Two drugmakers you may have never heard of just agreed to a big deal.
Ireland's Shire says it's paying $4.2 billion for ViroPharma, which makes a drug to treat a rare condition called hereditary angioedema. People with the inherited condition are prone to swelling that can be life-threatening. About 1 in 50,000 people have the genetic mutation that causes the problem.
The deal, expected to close in a few months, is the latest example of the business allure of high-priced drugs for illnesses that affect a few.
The prize in the drug companies' deal is a medicine called Cinryze. Derived from human plasma, Cinryze is a protein that can prevent swelling attacks. About 8,000 people in the U.S. have been treated with Cinryze, according to Shire CEO Flemming Ornskov.
Cinryze is pricey. A typical treatment requires two vials costing more than $4,600 in the U.S. To prevent attacks, the treatment is repeated every few days. Over the course of a year, a person's Cinryze bill can reach hundreds of thousands of dollars, making it one of the most expensive drugs on the market.
Shire's biggest seller at the moment is Vyvanse, an ADHD pill, which brought in nearly $600 million during the first six months 2013. But the company also sells Firazyr, another drug to treat hereditary angioedema, and several others for rare conditions. These are the kind of drugs that Shire is pinning its future on.
"Shire's strategy is to focus on speciality medicines and, in particular, rare diseases," Ornskov tells Shots. There are thousands of them that don't have effective treatments, he says. That means there are thousand of opportunities.
The Food and Drug Administration encourages the development of so-called orphan drugs, which generally are expected to be used by fewer than 200,000 people in the U.S. Cinryze is one. So, too, are Shire's Elaprase for Hunter's syndrome and Vpriv for Gaucher disease.
"On an individual patient level, the cost is high" for the drugs, Ornskov says. "In actual dollars spent, these are relatively small given the size of the patient population."
He says Cinryze sales should exceed $400 million this year. Sales could increase if more patients are diagnosed and if additional uses are found for the medicine, he says.
As for Cinryze's high price, Ornskov says orphan drugs can cost as much to develop as blockbusters for more common conditions. Even if they don't, the key factor in determining an orphan drug's price is its worth in prolonging life, reducing suffering or eliminated the need for other kinds of care. "It's value-based," he says. "It's not just mathematical."