5-milliliter (ml) vial containing 400 units or 80units/ml. Before patient administration, the concen-trated form of the enzyme is diluted with a salinesolution to 100 ml (4 units/ml). Ordinarily the drugcan be administered on an outpatient basis by anurse. An intravenous line is started, usually in theforearm, and each patient is given a 5-ml test doseand observed for 10 minutes. If no adverse reactionis noted, the remainder of the predetermined dose isadministered over a 1-to 2-hour period. If the patientdoes not experience any ill feelings during this

interval, he or she leaves shortly after the infusion iscompleted.

Clinical Experience

NIH, Scripps Clinic, and Mount Sinai MedicalCenter have the greatest clinical experience withalglucerase. Each has pursued somewhat divergentdosing strategies. This section reviews the clinicalexperience of each institute chronologically. Fol-lowing the presentation of this evidence, conclu-sions are drawn regarding the efficacy of varioustreatment strategies.

Clinical experience with chemically modifiedenzyme actually began in 1983 at the NIH, but muchof this early work is unpublished. The FDA consid-ered NIH data in its regulatory review of alglucerase,along with data from Genzyme acquired during theIND (Investigational New Drug) phase. The existingclinical experience with alglucerase is summarizedin table 2.




Table 2—Clinical Experience With Ceredase

Number ofInstitution Date patients Dosage regimen

NIH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1983 8 2-12 units/kg weekly

NIH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1983-present 1 30 units/kg weekly and biweekly (high-doseunfractionated)

NIH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1986-1988 23 0.6-234units/kg single dose

NIH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1989-present 12 60 units/kg weekly and biweekly for 2 years;decreased to 30 units/kg for 6 months (high-dose unfractionated) and then further re-duced to 15 units/kg

NIH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fall 1991-present 40 IO units/kg biweekly (low-dose unfractionated)

Scripps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1990-present 20 2.3units/kg 3 to 7 times weekly (low-dosefractionated)

Shaare Zedek Medical Center,lsrael . . . . . 1991-present 10 2.3 units/kg biweeklyMount Sinai Medical Center, New York... 1990-present 41 7.5-60 units/kg biweekly

Albert Einstein College of Medicine . . . . . . 1990-present 1 60 units/kg biweeldy

University of Pittsburgh . . . . . . . . . . . . . . . . 1990-present 1 60 units/kg biweeklyUniversityof NewMexico . . . . . . . . . . . . . . . 1990-present 1 60 units/kg biweekly

SOURCES: N. Barton, “Ceredase (Microphage-Targeted Glucocerebrosidase) for the Treatment of Type 1 Gaucher’s Disease,” Proceedings From the Endocrinologic and Metabolic Advisory Committee 1 :135-248, 1990; N.W. Barton, F.S. Furbish, G.J. Murray, et al., “Therapeutic Response toIntravenous Infusions of Glucocerebrosidase in a Patient With Gaucher Disease,” Proceedings of the National Academy of Sciences USA

87:1913-1916, 1990; N.W. Barton, R.O. Brady, J.M. Dambrosia, et al., “Dose-Dependent Responses to Microphage-Targeted Glucocerebrosi-dase in a Child With Gaucher Disease,” Journal of Pediatrics 120:277-280, 1992; N.W. Barton, G.J. Murray, and R.O. Brady, “Hematological

Responses Are Dependent on the Amount of Glucocerebrosidase Administered to Patients With Gaucher’s Disease,” Blood 78:431a, 1991; N.W.Barton, R.O. Brady, J.M. Dambrosia, et al., “Replacement Therapy for Inherited Enzyme Deficiency-Microphage Targeted Glucocerebrosidasefor Gaucher’s Disease,” New EnglandJournalofMedicine 324:1 464-1470, 1991; N. Barton, Chief, Clinical Investigation Section, Developmentaland Metabolic Branch, National Institute of Neurological Disorders and Stroke, National Institutes of Health, Bethesda, MD, personalcommunication, January 21, 1992; E. Beutler, “Gaucher’s Disease,” New EnglandJoumalof Medicine 325:1354-1360, 1991; E. Beutler, A. Kay,A. Saven, et al., letter, New Journal of Medicine 325:1809-1810, 1991; E. Beutler, A. Kay, A. Saven, et al., “Enzyme Replacement Therapy forGaucher Disease,” Blood78:l 183-1190, 1991; E. Beutler, Chairman, Department of Molecular and Experimental Medicine, Scripps ResearchInstitute, La Jolla, CA, personal communication, February 26, 1992;A. Zimran, I. Hadas-Halpern, and A. Abrahamov, letter, New EnglandJournal of Medicine 325:181 O-1811, 1991; G. Grabowski, Professor, Department of Genetics and Molecular Biology, Mount Sinai Medical Center, NewYork, NY, personal communication, January 28, 1992; S. Fallet, M.E. Grace, A. Sibille, et al., “Enzyme Augmentation in Moderate toLife-Threatening Gaucher Disease,” Pediatric Research 31:496-502, 1992; H.M. Nitkowsky, A. Madan, and H. Goldman, “Experience WithIntravenous Infusions of Glucocerebrosidase in a Patient With Gaucher Disease,” abstract #560, American Journal of Human Genetics, vol. 49,1991; T. Ohashi, S. Marchese, D. Pegram, and J.A. Barranger, “Development and Application of a Treatment for Gaucher Disease UsingGlucocerebrosidase Targeted to Macrophages,” abstract #552, American Journal of Human Genetics, vol. 49, 1991; T.J. Gribble and K. Latimer,“Successful Use of Enzyme Therapy in Gaucher’s Disease,” abstract #556, American Journal of Human Genetics, vol. 49, 1991; R.O. Brady, J.M.Dambrosia, and N.W. Barton, “Effectiveness of Low-Dose Replacement Therapy in Gaucher’s Disease,” Clinical Research 40:144A, 1992; M.L.Figueroa, Y. Sate, A. Kay, and E. Beutler, “Efficacy of Frequently Administered Microphage-Targeted Glucocerebrosidase in the Treatment ofGaucher Disease,” Clinical Research 40:167A, 1992; A. Abrahamov, 1. Hadas-Halpern, E. Levy-Lahad, and A. Zimran, “Enzyme ReplacementTherapy for Children With Gaucher Disease: Low Dose, High Frequency, Lower Cost, High Efficacy,”Pediatric Research 31 :137A, 1992; G.M.

Pastores, A.R. Sibille, and G.A. Grabowski, “Enzyme Augmentation Therapy in Gaucher Disease Type 1: Dosage, Efficacy and Adverse Effects,”Clinical Research 40:357A, 1992.

The National Institutes of Health

NIH’s first efforts (during the early 1980s) withthe microphage-tmgeted alglucerase involved eightpatients. These participants received a freed weeklydose of 189 units (9). Only one of these patients, thesmallest, showed any clinical improvement. Hisallotment was equivalent to a dose of 9-12 units/kg,the highest in the study (10). Since that time, he hascontinued to receive enzyme replacement therapy

with weekly to biweekly doses of 30 units/kg (9).His blood counts improved, the size of his spleen andliver decreased, and his bone is rebuilding. Althoughthe patient had a more marked response to the higherdosage of enzyme, he did respond at the lower doses.The red blood cell count initially rose 11/2 timesmore rapidly with the high dose than with the

low-dose regimen. On the low-dose regimen, the redcell count improved, but did not normalize (12,15).

To refine the dosage regimen, NIH researcherstested the responses of 23 patients to the administra-tion of single doses of alglucerase. The doses rangedfrom 0.6 to 234 units/kg. They measured plasmalevels of the enzyme during the infusion, thenestimated their clearance from the bloodstream afterthe infusion was stopped (15). Forty-four hours later,NIH researchers performed a liver biopsy in 21 of these patients (9).

From the lowest dose up to approximately 100units/kg of body weight, the plasma concentration of the enzyme increased in proportion to the amount of enzyme infused. Beyond this dose, there was nofurther rise in its plasma concentration, suggesting




that the enzyme receptors (the sites on the macro-phage that actually absorb the enzyme) were satu-rated. Thus, doses beyond 100 units/kg appear not tobe efficiently utilized by the body.

Liver glucocerebroside levels decreased in 8 of 11patients who received greater than 30 units/kg,whereas it decreased in only 1 of 10 patients whoreceived a lower dose. However, 6 of these 10low-dose patients had some apparent diminution inglucocerebroside storage deposits in the liver byelectron microscopy.

Interpreting these findings to mean that a mini-mum dose of 30 units/kg was required for initialtherapy, NIH investigators enrolled four adults andeight children with moderate to severe Type 1Gaucher disease in a study of a higher dosageregimen (11,89). This is the only case series the NIHhas published about its clinical experience withalglucerase. Upon entry into the study, all patientswere anemic, had enlarged livers and spleens, anddisplayed evidence of bone abnormalities on x-rays.Study participants received 60 units/kg of alglu-cerase administered intravenously every 2 weeks.Two severely affected patients received twice thatdosage in weekly alglucerase infusions of 60 units/ kg. After 9 to 12 months of therapy, all participantsexperienced improvement and none suffered significant toxicity. The red blood cell count increasedsignificantly in all 12 patients and the platelet countincreased significantly in seven patients. The spleen

size decreased significantly in all patients and theliver in five. Bone pain responded less dramatically.All recipients felt that their quality of life hadimproved as a result of the enzyme replacementtherapy. In a comparison with 12 untreated Gaucherpatients, all adults with less severe disease, thetreated group performed more favorably. However,this comparison group cannot be considered acontrol group in any conventional sense, becausethere was no attempt to match patients in anyfashion.

The dose of 60 units/kg biweekly was continued

in these 12 patients for a second year. NIH research-ers (10) observed that the maximum hematologicalresponse occurred after 9 to 12 months of enzymereplacement therapy and then plateaued. The great-est decline in liver and spleen size seemed to occur

later; after 18 months there was a 55 percentdecrease in splenic size. On the basis of the responseof a child they began treating in 1983, NIHresearchers believe that significant skeletal im-provements do not develop until after at least 3 yearsof therapy. After 2 years on the therapy, the dose was

decreased to 30 units/kg biweekly for 6 months andthen further reduced to 15 units/kg biweekly. After4 months at this dosage (July 1992), the clinicalstatus of the patients had not deteriorated. Theresearchers expect to reduce the dosage further to 7.5units/kg biweekly in September 1992, with furtherreductions planned, dependent on the clinical well-being of the patients (10).

NIH has two experiences with lower dose therapy(10). One is a single case of a patient whose dose wasdecreased from 60 units/kg biweekly to 7.5 units/kgbiweekly. He continued to show improvement,albeit modest, on the lower doses. In the other case,NIH is conducting a two-anneal trial involving lessseverely ill patients than the previously describedstudy. Each arm enrolled 20 patients, none of whomhad undergone splenectomy. The researchers initi-ated enzyme therapy in both groups using 10units/kg biweekly. One group was also given avitamin designed to enhance the uptake of theenzyme by increasing the number of microphagereceptors. Of the 12 patients for whom preliminaryresults are available (it is not yet known from whicharm they originated), 8 had significant improvementin their red blood cell count, and 3 of them

experienced a reduction in spleen size after 6 monthsof therapy (36). These data imply that treatment canbe initiated at lower doses of enzyme in clinicallystable patients without immediately threateningmedical problems (10). Table 3 summarizes the dataon the efficacy of low-dose (unfractionated) therapy.

