Cephalon’s Pricing Shenanigans

November 26th, 2008 | Sources: Wall Street Journal

Cephalon has a great story. Founded 20 years ago, the Frazer, Pennsylvania-based biotech start-up has grown to become one of the top ten biopharmaceutical companies in the world. It has 9 products on the US market, a reputation for creativity, a prodigious pipeline, and revenues exceeding $1.4 billion.

And now that Provigil—the drug responsible for half its revenue is due to lose patent protection in 4 years—Cephalon has begun the next chapter in its story.

We’ve heard this one before. It’s about pricing schemes that wring every red cent out of Provigil and its long-acting offspring, Nuvigil.

Provigil has FDA approval for narcolepsy, obstructive sleep apnea and shift-work sleep disorder. It has also become a popular lifestyle drug that people use to stay sharp at work or wherever.

Twice already this year, Cephalon jacked-up the price of Provigil. It now costs 28% more than it did this spring and 74% more than 4 years ago.

It has done so in anticipation of the spring, 2009 launch of Nuvigil, which had received FDA approval 2 years ago but was shelved by Cephalon as part of its now-unfolding revenue-maximization strategy.

See, Nuvigil will come out cheaper than the now jacked Provigil, so everyone will switch to the new product which enjoys patent protection until 2023. Then, when the generics hit the market, patients and physicians will not be inclined to switch from the convenient long-acting drug to the short-acting generic.

Cephalon talks openly about its perfectly legal scheme. Its VP of investor relations Chip Merritt recently told those attending a conference last month, “you should expect that we will…raise Provigil prices to…create an incentive for the reimbursers to preferentially move to Nuvigil.”

Most insured patients taking Provigil for FDA-approved uses won’t be directly impacted by the price increase, but those who take the stuff for recreational purposes may be left out to dry.

That’s when we learn about price-elasticity for a wakefulness drug that you can’t order with extra foam, whipped cream and caramel drizzle.


 

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