Scripps Clinic

Researchers at Scripps Clinic have reported ad-ministering alglucerase to 11 patients with moderateto severe

7Type 1 Gaucher disease for 3 to 24 months

(20,27,28,53). They utilized only one-quarter of the

total dose recommended by NIH (30 units/kg every4 weeks), but gave it 3 times weekly. Their rationalefor a frequent (or fractionated) low-dose therapyrests on the hypothesis that there are two types of receptors on human macrophages for glucocerebro-

7 Researchers at NIH have claimed that because some of the patients at Scripps do not have a spleen, the amount of glycolipid deposits may be less

than that of patients at NIH and thus the two patient populations may not be comparable.




Table 3-Clinical and Experimental Evidence Supporting Low-Dose Therapy Unfractionateda

Institution Year Experience

NIH . . . . . . . . . . . . . . . . . . . . . . . . 1983-present

NIH . . . . . . . . . . . . . . . . . . . . . . . . 1986-1988

NIH . . . . . . . . . . . . . . . . . . . . . . . . 1991-present

NIH . . . . . . . . . . . . . . . . . . . . . . . . 1990-present

NIH . . . . . . . . . . . . . . . . . . . . . . . . 1991-present

Mount Sinai Medical Center,New York . . . . . . . . . . . . . . . . . 1990-present

Genzyme’s internationalCollaborative GaucherGroup . . . . . . . . . . . . . . . . . . . . 1992

Single patient had some improvement in his hemoglobin at doses as low as 9-12units/kg.

23 patients received a single infusion of the enzyme in doses ranging between0.6-234 units/kg. Although only 1/10 of the patients receiving less than 30units/kg had a decrease in liver glucocerebroside, 6/10 had structuralchanges in hepatic storage deposits.

12 patients who received at least 2 years of enzyme therapy with 60 units/kgbiweekly were decreased to 30 units/kg biweekly for 6 months and theirhematological response was stable. Currently they receive 15 units/kg, andafter 4 months on this dose, their clinical status has not deteriorated.

Single patient was decreased from 60 units/kg biweekly to 7.5 units/kg biweekly.There was a modest but milder improvement observed at the lower dose.

40 patients are receiving 10 units/kg biweekly; and 20 of these are also receivinga therapy designed to enhance the uptake of the enzyme. Preliminary datasuggest both groups are responsive.

41 patients are being treated with doses between 7.5 and 60 units/kg biweekly.The observed clinical responses do not appear to be dose dependent.

Approximately 75 patients throughout the country received initial doses lowerthan 60 units/kg biweekly. They demonstrate increased red blood cell countsand decreased organ volume after 1 to 3 months of therapy.

a Unfractionated refers to Iow-dose therapy being given biweekly rather than three times weekly.

SOURCES: N. Barton, “Ceredase (Microphage-Targeted Glucocerebrosidase) for the Treatment of Type 1 Gaucher’s Disease,” Proceedings From the Endocrinologic and Metabolic Advisory Committee 1 :135-248, 1990; N.W. Barton, F.S. Furbish, G.J. Murray, et al., “Therapeutic Response toIntravenous Infusions of Glucocerebrosidase in a Patient With Gaucher Disease,” Proceedings of the National Academy of Sciences USA87:1913-1916, 1990; N.W. Barton, R.O. Brady, J.M. Dambrosia, et al., “Dose-Dependent Responses to Microphage-Targeted Glucocerebrosi-dase in a Child With Gaucher Disease,” Journal of Pediatrics 120:277-280, 1992; N.W. Barton, G.J. Murray, and R.O. Brady, “HematoIogicalResponses Are Dependent on the Amount of Glucocerebrosidase Administered to Patients With Gaucher’s Disease,” Blood78:431a, 1991; N.W.Barton, R.O. Brady, J.M. Dambrosia, et al., “Replacement Therapy for Inherited Enzyme Deficiency-Microphage Targeted Glucocerebrosidasefor Gaucher’s Disease,” New EnglandJournal ofMedicine 324:1 464-1470, 1991; N. Barton, Chief, Clinical Investigation Section, Developmentaland Metabolic Branch, National Institute of Neurological Disorders and Stroke, National Institutes of Health, Bethesda, MD, personalcommunication, January 21, 1992; M.D. Grabowski, Department of Genetics and Molecular Biology, Mount Sinai Medical Center, New York, NY,personal communication, January 21, 1992; S. Fallet, M.E. Grace, A. Sibille, et al., “Enzyme Augmentation in Moderate to Life-ThreateningGaucher Disease, Pediatric Research 31 :496-502, 1992; A. Taunton-Rigby, Senior Vice President, Bio-Therapeutics, Henri Termeer, ChiefExecutive Officer, and David McLachlan, Senior Vice President, Chief Financial Officer, Genzyme, personal communications, Boston, MA,February 26, 1992; R.O. Brady, J.M. Dambrosia, and N.W. Barton, “Effectiveness of Low-Dose Replacement Therapy in Gaucher’s Disease,”Clinical Research 40:144A, 1992; G.M. Pastores, A.R. Sibille, and G.A. Grabowski, “Enzyme Augmentation Therapy in Gaucher Disease Type1: Dosage, Efficacy and Adverse Effects,” Clinical Research 40:357A, 1992.

sidase; one is present in low concentra tion but h as a nenhanced ability to bind the enzyme; the otherreceptor is present in much greater quantities but isless able to bind the enzyme (21,28,53). Conse-quently, the Scripps researchers believe that whenhigh doses of the enzyme are administered assuggested by NIH, it quickly saturates the former orhigh affinity receptors. Most of the enzyme thengoes t o the low affinity r eceptors, wh ere it isdegraded without alleviating the patient’s symp-toms. The scientists who favor high-dose therapy donot dispute the existence of a low-affinity receptor;they only take issue with the idea that it plays a role

in the absorption of the enzyme. They argue that thehigh affinity receptors are not saturated with enzymeuntil doses exceed 100 units/kg (10,13,15). TheScripps investigators favor more frequent therapybecause they believe that the intra-cellular half-lifeof the enzyme is about 8 hours. Giving large

amounts of the enzyme every 2 weeks essentiallyloads the target cells with excessive amount of enzyme which delivers no therapeutic effect after 1or 2 days. Table 4 summar izes the chief argumentson each side of this controversy.

All patients experienced a decrease in the size of the liver of a similar magnitude to the NIH patientson the high dose unfractionated therapy. In thepatients who had not undergone spleen removal, thespleen became smaller. The blood counts increasedin all of these pat ients but the Scripps stu dy does notstate whether these changes were statistically signif-

icant.Approximately 10 other patients at Scripps and 10

in Israel are also receiving the lower dose regimen.Their response has been similar to the publishedresults from the Scripps study (20,21). Results havebeen published on only three of these patients from




Table 4-Scientific Basis for Biweekly High-Dose Unfractionated Versus Low-Dose Fractionated

Dosing regimen Theoretical basis

80 units/kg for first year of therapy administered . Single type of macrophage receptor for glucocerebrosidase which is notevery 2 weeks saturated at doses below 100 units/kg.

. The glycolipid acoumulates slowly in untreated patients, and giving the enzymemore frequently confers no therapeutic advantage.

30 units/kg every 4 weeks, usually spread out over. Two types of receptors for the enzyme: a low concentration of high affinity

12 infusions (i.e., 3 times a week) receptors and a high concentration of low affinity receptors; high doses rapidlysaturate the latter receptors where the enzyme confers little therapeutic benefit;low doses bind preferentially to the former receptors where drug exerts muchgreater effect.

q Intracellular half-life of the enzyme is 8hours; therefore giving large amounts ofthe enzyme infrequently loads target cells with enzyme which delivers little effectafter a few days.

SOURCES: N.W, Barton, G.J. Murray, and R.O. Brady, “Hematological Responses Are Dependent on the Amount of Glucocerebrosidase Administered toPatients With Gaucher’s Disease,”B/ood78:431 a, 1991; N. Barton, Chief, Clinical Investigation Section, Developmental and Metabolic Branch,National Institute of Neurological Disorders and Stroke, National Institutes of Health, Bethesda, MD, personal communication, January 21, 1992;E. Beutler, Chairman, Department of Molecular and Experimental Medicine, Scripps Research Institute, La Jolla, CA, personal communication,January 21, 1992; M.L. Figueroa, Y. Sate, A. Kay, and E. Beutler, “Efficacy of Frequently Administered Microphage-Targeted Glucocerbrosidase

in the Treatment of Gauoher Disease,” C/in&/Research 40:167A, 1992.

Israel, all children. The two most severely afflictedreceived 30 units/kg every 4 weeks spread out over

12 infusions (three times weekly), while the least illreceived the same 30 units/kg every 4 weeks spreadout over only four infusions. The first two patientshad more dramatic hematologic and organ re-sponses, suggesting that frequency of infusion maybe as important as dose (1,125).

Mount Sinai Medical Center

In a published study conducted at Mount SinaiMedical Center in New York, researchers adminis-tered alglucerase for 6 to 12 months to three childrenand eight adults with moderate to severe Type 1

Gaucher disease; two received 30 units/kg biweekly,three 50 units/kg biweekly, and the remaining six 60units/kg biweekly (52). Four patients were splenec-tomized. Within 6 months, the red blood cell countincreased in all patients, the platelet count increasedin eight patients, and the liver and spleen sizedecreased in all. The average responses were of similar magnitude to those observed by NIH after 9to 12 months of therapy. Furthermore, the MountSinai investigator concludes that responses wereindependent of the dose and presence of a spleen.

More recently in a published abstract, the investi-gator reported his preliminary findings in giving

doses of alglucerase of 15 to 60 units/kg biweekly to34 patients (age 2 to 71 years; 16 splenectomized)with moderate to life-threatening Type 1 Gaucherdisease. Red blood cell and platelet counts increasedwithin 3 to 12 months and hepatic and splenicvolumes decreased by 12 to 18 months. The changein red cell blood counts and organ (liver and spleen)

size were not clearly related to the initial dose (30 to60 units/kg biweekly) and the rate of organ decrease

was not related to dosage decrease, thus tending toreinforce the earlier results. Improvement in bloodcounts was slowed in those with the largest spleens.

Conclusions Regarding Efficacy

The existing clinical experience suggests thefollowing conclusions about the efflcacy of enzymereplacement therapy:

a)

b)

c)

d)

It is generally accepted that alglucerase injec-tions are beneficial for those patients withType 1 Gaucher disease who have sufficientlylow blood counts or enlarged livers and

spleens or bone disease to cause symptoms(1,11,20,27,36,52,53,61,65,92,93,95,107,125).No significant toxicity has been observed.Since the enzyme replacement therapy gradu-ally metabolizes accumulated glycolipids, itwould be of no use in quickly amelioratingacute crises of severe bone pain or uncon-trolled bleeding.Clinical experience with the treatment hasbeen too limited to assess its impact onmortality in the peer reviewed literature. How-ever, according to Genzyme and other re-searchers, patients who were pre-terminalprior to the initiation of enzyme replacementtherapy now enjoy a functional lifestyle (10,61,107).It is unclear at what stage in the disease apatient should begin therapy. Alglucerase maybe most effective if it is given to youngerpatients, before accumulating glucocerebro-




side deposits have irreversibly damaged nor-mal tissue. Some researchers advocate initiat-ing treatment before the patient becomessymptomatic, believing that it might arrest thedevelopment of disease (32,61). As suggestedearlier in this paper, such an approach coulddramatically increase the number of patients

on enzyme replacement therapy. However, atthis time, nothing is known about long-termadverse effects of alglucerase. It is possiblethat the therapy itself will cause adverseeffects in patients who would never experi-ence the symptoms of Gaucher disease. Inaddition, such a treatment strategy might alsooutstrip the manufacturer’s ability to supplythe drug.

8

Conclusions Regarding Appropriate Dosing Regimens

Much of the published literature has concernedinitial therapy of Gaucher disease with alglucerase.However, therapy is likely to be given in two phases,an initial phase (presumably with relatively hightotal doses) to remove accumulated glycolipiddeposits from the tissues, and a maintenance phase(lower dose) to prevent the reaccumulation of thedeposits. Investigators are currently evaluating themost effective doses and dosing schedule for bothphases of therapy.

Initial Therapy

Uncertainty surrounds the choice of an initial

dosage strategy. Most experts believe that the initialdose required to metabolize the glycolipid debris ina moderate to severely ill patient with a spleen mustbe about 60 units/kg biweekly (high-dose unfractionated therapy). For those patients with less severedisease, an initial dose as low as 10 to 30 units/kgbiweekly may be sufficient (10,13). Others suspectthat lower doses administered three times a week(low-dose fractionated therapy) are more effica-cious (20,21,28,53). These researchers base thisclaim on two hypotheses summ arized earlier: 1) theenzyme half-life is very short; and 2) there are twotypes of receptors that absorb glucocerebrosidase.

The proponents of high-dose un fractionat ed th er-apy do not believe that a second low affinity receptorfor glucocerebrosidase plays an important role. Theyclaim that the rate of accumulation of glucocerebro-

side in untreated Gaucher patients is slow and thatthere is no advanta ge to frequent infusions. The totaldose of enzyme, not the frequency of administration,determines the patient’s response to therapy. Fur-thermore, they argue that the high- and low-dosetrials that have been conducted are not directlycomparable, since some patients participating in the

low-dose fractionated studies did not have a spleen.The absence of a spleen, the greatest reservoir forstored glucocerebroside, may have decreased thesepatients’ requirement for the dru g, thus increasing itsapparent effectiveness. Definite conclusions cannotbe drawn about the relative efficacies of theseregimens because there has been no direct compari-son in one study drawing from the same patientpopulations. Furthermore, because they enrolledsmall numbers of patients , the studies do not havethe statistical power to detect modest differences ineffectiveness.

Maintenance Therapy

There is even greater uncertainty about theappropriate dose for long-term therapy. Genzymebelieves that the NIH liver biopsy data and recentNIH dosage reduction studies (10,13), previouslydescribed, suggest that after about 12 months of high-dose therapy, a maintenance dose of 7.5 to 15units/kg biweekly (low-dose unfractionated ther-

apy) ma y be adequa te t o cont rol the pat ient’sproblems. However, the NIH investigations are toopreliminary to support such a conclusion (21,61).The NIH t rials did not even at tempt t o lower th e doseuntil 2 years of high-dose therapy had been com-

pleted, and they have not even begun to treat anypatients with a maintenance dose lower than 15units/kg biweekly.

In Summ ary, the clinical evidence supports theefficacy of two dosing strategies for moderate toseverely ill patients. Because the clinical experienceinvolves small numbers of patients with varyingdegrees of disease severity, and some with and somewithout spleens, the relative efficacy of these tworegimens has not been established:

q High-dose unfractionated therapy (30 to 60units/kg biweekly) for one to two years depend-

ing on disease severity, followed by mainte-nance therapy using a low-dose unfractionatedregimen (probably 15 to 30 units/kg biweekly).There is as yet no published evidence to support




the efficacy of maintenance therapy with a doselower than 15 units/kg biweekly.

. Low-dose fractionated therapy (2.3 units/kgthrice weekly). Researchers investigating thisregimen believe that if the high-dose unfrac-tionated therapy can be reduced after about 1

year, then this low-dose fractionated strategycan also probably be reduced.

9The minimum

effective dose for such a strategy has not beenestablished (21).

THE DISCOVERY ANDDEVELOPMENT OF

ALGLUCERASE

To bring a new drug to market, a company mustinvest in the research and preclinical and clinical

development required for approval by nationalagencies in charge of new drug approval (47). In theUnited States, the FDA is the national agency whoserequirements for new drug approval govern entry tothe market. Even after a company files a New DrugApplication (NDA)-a request to market the drug inthe United States—it may conduct additional R&Don new formulations, drug dosage forms, manufac-turing processes, or indications for use. Genzyme isno exception. The company incurred substantialcosts in developing its placental form of alglucerasefor the market.

In the case of alglucerase, however, direct andindirect Federal subsidies for R&D had a majorimpact on the costs of attaining market approval forthe drug. NIH bore a substantial part of the costs of R&D. The FDA expedited the review of the drug andgranted Genzyme limited rights to sell the drugbefore it was approved for marketing under aprovision known as the “Treatment IND.”

This section outlines the history of the algluceraseR&D process and presents estimates of the total costof obtaining market approval for Genzyme’s placen-tal form of alglucerase (marketed under the brandname Ceredase

tm), including estimates of the por-

tion of the cost borne by three groups: the privateinvestors in Ceredase

tm, NIH, and the consumers

who paid for the drug before it was approved formarketing. Table 5 contains a brief of the criticalmilestones in the development process.

Table 5-The Development of Ceredase

Date Milestone

1965

1974

1981

December 1983

March 1985

September 1987

March 1988

March 1989

October 1989February 1990April 1990April 1991

November 1991

Gaucher disease first attributed to glucocere-brosidase deficiency.

Enzyme replacement therapy first attemptedat NIH as a treatment for the disease.

Genzyme begins to supply NIH with the

enzymeFirst successful treatment with the modified

form of the enzyme is begun at NIH.Genzyme receives orphan designation for

the modified placenta-derived enzyme.Clinical Partnership (Genzyme Clinical Part-

ners, L. P.) established with $10 million tofund research and development.

FDA allows Genzyme’s IND application forCeredase, its trademarked name for themodified enzyme.

Clinical trials begin at NIH with 12 Gaucher’spatients.

Treatment IND protocol approved by FDA.Clinical partnership bought out by Genzyme.Genzyme files an NDA for Ceredase.FDA approves Ceredase for the treatment of

Gaucher disease (Type 1).Genzyme receives orphan designation for a

recombinant form of the enzyme.

KEY: FDA - Food and Drug Administration; IND - Investigational NewDrug; NDA - New Drug Application.

SOURCE: Office of Technology Assessment, 1992.

History of Alglucerase Development

Genzyme Corporation: Background

Founded in 1981, Genzyme is a diversifiedpharmaceutical company with four divisions: bio-therapeutics, diagnostic products, diagnostic serv-

ices, and pharmaceuticals and fine chemicals. Thecompany’s general strategy, according to its 1991annual report, is to take advantage of its expertise incarbohydrate engineering, protein chemistry, andenzymology to develop and sell profitable healthcare products. The strategy appears to have beensuccessful: the price of Genzyme’s stock rose fromless than $13.50 per share in the second quarter of 1986, when the company went public, to $42.00 asof September 1, 1992. The stock has traded at pricesas high as $66.50. In 1990, the year prior to FDAapproval of alglucerase, the company reported totalrevenue of approximately $55 million, derivedmainly from product sales and revenue from R&Dcontracts. The company had 1991 revenues of approximately $100 million. Alglucerase sales ac-counted for approximately $37.25 million of thistotal (73,86,107).

9These researchers have not presented evidence to support this suggestion.




The company manufactures its products at foursi tes in the United States and England, and i temploys approximately 850 people worldwide (650in the United States). About 40 percent of theemployees are involved in manufacturing and distri-bution, 25 percent in R&D, and a bout 18 percent inmarketing and sales. The remaining 17 percent work

in administration or finance.Ceredase

TM, the Biotherapeutics group’s flagship

product, is expected to have sales of $200 million by1993 (4). At least 12 other products are in variousstages of development, regulatory review, and pro-duction. The compa ny is a lso aggressively pursu ingthe development of the recombinant DNA (geneti-cally engineered) form of the enzyme (currently inclinical trials) and is building a new facility tomanufacture i t in larger quanti t ies

lO; clinical trials

using the recombinant form are expected to becompleted by the end of 1992 (107).

Orphan Designation for Alglucerase

The Orphan Drug Act, enacted in 1983, providespotentially sizable financial incentives for the develop-ment of treatments for rare disorders (i.e., thoseaffecting 200,000 or fewer people in th e Un itedStates). When a drug under development is givenorphan status by the FDA, it is eligible for a 50percent income tax credit on qualifying clinicalresearch.

llAt the time it was developing the

placental form of alglucerase, however, Genzymehad no current tax liability, so it could not use the taxcredit. The most powerful incentive in the law for acompany such as Genzyme is that the FDA grants a7 year period of exclusive marketing to the frost firmwhose orphan product obtains FDA approval for aspecific indication. Because NIH had discoveredalglucerase, Genzyme could not rely on patentprotection to ensure an adequate return on i tsinvestment. As a result, without orphan designation,Genzyme would ha ve ha d t o rely solely uponproprietary information to give it a competitiveedge. Given the difficulty in maintaining the secrecyof the manufacturing process, such an advantagewould have been a shaky foundation on which tobegin the development of a new drug. Thus, orphandrug designation was a n important st imulus to thedevelopment of this drug.

Genzyme filed for orphan designation for alglu-cera se in 1983 and officially received orphan sta tusfrom the FDA in March 1985.

R&D Limited Partnership for theDevelopment of Alglucerase

After the FDA granted orphan status for alglu-

cerase, Genzyme entered into a joint venture with alimited partnership, Genzyme Clinical Partners, “todevelop, manufacture and sell injectable productsincorporating modified forms of the enzyme. . .’(59). Genzyme Development Corporation, a wholly-owned subsidiary of Genzyme, was designated thegeneral partner of the venture (the general partner isthe party with unlimited financial liability). Begin-ning in September 1987, the joint venture madeGenzyme responsible for conducting human clinicaltrials, improving the manufacturing process, andseeking FDA approval for alglucerase (59). Thelimited partners contributed $10 million to this

endeavor. In return for undertaking this research, thecorporation was reimbursed by the partnership for itsquarterly projected costs, plus a 7 percent fee. Theagreement also stipulated that Genzyme wouldcontribute additional research funds, if necessary, tofurther develop and market the product (107). Thepartnership received an immediate $400,000 cashpayment and a 2 percent royalty on future productsales for the use of some proprietary technologies.

Under the terms of the joint venture agreement,any future product would be marketed throughGenzyme, at a cost to the joint venture of 28 percent

of selling prices net of certain expenses. Fiftypercent of the profits from any product sales were togo to Genzyme and 50 percent to the partnership.After 36 months, Genzyme had an option to acquireall rights to the developed technology for $10million in cash and stock and a 4 percent royalty onproduct sales to the year 2000. As part of the initialpartnership agreement, Genzyme granted warrantsto the investors in the partnership. These warrantsentitled the investors to the right to purchase justover 300,000 shares of common stock at pricesranging from $18.125 per share to $20.125 per sharefrom September 1, 1989 through August 31, 1994.

After the Partnership’s initial funding ran out atthe end of 1989, Genzyme bought out the partner-

10 This facility will also house other Gen zymeoperations.

11 “Qualifying research” is defined b y the Internal Revenue Service as excluding all management and supervision expenses except the d irectsupervision of scientists and technicians. Thus, not all clinical research expenditures are eligible for the tax credit.




ship in February 1990. From this transaction, thepartners received 1,406,000 shares of common stock valued at approximately $21 million (59). Genzymecharged this expense to “purchase of in-processresearch and development” in its statement of operations.

The Regulatory Process

Genzyme received approval for an IND applica-tion to begin clinical trials of its modified form of theenzyme in March 1988 (102). Primarily on the basisof encouraging results from the l-year NIH studyinvolving 12 patients (11,89), Genzyme fried itsNDA for alglucerase in April 1990 and receivedapproval 1 year later. Although the FDA usuallyrequires randomized clinical trials to establish effi-cacy, such studies are often impractical for rare

conditions. In approving alglucerase, the FDA reliedalmost exclusively on observational studies. Theapproval of the NDA was expedited by Subpart Edesignation, a new FDA regulation designed toexpedite the review of drugs for life-threatening orseverely debilitating illnesses (115). (This regula-tion is separate from the provisions of the ODA.)Genzyme chose not to receive official protocolassistance from the Office of Orphan ProductDevelopment, relying instead on informal channelsof communication (107).

Treatment IND

Between October 1989 and April 1991, alglu-cerase was made available to patients around thecountry under the FDA’s Treatment IND program.This program is designed to facilitate access toexperimental drugs for the treatment of otherwise

untreatable diseases. Under this arrangement, Gen-zyme sold the drug to patients not enrolled in clinicaltrials whose physicians agreed to abide by a specificprotocol (107,1 15). As part of Treatment IND regula-tions, Genzyme was entitled to charge patients a pricesufficient to recover the “costs of manufacture,research, development, and handling of the investiga-tional drug (115). ” The FDA approved a price of $3.00 per unit. After final FDA approval signified theend of the Treatment IND program, the market priceof alglucerase was set at $3.50 per unit (107).

Genzyme and NIH

By the end of 1975, NIH researchers had patentedtheir method for harvesting the enzyme. Between1976 and 1981, NIH contracted with the NewEngland Enzyme Center at the Tufts UniversityMedical School to supply it with sufficient quanti-ties of the enzyme in accordance with the NIH-devised protocol (107). During this period, thecontracts amounted to almost $1 million. The termsand amounts of these contracts are summarized intable 6.

Table 6-NIH Contracts Pertaining to Alglucerase

Year Purpose of contract Principal investigator Amount

1976 Harvest glumcerebrosidase from human placentae using a previously published Henry Blair, Tufts University $ 50,000procedure, with a slight modification in the ammonium sulfate fractionation step.

1977 Harvest glucocerebrosidase in increased quantities. Henry Blair, Tufts University 185,0001978 Harvest glucocerebrosidase in increased quantities. Henry Blair, Tufts University 403,3731980 Harvest glucocerebrosidase in increased quantities. Henry Blair, Tufts University 20,0001981 Harvest gluoocerebrosidase in increased quantities. Henry Blair, Tufts University 292,5001982 Harvest glucocerebrosidase from placental tissue. Henry Blair, Genzyme 355,7701983 Harvest glucocerebrosidase from placental tissue. Henry Blair, Genzyme 545,4541984 Harvest glucocerebrosidase from placental tissue. Henry Blair, Genzyme 405,9851985 Harvest glucocerebrosidase from placental tissue. Henry Blair, Genzyme 295,3831987 1. Harvest enzyme at high purity for clinical trials. Henry Blair, Genzyme 54,964

2. Develop enzyme targeting strategies.3. Develop methods to enhance current 8-hour half-life.4. Develop techniques to enhance enzyme delivery to target cells.5. Produce antibodies to human glucocerebrosidase for use as diagnostic probes

and to facilitate isolation of the human gene.1988 Same as 1987. Henry Blair, Genzyme 414,0061989 Harvest glucooerebrosidase from placental tissue. Scott Furbish, Genzyme 551,1741990 Harvest glucocerebrosidase from placental tissue. Scott Furbish, Genzyme 1,992,0601991 Harvest glucocerebrosidase from placental tissue. Scott Furbish, Genzyme 2,000,0001992 Harvest glucocerebrosidase from placental tissue. Genzyme 2,300,000

Total $9,865,669SOURCE: U.S. Department of Health and Human Services, Public Health Service, National Institutes of Health, 1992.




In 1981, the center closed down, and Genzyme,then a fledgling ph armaceutical company, took overthe contract to supply the enzyme. The transitionwas easily achieved since Henry Blair, the formerhead of the center, was also one of the founders of Genzyme. In t he following 11 year s, the N IHcontracts with Genzyme totaled nearly $9 million.

Under the terms of these agreements, Genzymesupplied enzyme for the clinical trials conducted atNIH. Between 1983 and 1988, Genzyme furnishedenzyme for two previously described studies, oneinvolving a single patient and a second enrolling 23subjects. Between 1989 and 1991, Genzyme sup-plied the enzyme for a high-dose trial involving 12participants. For a total of 8 months during thisinterval, Genzyme supplied the enzyme free of charge. Currently, the company is providing modi-fied glucocerebrosidase for a low-dose study and aprotocol involving Type 3 patients as part of itscurrent contract with NIH (see table 6).

Because NIH and others had published papersdiscussing harvesting, purification, and modifica-tion strategies, these processes were not patentable.However, Genzyme claims that its current procedurefor harvesting the enzyme from human placentaltissue and modifying it bears little resemblance tothe original NIH-devised protocol, and that it hasnow sufficiently changed the original NIH process toobtain patent approval (107). It claims the originalprocess had a much lower yield per unit of tissue,with a higher degree of impurity (107). BecauseGenzyme’s protocol is proprietary, we are unable to

determine the extent to which it differs frompreviously published protocols and the 1975 patent.This pa tent will expire in October 1992.

The Cost of Developing Alglucerase

To bring a new drug to market , investments arerequired in both R&D and manufacturing facilitiesand equipment. Most studies of the costs of pharma-ceutical R&D do not include the costs of manufac-turing design, engineering, or construction in esti-mates of R&D costs (e.g., 47,68). In the case of Ceredase

TM, a large fraction of the costs associated

with bringing the drug to market were (and continueto be) for improving the manufacturing process andassuring quality control, and Genzyme chargedthese costs to R&D accounts (107). To the extentthat they can be separately identified, the costs of investing in manufacturing capacity are excludedfrom estimates described in this section but are

discussed in a later section on the cost of producing,marketing, and distributing the drug.

Three different sets of “investors” bore the costsof discovering and developing the placental form of alglucerase: NIH, the investors in Genzyme’s Cere-dase

TMenterprise (including both the investors in

the R&D Limited Partnership and the owners of Genzyme Corporation), and the consumers or theirhealth insurers who purchased Ceredase

TMunder the

treatment IND.

NIH Investments in Alglucerase

Most of the early costs of identifying, synthesiz-ing, and testing alglucerase were borne directly byNIH, as either intramural or extramural (contractorgrant) research. Table 6 shows that between 1976and 1981, a total of $950,873 was spent under NIHcontracts for research pertaining to alglucerase.These expenditures do not count intramural research

(work funded by NIH on its own campus) expendi-tures or any extramural grants to researchers otherthan Genzyme or the New England Enzyme Center.NIH accounting systems do not allow estimation of the intramural spending on Gaucher disease.

The NIH contribution did not end when the drugentered the clinical testing phase. Some of NIH’sclinical expenditures were intramural and cannot beestimated directly. For example, NIH researchersconducted the pivotal clinical trial for FDA ap-proval. NIH contracted with Genzyme to providequantities of alglucerase sufficient to conduct itsclinical research. Between 1982 and 1992, NIH

spent $8.9 million on contracts with Genzyme forthis pur pose. The t otal contr ibution of NIH, exclud-ing the costs of intramural research, was $9.7million.

Consumer Investments inExperimental Alglucerase

The company sold approximately $6 million of alglucerase between October 1989 and April 1991under the treatment IND program (102), but thecompany has, in total, written off or still hasoutstanding receivables totaling about 10 percent of the IND revenues (73,86,107).

Private Investments in Alglucerase

On theGenzymeGenzymeR&D for

basis of information supplied by theCorporation (107a), we estimate thatspent approximately $29.4 million onplacental alglucerase on behalf of its




investors and its contracts with the R&D LimitedPartnership. These expenditures spanned the decadepreceding the product’s introduction to the market in1991. They represent only the cash outlays, not thefully capitalized cost of bringing Ceredase to mar-ket. Genzyme claims that much more was spent in

cash outlays for R&D, about $48.6 million, but itincludes in that amount the difference between thecost of the 1990 buyout of the R&D LimitedPartnership ($20.8 million) and the partnership’sinitial investment of $10 million as well as the netgain to the holders of the Partnership’s warrants onthe exercise date ($8.4 million). These payments donot represent actual expenditures for the work,materials, and facilities needed for the conduct of R&D. They are part of the purchase price of thevaluable asset that Ceredase

tmhad become by the

time the partnership was bought out by the com-pany.

12)

With the data available to us, it is impossible toestimate the time profile of private spending onR&D. About 14 percent ($4.2 million) of Gen-zyme’s expenditures for R&D were spent before1987, the year in which the R&D Limited Partner-ship was formed. According to Genzyme’s 1991annual report, the $10 million raised from thePartnership was fully spent by the end of 1989. Alarge part of Genzyme’s R&D expenditures includepart of the cost of purchasing Integrated Genetics,Inc. in 1989, whose assets were used in part tofurther develop and manufacture placental alglu-

cerase (73).Genzyme’s development of treatments for Gaucher

disease are not over. Research and development arecurrently underway for a recombinant form of glucocerebrosidase that would potentially be bothsafer and cheaper to produce. We did not analyze thefinancing costs of the research leading to thispotential new product.

Conclusions About the Discovery and Development of Alglucerase

The cost of developing alglucerase for FDA

approval was borne by three parties-the FederalGovernment NIH), private investors in the Cere-

dase enterprise, and consumers or their insurers whopaid for the drug while it was still experimental. Therelative contributions of these three parties cannot beestimated, because NIH’s intramural costs havegone uncounted. Of the costs that were counted, NIHpaid for at least 20 percent.

THE COST OF MANUFACTURING,DISTRIBUTING, AND MARKETING

PLACENTAL ALGLUCERASE

Since it was approved for marketing in April1991, the price of Genzyme’s alglucerase has been$3.50 per unit. The cost of producing alglucerasemay be higher than that of many other drugs becauseof the complicated process of harvesting placentaeand extracting and purifying the enzyme fromplacental tissue. Genzyme Corporation provided us

with estimates of the cost of producing placentalalglucerase in 1991 and 1992(107). The cost per unitbefore taxes was estimated at $2.34 in 1991 and

$1.90 in 1992.13

The unit costs decreased in partbecause the volume of production increased dramat-ically between 1991 and what is estimated for 1992.Based on revenue data and the price of the drug,production rose from approximately 11 million unitsin 1991 to at least 27 million units in 1992. As aresult, fried costs are allocated across larger produc-tion and distribution volumes. If the volume of product increases over time, the unit cost can beexpected to decrease further, although probably at a

decreasing rate. Genzyme contends that its currentproduction arrangements with the placenta-harvesting organization limit its total production of the placental form of alglucerase to 40 million units.

The per-unit costs also include a relatively highpercent of sales expected to be bad debts and freegoods. In 1992 bad debts and free goods together areprojected to constitute 14 percent of revenues.Although few accounts have to date been written off as uncollectable (86), Genzyme does not expect tocollect the full amount of the purchase price from allpatients or their insurers.

The per-unit cost estimates provided by Genzymeinclude charges for depreciation on facilities and

12 Conservative accounting procedures demand that payments for rights to market drugs not yet approved by the FDA be accounted for as the purchaseof in-process R&D and not shown as assets. Once a drug is approved by FDA, the purchase is recorded as a purchase of product technology and maybe amortized over its expected life.

13

Genzyme c l a im s i t s u n i t c os t s a r e h i gh e r t h a n t h e numbers presented here, but the company allocated the Cost Of ongoing R&D expenditures (not

related to placental alglucerase) to the cost of the product.




equipment used in manufacturing, distributing, andselling placental alglucerase. Genzyme invested infreed manufacturing capacity early, before the prod-uct was marketed, and continues to incur freedmanufacturing expenses. Genzyme estimates that itsexpenditures for freed manufacturing assets between1981 and 1994 will total over $11 million (107a).

Depreciation charges probably do not reflect the trueeconomic cost of such facilities, however, becausethey ar e only a very rough an d imperfect a pproxima-tion of the actual loss of market value of the assetsin each year. It is impossible with the informa tion athand to determine the extent to which depreciationexpenses included in the unit cost estimates under-state or overstate the true costs of manufacturing andmarketing alglucerase.

Genzyme’s estimates of unit costs imply that eachunit sold will contribute about $1.60 in 1992, andsomewhat more in future years, to repaying theinvestors in placental alglucerase R&D. This esti-mate does not take the effect of taxes into account.Analyzing the after-tax contribution of algluceraserevenues to repayment of the investors in a lgluceraseR&D is complicated. Taxes must be paid on thetaxable income from sales of alglucerase, but taxdeductions and credits were also earned on the R&Dthat Genzyme undertook either on its own or onbehalf of the alglucerase R&D Limited Partnership.Such tax deductions and credits effectively reducedthe net cost of R&D. Although Genzyme had net taxlosses in its early years, a large proportion of theselosses could be carried forward and charged against

its net income in future years. Because of thedisparities in amount and timing of tax liabilities ,deductions, and credits, it is impossible to estimatethe after-tax contribution of alglucerase revenues tothe repayment of the after-tax private investment inalglucerase R&D.

We do not report the internal rate of return14

to theprivate investments in alglucerase because it isimpossible to determine the true contribution of alglucerase revenues to repaying the R&D invest-ment. Placental aglucerase is only one of manyprojects t hat the company wa s involved in, an d ma nyarbitrary decisions are required to allocate costs to

any single project. Although we did not attempt toassess the project’s rate of return, for many success-

ful R&D projects t he r etur ns mu st be high tocompensate for the risks of failure. In the case of alglucerase, however, the risk was probably notcommensurate with the risk associated with thedevelopment of most other pharmaceuticals. Muchof the basic research was performed by NIH, and theprobability of success by the time the Limited

Partnership was formed must have been quite high.

POTENTIAL ADVANCESIN THERAPY FOR

GAUCHER DISEASE

Curren tly, NIH is exploring ways t o increase t heamount of infused enzyme absorbed by the macro-phage cells (10). NIH is also planning to examine theeffects of alglucerase on the nervous system inpatients with Type 3 Gaucher disease, particularlythose who are unable to voluntarily move their eyes

from side to side (10). This latter research could leadto an expansion in the market for alglucerase.

A recombinant form of glucocerebrosidase hasrecently been developed by putting the geneticinformation necessary to create the enzyme into anon-human cell, usually from an animal (103). BothGenzyme and an NIH researcher have applied forpatents covering this process. Although no patenthas been issued yet, NIH has awarded licenses forthe use of its process to both Genzyme and EnzonInc., a pharmaceutical company in Plainfield, NewJersey. Genzyme is currently producing a recombi-

nant form of the enzyme. Enzon has not indicatedwhen its form might be ready for clinical trials (101).NIH and Mount Sinai Medical Center initiated trialswith recombinant therapy early in 1992 (10,61). Thisrecombinant form of the drug is potentially saferbecause it poses less risk of viral contamin ation thanwhen the enzyme is harvested from the biologicalmaterials of several million different people, such asfrom their placentae.

It is possible that in the future geneticallymodified animals may be utilized to produce humanproteins such as glucocerebrosidase in their milk.For example, scientists have developed transgenic

goats whose milk produces a variant of human tissueplasminogen activator, a substance used to destroy

14 The in ternal rate of return is defined a s the ra

teof interest a t wh i c h t h e p r e s e n t v a l u e of expected cash inf lows i s equal to the present va lue of expected

cash outflows. Put another way, it is the interest rate at which a company could borrow money to fund the project and still break even.



Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease q19

the blood clots obstructing the coronary arteriesduring a heart attack (49).

Other researchers hope that gene transfer will bea means for treating Gaucher disease. In thistechnique, scientists would develop a means to

introduce the normal glucocerebrosidase gene intothe tissues of a Gaucher patient in the hope the genewill be incorporated into the patient’s DNA andreproduced indefinitely (72,77). One of the mostpromising such strategies would use a type of virusknown as a retrovirus. Scientists would remove theparts of the virus’s genetic material necessary forreproducing itself and replace it with a normalglucocerebrosidase gene. Physicians would mix thevirus with bone marrow cells that have beenremoved from the patient and then reinfuse them intothe patient. Prior to reintroducing the geneticallymodified bone marrow cells, physicians must oblit-

erate the patient’s own bone marrow because cellscarrying the abnormal glucowrebrosidase gene wouldotherwise survive and continue reproducing. Be-cause elimination of the bone marrow leaves thepatient susceptible to infection, anemia, and uncon-trolled bleeding during the recuperation period, thisprocedure would be risky (7,20).

Further compounding the problems associatedwith gene transfer is the difficulty of infecting veryimmature forms of human blood cells. Althoughresearchers have been able to correct the enzymedeficiency in a small number of patients by infecting

more mature blood cells with the normal glucocere-brosidase gene (54,103), they have not yet suc-ceeded in incorporating the gene into immature cellswith the capacity to reproduce themselves. There-fore, any normalization of the enzyme activityachieved by gene transfer will only be temporary,and the procedure (called transection) will need tobe repeated periodically.

Other therapies under consideration include: tech-niques to enhance the efficiency of the enzyme bysynthesizing a compound to enhance its activity;methods to inhibit the body’s ability to synthesize

glucocerebroside; and methods to inhibit the releaseof toxic substances from the macrophages alreadyengorged with glucocerebroside (7). These toxicsubstances are believed to cause some Gauchersymptoms.

PAYING FORALGLUCERASE THERAPY

This section examines the cost of alglucerasetherapy, the current system of paying for it, and theimplications of this system for patients, their fami-

lies, and their insurers.

Cost of Treatment

The cost of alglucerase therapy depends on theparticular regimen used, varying with dosage (meas-ured in units per kg), dosing interval (number of doses per year), weight of the patient (in kg), andprice per unit of alglucerase. To understand betterthe cost and financing of alglucerase, we examinethe four treatment regimens that were reviewedabove. The estimates that follow are not meant toimply that all patients follow one of these exact

regimens. However, these dosing schedules do yieldthe range of costs associated with enzyme replace-ment therapy for Gaucher disease. All regimens areconsistent with the FDA-approved labeling for alglu-cerase (which is discussed in greater detail below):

(a) High-dose unfractionated-60 units/kg eachweek (1 1);

(b) High-dose unfractionated followed by mainte-nance therapy-6O units/kg biweekly for 1 year, 30units/kg biweekly thereafter (10,11);

(c) High-dose unfractionated initial dose followedby lower dose maintenance therapy-30 units/kgbiweekly for 1 year, 15 units/kg biweekly thereafter

(10,52,61,95);(d) Low-dose fractionated therapy-30 units/kgmonthly administered three times weekly (as used inScripps Clinic and in Israel). This regime is equiva-lent to a dose of 2.3 units/kg per infusion (1,20,27,53).

Table 7 shows the cost of treating each patient forthe first year of therapy, by component of therapyand by regimen type, for a 50-kg individual at thecurrent price of $3.50 per unit. Under the initialdosing protocol for a moderate to severely affectedpatient (regimen b), the annual cost of alglucerase

for a 70-kg individual is $382,200. This price doesnot include the costs of administering the biweeklyinjections, nor the cost of associated diagnosticevaluations. The costs of ancillary services likeoutpatient infusion of the drug and laboratory tests




Table 7—Estimated Annual Per Patient Drug and Ancillary Charges for Alglucerase Therapy UnderFour Potential Dosing Regimens

Dosing regimen

First year (units) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 60 30 2.3

Subsequent year (units) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 30 15 2.3

Frequency(annual). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 26 26 144

First year drug cost ($/year)a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $546,000 $273,000 $136,500 $57,960Subsequent year drug cost ($/year)a . . . . . . . . . . . . . . . . . . . . . . . . . $546,000 $136,500 $68,250 $57,960

Anciilary chargesb

Infusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,640 1,820 1,820 10,080

Complete blood count . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720 720 720 720

Liver function tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 1,200 1,200 1,200

Magnetic resonance imaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 1,200 1,200 1,200

Total ancillary charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,760 $4,940 $4,940 $13,200

Total first year cost of therapy (annual) . . . . . . . . . . . . . . . . . . . . . . . $552,760 $277,940 $141,440 $71,160

Total subsequent year cost of therapy (annual).. . . . . . . . . . . . . . . $552,760 $141,440 $73,190 $71,160. . .aThese figures assume a unit price of $3.50, the cost of alglucerase for privately insured patients.Thereare discounts available to Medicaid recipients andthose who exhausted their insurance benefits, as discussed in the text. Costs are computed using an average patient weightof 50 kg, a figure which wascomputed from a distribution of patient weights provided by Genzyme.

b The charge for each infusion is $70.All regimens include a complete blood count twice a month($30 each),a liver function test twice a month($50each),and magnetic resonance imaging twice a year($600 each). Charge data are average allowed charges from Blue Shield of California.


range from $4,940 to $13,200 annually, dependingon the treatment regime (87).

15

The cost of treatment can be greatly reduced bylowering the dosage. Genzyme advocates a mainte-nance dosing therapy of as little as 7.5 units/kgadministered biweekly. An NIH researcher is using10 units/kg biweekly as initial therapy in patientswho are not severely ill (10). For these regimens, theannual cost of therapy for an average patient would

be between $34,125 an d $45,500 (without an cillarycosts). However, as noted earlier, there are nopublished reports of responses to therapy amongmoderately to severely ill patients treated withmaintenance doses of less than 15 units/kg bi-weekly. Furthermore, although the per-patient costsof the 10 units/kg biweekly regimen are relativelylow, this regimen would be unlikely to reduceaggregate expenditures on alglucerase. It would addthe expenditures for treating the large population of patients with less severe forms of Gaucher disease tothe expenditures for treating more severely illpatient s with a h igher dose regimen. Thus, one could

view this regimen as an approach to expandingtreatment to a broader population, not as an approachto reducing costs of treating severely ill patients.

Who Pays the Cost of Alglucerase Treatment?

Table 8 shows the distribution of the first 301patients to receive alglucerase injection therapyaccording to the t ype of health insur ance tha t pa id allor part of their alglucerase expenses on December31, 1991 and a similar distribution for all patientsreceiving alglucerase on March 31, 1992 (3). Mostpatients (60 percent) have indemnity insuranceeither through commercial insurers (25 percent),Blue Cross and Blue Shield (BCBS) plans (21

percent), self-insured employer groups (9 percent),or plans available to Federal employees (4 percent).Fourteen percent receive their medical care througha health maintenance organization (HMO). Almost13 percent have Medicare coverage either becausetheir medical condition has rendered them disabledor because they a re older t han 65 years of age. Eightpercent have Medicaid coverage, and t he r emaining6 percent either have some other type of insur ance ornone at all . This last group includes patients whoreceive alglucerase free of charge through theGenzyme Access Program because they lack healthinsurance.

This picture of coverage may not be representa-tive of the insurance status of all Gaucher patientswho will ultimately receive alglucerase therapy. The

15 T h e s e c o s t s remain the same for patients in d osing regimens b and c regardless of whether they are receiving initial treatment or a lower main tenancedose since both doses involve the same number of infusions.




Table 8-Distribution of Alglucerase Patients by Primary Payer

Percent of patients Percent of patients

Type of payer as of December 31, 1991 as of March 31, 1992

Medicare . . . . . . . . . . . . . . . . . . . . . . . . . 12.8% 12.5%

Medicaid . . . . . . . . . . . . . . . . . . . . . . . . . . 8.0 8.9

Private health insurance

Blue Cross and Blue Shield . . . . . . . . 21.1 20.9Commercial insurers . . . . . . . . . . . . . . 25.9 24.3

Health maintenance organizations. . 13.6 13.2

Self-insured groups . . . . . . . . . . . . . . 8.8 8.7Federal employee insurers . . . . ... , . 3.7 4.1

Other including Genzyme’s freedrug program . . . . . . . . . . . . . . . . . . . . 5.9 7.5

Total . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 100.0

Number of patients . . . . . . . . . . . . . . . . . 301 NAa

aGenzyme did not provide data on number of patients receiving alglucerase as of March 31, 1992.

SOURCE: Genzyme, 1992.

patients treated first may differ clinically or in otheressential respects from the entire Gaucher popula-

tion. For example, given the relative expense of thetherapy, those patients with the most completecoverage may begin therapy earlier than those whoare less well-covered. Furthermore, because insur-ance status can change over time, the distribution of insurance coverage among these 301 patients couldbe very different 2 or 3 years in the future. However,these are the only data available that describeinsurance coverage of recipients of algluceraseinjections.

Insurance Payment for Alglucerase Therapy

For those Gaucher patients with health insurance,payment for alglucerase therapy depends on severalfactors. These include the status of alglucerase as acovered benefit, the split between the insurer’s andpatient’s responsibilities in paying for coveredbenefits, the patient’s lifetime insurance benefit, andother logistical and administrative issues. To com-pile this information, we contacted Genzyme, pri-vate insurance plans, representatives of Federalhealth insurance programs, and insurance tradeassociations.

Coverage

Patients usually receive coverage for alglucerasethrough the general outpatient medical benefitprovisions of their insurance. These benefits covermedically-necessary, FDA-approved drugs administ-ered under a physician’s supervision in a medical

office or clinic. As described above, alglucerase isusually administered by infusion in a physician’s

office.l6

Most insurance plans define “medicallynecessary” to include therapies administered forindications described on the drug’s package insert.

Although we found that most private (commer-cial, BCBS, and HMO) insurers accept a physician’sprescription as sufficient evidence of medical neces-sity, several insurers, especially BCBS plans, sub-

ject alglucerase claims to greater scrutiny. Represen-tatives of these plans cited the drug’s high price andambiguity in the labeling of FDA-approved indica-tions and dosing regimens as reasons for their closeconsideration of claims (5,30,41,46,69,82). The

label indicates that alglucerase is indicated for Type1 Gaucher with: “a) moderate-to-severe anemia; b)thrombocytopenia with bleeding tendency; c) bonedisease; [or] d) significant hepatomegaly or sple-nomegaly.” However, the label does not provideany more detailed clinical guidelines to interpretthese indications. The dosing regimen, based on theclinical evidence discussed earlier in this paper, alsolacks specificity:

Dosage should be individualized for each patient. Aninitial dosage of up to 60 unit/kg of body weight perinfusion may be used. The usual frequency of infusion is once every two weeks, but diseaseseverity and patient convenience may dictate admin-istration as often as once every other day or asinfrequently as once every four weeks. After patientresponse is well established, dosage maybe adjusteddownward for maintenance therapy. Dosage can be

115 A handful of patients tivc the drug infused in their homes, although insurance coverage of this form of administration tends to be less common

than for infusion in the physician’s ofllce. Genzyme anticipates that home infusion of alglucerase will increase over time (3). Another recent OTAreportexamines Home Drug In@ion Therapy Under Medicare in greater detail (114).




progressively lowered at intervals of 3-6 monthswhile closely monitoring response parameters. Ul-trastructural evidence suggests that glucocerebrosidelipid storage may respond to doses as low as 1unit/kg.

As described earlier in this paper, the potential

dosing regimens for alglucerase consistent with thislabel imply a wide range of expenses for patients andtheir insurers.

Private Health Insurers—The most intensivescrutiny of alglucerase claims appears to occuramong BCBS plans. Several plans, including thosein New York and Massachusetts, require an assess-ment of patient progress every 6 months in consulta-tion with the patient’s physician to determinewhether doses might be reduced without compro-mising the efficacy of the therapy (30,82). The New

York plan has also adopted specific clinical guide-lines for interpreting anemia, thrombocytopenia, andthe other indications for therapy .17 Blue Shield of California recently took the more restrictive step of limiting coverage to the dosing regimen tested at theScripps Clinic (regimen c in table 7) (5). Based on areview of scientific literature and a meeting of itsmedical advisory committee, the plan concluded thatthere is insufficient evidence that more costlyregimens are any more effective (i.e., medicallynecessary) than the Scripps dosing. One plan, BCBSof Connecticut, reported that it is not currently

paying any claims until the insurer’s medical reviewcommittee has studied the drug more carefully(46).

18Among the commercial plans contacted by

the authors, only Aetna has developed its ownguidelines for determin ing the medically necessaryindications for alglucerase. Under plans requiringprecertification of prescription drugs, such as Aetna’sHMOs, these guidelines call for an assessmen t of patient progress every 3 months (69). The reviews of claims and related patient data required by theseplans are more intensive than that performed formost other drug therapies or physician services,

undoubtedly as a consequence of the relative infre-quency of alglucerase claims, the drug’s high costs,and the wide range of potential dosing therapies.

Medicare and the Civilian Health and Medical Program of the Uniformed Services (CHAMPUS)—

Medicare covers injectable drugs approved by theFDA when they are provided as part of a physician’sprofessional services for indications specified on thelabel. For indications other than those on the label,the Health Care Financing Administration (HCFA)allows its “carriers” (private insurance firms andBCBS plans that pay claims for Medicare outpatient

services under contract from HCFA) to makecoverage decisions. Hence, there can be differencesamong carriers regarding the coverage of unlabeled uses of drugs like alglucerase (31). Although HCFAcan issue national coverage guidelines that super-sede car rier s’ decisions, it ha s n ot done so foralglucerase, citing the relatively small number of Medicare beneficiaries receiving alglucerase

19and a

query of carriers which indicated that all currentlycover alglucerase claims (123).

20CHAMPUS, the

Federal health insurance program run by the U.S.Department of Defense for dependents of uniformedU.S. Defense Department personnel, has not yetreceived any claims for alglucerase therapy. SinceCHAMPUS tries to coordinate its coverage policieswith those of HCFA, this program expects to pay foralglucerase therapy needed by its beneficiaries (6).

Medicaid—With the exception of certain feder-ally mandated benefits, States can opt to excludeservices from coverage even if a physician considersthem to be medically necessary (112). However,those States with Medicaid prescription drug bene-fits (all States except one) must cover every drug for6 m onth s following FDA a ppr oval (55). Accordin gto HCFA, all Stat es th at ha ve received claims foralglucerase therapy have continued to pay beyondthe 6-month anniversary of approval in October1991 (70).

1 7 Ge n z y m e h a s s u g g e s t e d t h a t t h e s e i n t e r p r e t a t i o n a r e overly restrictive because th ey ind icate disease more Severe than that found among some of the patients followed in NH’s clinical studies of alglucerase (107a).

18 As of M arch 1992, BCBS of connecticut h ad rece ived a lg lucerase c l a ims for two p a t i e n t s - - o n e wh o a c t u a l l y h e l d i n s u r a n c e from BCBS and another

who held insurance through a self-insuring employer that had contracted with BCBS to administer its claims (3).

1 9 HCF A e x p e c t s t h a t t h e r e w o u l d n e v e r b e m o r e t h a n 1 , 0 0 0 t o 2 , 0 0 0 M e d i c a r e b e n e fi c ia r e s o n a l gl u c e r a se therapy at any one time. HCFA also

be l ieves tha t because the therapy will enable Gaucher’s patients to work in the long r u n , most Medicare beneficiaries receiving alglucerase will be over65 years old rather than disabled (31).

20 HCFA usually only m akes national coverage decisions when cont roversy a r i ses among car r i e r s over par t i cular se rv ices or therap ies (114).




Cost Sharing Between Patients andInsurers for Alglucerase Therapy

Table 9-Selected Insurance Characteristics ofFull-Time Participants in Employment-Based Plans

at Medium and Large Firms

Even patients with insurance that covers alglu-cerase may have to pay out-of-pocket for some of the

expenses associated with their therapy. Medicarerequires patients to pay 20 percent of the approvedfees for physician office visits, including the infu-sion of drugs and diagnostic laboratory tests. How-ever, about 71 percent of all Medicare enrollees havesupplemental health insurance (sometimes called“medigap” policies) that covers all or part of thiscopayment (43,9 1); Genzyme indicates that a greaterfraction, 90 percent, of Medicare beneficiariesreceiving alglucerase in March 1992 had supple-mental insurance. The benefits that such plans offervary greatly, so there is little basis for estimating theout-of-pocket expenses of covered individuals. It is

clear that the out-of-pocket for Medicare patientswho lack supplemental coverage is substantial.Based on the cost estimates in table 7, the expensescould total more than $50,000 per year for a 50-kgMedicare patient who paid the full copayment. Inaddition, some providers bill patients for more than“allowed” charges and seek payment directly frompatients for the difference between the billed andallowed amounts. To the extent that providers“balance bill” for ancillary services,

21patients’

out-of-pocket expenses could even exceed the 20percent copayments described here.

Most private indemnity insurance plans carry anannual deductible and a copayment (123). Hence,privately insured Gaucher patients also face someout-of-pocket expenses for their alglucerase therapy.However, most private policies place limits on thepatient’s total annual financial liability for coveredservices. According to recent national estimatespresented in table 9, 83 percent of all beneficiariesof such plans have a limit on out-of-pocket expenseseach year (not including premiums) after which theinsurer pays 100 percent of covered medical services(123). Almost three-quarters of indemnity benefici-

1. Maximum annualout-of-pocket expense Percent of beneficiaries

No specified maximum . . . . . . . . . . .17?40

$100-$699 . . . . . . . . . . . . . . . . . . . . . 19$700-$1,299 . . . . . . . . . . . . . . . . . . . . 38$1 ,300-$2,099 . . . . . . . . . . . . . . . . . . 16$2,100 or more . . . . . . . . . . . . . . . . . 8Based on earnings . . . . . . . . . . . . . . 2

100

Il. Lifetime maximum benefits Percent of beneficiaries

<$500,000 . . . . . . . . . . . . . . . . . . . . .=$500,000 . . . . . . . . . . . . . . . . . . . . .

$500,001-$999,999 . . . . . . . . . . . . .= $1,000,000 . . . . . . . . . . . . . . . . . . .>$1,000,000 . . . . . . . . . . . . . . . . . . . .No lifetime maximum benefits . . . . .Policy has both lifetime and annual

maximums; Iifetime maximumnot given . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . .

14%12

340

221

6

100

SOURCE: U.S. Department of Labor, Bureau of Labor Statistics, Emp/oyeeEenefits in Medium and Large firms, 1989, Bulletin 2363(Washington, DC: U.S. Government Printing Office, 1990).

ties have maximum out-of-pocket expenses of

$2,100 or less. Genzyme has indicated that as of March 1992, 80 percent of its privately insured

customers had a limit of $2,000 or less (107a). As

with Medicare, this limit does not include billed

charges disallowed by the insurer. The 17 percent of

private indemnity beneficiaries without a cap onout-of-pocket expenses would face copayments

similar to those borne by Medicare beneficiaries.22

Medicaid and HMO beneficiaries, who representabout 22 percent of all current alglucerase recipients,face little to no out-of-pocket expense. Under some

circumstances, States may charge the Medicaidbeneficiaries minimal copayments (usually under

$5.00) for physician visits and outpatient drugs(112). Many HMOs also require a copayment(usually under $10) for each physician visit (60).

23

21 For ~glucer~e patients OnM~iC~, balance billing applies only to ancillary costs associated with the therapy becauseHmA Pays the wtu~ costor average wholesale price (rather than an ‘‘allowed charge’ for the drug itself) (107a).

22 Acco r d i n g t o t h e U.S. Depmen t of Labor estimates, 80 percent of people with employment-based k-cc fiOm medium id lage h ~ve

a 20 percent copayment rate (after paying any annual deductibles), 4 percent face a 15 percent copayment rate, 8 percent face a 10 percent copaymentmaking 7 percent have some other or no copayment rate (118). Oenzyme claims that 92 percent of its non-Medicare, non-Medicaidrate, and the re

privately insured customers as of March 1992 had faced a 20 percent copayment or less after meeting u annual deductible (107a).

‘Taking $lOasa maximum likely copayment per infusion and assuming amaximum annual number of infusions of 144 (according to the dosingregimen being tested at the Scripps clinic), the maximum potential out-of-pocket expenses for HMO patients would be $1,440. With only two infusionsper month (as tested atNIH and Mount Sinai Medical Center in New York City), themaximum out-of-pocket expenses would fall to $240 per year.




Threats to Lifetime MaximumInsurance Benefits

The vast majority of private health insurancepolicies impose a lifetime limit on the benefitspayable for each insuree. According to recent U.S.

Department of Labor estimates, at least 26 percent of beneficiaries of private employment-based insur-ance plans at medium and large firms have a lifetimemaximum benefit of $500,000 or less and another 43percent have a maximum benefit between $500,001and $1 million (table 9). Genzyme indicated that asof March 1992, only 54 percent of its privatelyinsured customers had a maximum of $1 million orless while 39 percent had no lifetime maximum atall.

24The high cost of alglucerase therapy puts many

Gaucher patients at risk of reaching these lifetimemaximum benefits within a few years. Furthermore,Genzyme has indicated that many of its customershave begun therapy with their lifetime maximumbenefit already significantly eroded, hastening thetermination of their insurance coverage. By exhaust-ing their insurance benefits, patients would not onlylack coverage for future alglucerase therapy, butthey would have no coverage for any other medicalexpenses they incur over the rest of their lives.Although Genzyme’s free drug program (discussedin the next section) would cover the cost of futurealglucerase, it would not pay for the drug’s adminis-tration or any other medical expenses.

Figure 1 shows how the four different dosingregimens laid out in table 7 would use up lifetimeinsurance benefits. Even conservatively assumingthat patients must pay $2,000 annually toward theiralglucerase therapy and that they have no previousmedical expenses, all four dosing regimens wouldsignificantly erode or completely use up a $500,000maximum within a few years. A 60 units/kg weeklydose would use up a $1 million maximum in lessthan two years, while a 60 units/kg biweekly dosereduced to 30 units/kg biweekly after the first yearwould use up over $800,000 in benefit in less than5 years. If patients have incurred significant medical

expenses prior to beginning alglucerase therapy (as

Genzyme indicates is the case), they risk exhaustingtheir insurance benefits even more quickly.

Insofar as 71 percent of current algluceraserecipients have some form of private health insur-ance, and assuming that between 54 percent (Gen-

zyme’s estimate) and 69 percent (U.S. Departmentof Labor’s estimate) of them have a lifetimemaximum benefit of $1 million or less, somewherebetween one-third and one-half of all agluceraserecipients face a significant risk of exhausting orcritically reducing their available insurance benefitsover time. Although patients may change healthinsurers as they change jobs or as their employerschange insurance contracts (and hence, receive a‘‘new’ lifetime maximum), in many cases, the newinsurance policies may exclude any expenses forGaucher treatment as a preexisting condition (58).

25

These constraints may also lock Gaucher patients

into their current jobs for fear of losing needed healthinsurance coverage. In addition, even if an em-ployer’s insurance does not exclude preexistingconditions, some firms may be unwilling to hireGaucher patients for fear that the high cost of alglucerase therapy and related medical expenseswill lead to higher insurance premiums for the firmas a whole.

Genzyme’s Drug Access Program

Genzyme maintains a staff of “reimbursement

specialists” to help patients determine the extent of their insurance coverage for alglucerase therapy, toobtain payment for alglucerase-related expenses,and, if necessary, to help find providers willing toadminister the therapy (3). In addition, Genzyme hasestablished a program to provide alglucerase free toGaucher patients who lack health insurance to coverthe therapy or who have reached their lifetimemaximum benefits. However, the free drug programdoes not cover the ancillary costs of alglucerasetherapy. As shown in table 7, these costs can rangefrom $4,800 to $13,200 for t he a verage pat ient.When patients cannot afford these substantial charges,

either they or Genzyme must find providers willing

24 Some of the difference between the D e p a r t m e n t of Labor and Genzyme figuresmay reflect the fact that the Genzyme figures includ e the 17p e r c e n t

of alglucerase recipients enrolled in th e Federal Government emp loyees’ insurance program and H MO S, which have traditionally not had lifetimemaximum benefits (3).

25 Many States allow i n s u r ance compan i e s t o exc l ude e i t he r pa r t i cu l a r preexisting conditionsor individual patients who h avepr eex i s t i ng conditions

from coverage wh en an em ployer changes insurance contracts. Federal law allows firms th at self-insure to mak e such exclusions no m atter what the

relevant State’s statute requires. Such exclusions are most common ly foun d among small employers. Insurers can also exclude preexisting conditionsfor new employees, al though a growing number of States are considering legislation to end this practice (58).



Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease . 25

1.50

1.25

1.00

%=

43

% 0.75(n

5=z

0.50

0.25

0.00

Figure l-Cumulative Per Patient Insurance Costs for Alglucerase Therapy UnderFour Potential Dosing Regimensa

1.50

1.25

‘- - - - - - - - - - - - - - - - - - - - - - ‘

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -‘ - - - - - - - - - - - - - - - - - - ” 1.00

6=k ~0.75 ~

EQ=z

‘- - - - - - - - -

”- -

”- - - - - - - - - - - - - - - - - - - -

‘- - - - - - - - - - - - 0.50

0.25

m I I I I 0.000 1 2 3 4 5

- - -

Years of therapy

Dosing Regimen A--all 5 years: 60 units/kg weekly

Dosing Regimen B -- first year:60 units/kg biweekly; subsequent years: 30 units/kg biweekly

Dosing Regimen C--first year: 30 unit/kg biweekly; subsequent years:15 units/kg biweekly

Dosing Regimen D -- all 5 years: 2.3 units/kg three times a week

aAssumes patient out-of-pocket expenses of $2,000 per year and treatment costs as outlined in table 8.


to administer the therapy at reduced or no compensa-tion.

This program establishes two prices for alglu-cerase: a price of $3.50/unit for patients withinsurance or other resources, and a price of zero forthose who cannot pay. By charging insurers the fullprice, Genzyme has substantial revenue and, at leastuntil they exhaust their lifetime medical benefits,

covered patients have access to the therapy and toancillary services.

It is not uncommon for pharmaceutical companiesto charge different payers different prices. Thisstrategy, which economists call price discrimina-tion, can maximize profits. Price discrimination canonly occur when a monopolist is able to establishdifferent prices for different buyers. The rationale is

straightforward: buyers vary in their willingness orability to pay for drugs and other products. If thedrug manufacturer or other producer can set a higherprice for buyers who are willing to pay more, therevenues will be greater than if all buyers must paythe same price. It is more profitable to make a saleat a reduced price, as long as the price exceeds theproduction cost, than not to make a sale at all.

Companies usually do not want information aboutdiscounted prices made public because other buyerswill demand discounts as well, eroding the ability tocharge different prices.

Price variation for medical treatments may takeunusual forms. One way to price discriminate is toforgive (or fail to pursue aggressively) the patient’sshare of the price of a drug. The forgone revenues are




sometimes treated as bad debt for accountingpurposes. The free drug program may similarlyrepresent a sophisticated form of price discrimina-tion. Although the company loses money on eachunit of drug offered free of charge, the policy of charging full price to insurers (who are typically

obligated by contract to pay the insured percent of the drug’s price for all FDA-approved indications)during the initial treatment period can be profitable.In the context of Genzyme’s complete pricingscheme, the free drug program is similar in itsconsequences to a policy in which patients areoffered a lifetime supply of alglucerase treatment inexchange for the value if their remaining insurancecoverage and associated copayments. Patients maybe willing to pay the full price of alglucerase as longas they have insurance coverage; when coverageends, they may be willing or able to pay little if anyof the cost. If Genzyme had opted against making thedrug available for free at the end of insurancecoverage, resistance to the pricing among patientadvocates would probably have been intense.

Other Issues in Medicare and Medicaid Paymentfor Alglucerase Therapy

Medicare Coverage of Disabled Individuals—According to estimates provided by Genzyme,approximately half of current alglucerase recipientswith Medicare coverage have this Federal insurancebecause their Gaucher disease has rendered themdisabled (3).

26However, because alglucerase ther-

apy has the potential to eliminate the physicaldisabilities associated with Gaucher disease, pa-tients could lose their Medicare coverage if theSocial Security Administration (SSA) deems themable to work.

27HCFA anticipates a reduction in the

Medicare rolls because of the effectiveness of alglucerase (31). These patients’ ability to getprivate insurance directly from an insurer or throughan employer will also be limited because prospectiveinsurers would likely exclude Gaucher treatmentfrom coverage as a “preexisting condition. ” With-out other resources, these patients will receive

alglucerase through Genzyme’s free drug program,but t hey will still bear t he expenses of its a dministra -tion and any other medical expenses related to theirGaucher disease. As of April 1992, one Medicarebeneficiary has expressed an interest in returning towork, but has not done so yet (3).

Securing Payment and Providers for Medicare Beneficiaries---Genzyme a nd the National GaucherFoundation report some instances of Medicarecarriers rejecting, suspending, or delaying claims foralglucerase (especially during the early months afterFDA approval) despite the fact that the carrier coversthe therapy (3,40). In addition, Genzyme reports thata few Medicare beneficiaries have had difficulty infinding medical providers to administer alglucerase.Some physicians have been reluctant to purchaseand stock the drug in their offices because of its cost.These physicians tend to refer their Gaucher patients

to hospital outpatient clinics to receive their infu-sions. However, some hospitals have also beenreluctant to administer the drug because they ini-tially receive only a portion of the Medicarepayments to which they are entitled; they receive thebalance through a reconciliation process that takesplace as long as a year after they administer thedrug.

28Because of the drug’s high cost, the differ-

ence between initial payments and the amount towhich the hospital is ultimately entitled can besubstantial (3,123).

Medicaid Rebates—In 1990, Congress enacted

legislation (Public Law 101-508) requiring pharma-ceutical manufacturers who supply drugs to Medic-aid beneficiaries to pay rebates to States accordingto a formula ba sed on volume of drug supplied underMedicaid and 1) a percentage of the averagemanufacturer’s price or 2) the ‘‘best price’ offeredto any purchaser of the drug (whichever is greater).Drugs administered as part of a physician’s officevisit are usually exempt from this Medicaid rebatelaw. HCFA generally grants this exemption bydesignating the drug with a “J-code” upon recom-mendation of the HCFA Common Procedure Coding

26 The other half q ualify for Medicare because they are over 65 years old.

27 SSA wi thdraws disabi l i ty s tatus f rom any beneficiary known to engage in "substant ial gainful act ivi ty" which is defined as earning m o r e t h a n $ 5 0 0

per m onth. SSA also periodically reviews the condition of all ‘disabled’ people to d etermine whether th ey are st i l l unable to w ork and expects recipientsof Federal disability benefits to no@the G overnment of any chan ges in their med ical condition or w ork status (1 17).

28 Although hospitals are entitled to 80 percent of allowed charges for outpatientprescription drugs, their initial reimbursements for drugs are bundled

together with reimb ursements for other outp atient services and red uced by a hosp ital specific cost-to-charge ratio calculated by a prescribed method ologyusing h istorical data. Hospitals could mark up the cost of alglucerase to recover the 80 percent to which they are enti t led m ore quickly. However, thisstrategy would lower the cost-to-charge ratio for all future outpatient Medicare reimbursements (3).



Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease . 27

System (HCPCS) Committee.29

HCFA expects to

add alglucerase to the list of exempt drugs before1993 (98). Genzyme currently participates in theMedicaid rebate program and provides rebates to

States based on the prices it charges for alglucerase

and the volume of drug provided to Medicaidpatients as reported by the States. The exact amountof rebates provided by Genzyme to States isconsidered proprietary information by both HCFAand Genzyme.

POTENTIAL CONSEQUENCESOF FEDERAL SUBSIDIES

Congress’s express intent in passing the OrphanDrug Act was to overcome disincentives to invest innew health care technologies. Implicit in the law isa conviction that firms need substantial guarantees

of monopoly power and subsidy of research costs inorder to undertake risky and expensive drug devel-opment for rare conditions. Drug development is arisky process. Drug companies bear costs for a largenumber of unsuccessful projects. Therefore, overallprofitability requires a relatively high return to theprojects that are successful. If high developmentcosts and risks of failure make high returns anessential incentive to invest, high prices may benecessary for companies to make such drugs avail-able. As shown earlier in the paper, other Federalinvolvement, like NIH research, also helps make thedevelopment and provision of pharmaceuticals more

attractive to industry.

To those who will pay for alglucerase and to thosewho are interested in controlling health care expen-ditures in general, the price of alglucerase and itscost of production are subjects of keen interest.According to Genzyme, the drug has high produc-tion costs due to an unusually intensive manufactur-ing process and expensive material inputs; treatmentof one moderately to severely ill adult for a year canrequire 10 tons of placental material (107). Further-more, the existence of public and private insurancedistorts the individual’s decision to undergo treat-

ment. It does so by breaking the link betweenpayment and consumption of health care. Becauseinsured patients do not pay the actual cost of thedrug, they (and their physicians) may not be deterredby its cost. Economic theory suggests that in thissituation-a monopoly market in which production

costs are high and demand does not vary substan-tially with price-a high price is inevitable. Withother pharmaceutical products, the structure of demand is similar, but production costs usually aremuch lower. This may explain why alglucerase

therapy is relatively expensive compared with mostmedical technologies.

Another important question for policymakers iswhether alglucerase injections are worth their cost.From the perspective of moderately to severely illGaucher patients, who have had very limited thera-peutic options in the past, the answer maybe clear.However, from the perspective of society as a wholewhich must allocate limited health care resources,this is a serious and difficult question. The limitedexperience to date strongly suggests that alglucerasereduces the morbidity of moderately to seriously ill

Type 1 Gaucher disease, but its effects on mortalityare essentially unknown. Even if Gaucher diseasewere uniformly and rapidly fatal, and algluceraseeliminated all mortality due to the disease, it wouldstill cost up to $350,000 for each year of adult lifesaved. At this price, alglucerase is not only one of themost expensive treatments ever introduced, but itscost per year of life saved (or per year of life savedadjusted for the quality of that life) would be wellabove the range of commonly accepted therapies(100). If it does not affect mortality, then anyenhancement in the quality of life comes at evengreater cost to society.

A related question is whether granting orphanstatus to the placental form of alglucerase delayedthe development of alternative treatments that mayhave been superior to placental alglucerase in termsof cost, efficacy, or safety. The newly developedrecombinant form of alglucerase may be less costlyto manufacture (20). Furthermore, Genzyme hasclaimed that the recombinant form is less likely to becontaminated with viruses than the placental form(107).

However, the placental form of alglucerase may

have developed first because the development of recombinant technology often poses greater finan-cial risk to the manufacturer than conventionalchemical purification and synthetic techniques. Inthe presence of this uncertainty, Genzyme may havedevoted its initial efforts toward a less efficient but

29‘MMdly, the HCpCS committee establishes five-digit codes for procedures provided to Mediczue and Medicaid patients. M1 injectable tigs,

including those exempt from the rebate law, have HCPCS codes that begin with the letter “J” (98).




more predictable production technique. If so, it isnatural to ask whether Genzyme’s orphan protectionfor its placental product delayed development of lesscostly recombinant technology. In addition, othermanufacturers may have delayed research intorecombinant technology if they believed that the

original FDA market exclusivity awarded to alglu-cerase would exclude their own recombinant form of the enzyme (21) or given Genzyme a naturaladvantage in achieving FDA approval and marketexclusivity for its recombinant form. If so, thegranting of orphan designation to the alglucerasemay have deterred the development of a lessexpensive manufacturing process.

CONCLUSION

In the case of alglucerase, Federal policy, incombination with insurance reimbursement policies,helped to create and promote a therapy that is very

effective, very costly, and potentially very profita-ble. The Federal role was multifaceted. NIH per-formed or financed most of the research leading tothe discoveries of the enzyme defect that causedGaucher disease, the infeasibility of treatment withthe naturally occurring enzyme, and the structure of alglucerase. NIH licensed its process for the recom-binant form of alglucerase to Genzyme and anothercompany. It also performed or funded much of theclinical research that produced evidence regardingeffectiveness of treatment, and that helped establishdosing guidelines. Through a series of contracts,NIH has purchased alglucerase from Genzyme inorder to carry out these trials and to perform furtherstudies. Thus the Federal Government supported orperformed much of the research that made it possibleto develop this unique treatment for Gaucher dis-ease, and removed much of the risk that pharmaceu-tical companies face when they decide to develop adrug.

Another government agency, the FDA, alsoplayed a critical role in making alglucerase availableto patients with Gaucher disease. Although the FDAis sometimes portrayed as an obstacle to pharmaceu-tical innovation, in this case, the FDA, in administer-

ing provisions of the Orphan Drug Act, gaveGenzyme a 7-year monopoly in the sale of alglu-cerase. Because alglucerase had been discovered byNIH, which had published its structure, and becausethe NIH held a patent for the purification process,Genzyme could not rely upon patent protection fora monopoly position. Without the market exclusiv-

it y provision of the ODA, there would have been nomonopoly, and the revenues and profits from the saleof alglucerase would presumably have been moremodest. The orphan drug law and the NIH’sinvolvement together significantly reduced the costand uncertainty customarily associated with a manu-facturer’s pharmaceutical development project.

Genzyme could not maintain the very high priceof alglucerase if insurance companies did not pay forthe therapy. In fact, most insurers-including theMedicare program administered by the FederalGovernment and the Medicaid program adminis-tered jointly by the Federal Government and theStates—are bound by their contractual obligations tocover drugs administered according to FDA-approved labeling. Most private insurance policiesplace a limit on lifetime benefits, and patients withsevere forms of Gaucher disease who receivealglucerase may exhaust their insurance coverage in

a few years. At that time, Genzyme will supply thedrug without payment, but patients will no longer becovered for their remaining health care, includingthe costs of administering alglucerase as an intrave-nous infusion.

The commercial development of alglucerase isunusual insofar as the company that produced it wasable to obtain a monopoly in the production of acompound that had already been discovered and forwhich much of the development work had beenperformed by the Federal Government and otherresearchers. Furthermore, it is not representative of

all drug development; this is an unusually successfuland profitable product. Nevertheless, it raises ques-tions that are common to many new products: Whatis the appropriate Federal role in the development of a commercial product? Should the potential costs of the product be considered when the Federal Govern-ment supports basic and applied research, especiallyif the Federal Government is itself a payer of suchtherapies through its own health insurance pro-grams? How should the Federal Government con-sider impacts on patients and insurers when support-ing such work? As the range of new therapeuticproducts expands, with the promise of unprece-

dented effectiveness and expense, such questionswill arise more and more often. The costs of newdiagnostic procedures and treatments may be so highthat insurers cannot cover them and patients cannotpay for them. Furthermore, this case illustrates thatsuch deep involvement of agencies such as NIH inthe development of medical technology creates the




potential for the Federal Government to pay for suchtechnologies twice-once through support of theR&D process and again as a health insurer. TheFederal Government has no mechanism to ensurethat the process American pay for drugs and othertechnologies reflect the public’s contribution to their

development.

Perhaps the most significant lesson to emergefrom the case of alglucerase is that cost considera-tions cannot be ignored in the development anddiffusion of any treatment. Payments for alglu-cerase, like expenditures for any other treatmentordiagnostic procedure, divert health care resourcesfrom other uses. Less expensive treatments, how-ever, are unlikely to attract comparable scrutinyfrom insurers, and few other treatments will sopredictably deplete insurance coverage. The highprice of alglucerase threatens to put this promising

treatment out of reach of many patients, even thosewho are well-insured.

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federal and private roles in the development and provision of alglucerase therapy for gaucher...

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