Genzyme: The Price of Success - Pharmaceutical Executive

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Genzyme: The Price of Success
Genzyme put patients first, and grew to become a multi-billion-dollar company. But empires don't survive on altruism.


Pharmaceutical Executive


The company's flagship products treat a family of diseases known as lysosomal storage disorders (LSDs), which typically affect fewer than 10,000 people worldwide and are caused by enzyme deficiencies. Genzyme markets three enzyme-replacement therapies—Cerezyme; Fabrazyme (agalsidase beta), for Fabry disease; Aldurazyme (laronidase), for Mucopolysaccharidosis I (MPS I)—and is developing a fourth, Myozyme (alglucosidase alfa), for Pompe disease. In 2005, LSDs brought in $1.3 billion, or 48 percent of Genzyme's total revenues. Cerezyme accounted for most of that, pulling in $932 million. Fabrazyme jumped 45 percent from 2004, to $305 million. And Aldurazyme chipped in $77 million, up 80 percent from the year before.

Cash cow Cerezyme costs $200,000 per patient, per year. Patients who need the drug, which is given as an infusion every two weeks, must take it for life. Genzyme's other LSD treatments, Fabrazyme and Aldurazyme, both approved in 2003, also are very expensive, each costing on average between $175,000 and $200,000 a year per patient.

Those prices—especially Cerezyme's, because of how long it's been on the market—have attracted some unfavorable attention to Genzyme. Last November, The Wall Street Journal ran three scathing articles—two of them on Page One—on the company's pricing strategies. Genzyme, though, is unapologetic. "We have to explain that our drugs are expensive, but I don't mind explaining it," says Termeer. "We try not to have massive price differentials between markets. We try to be very insistent on access, making sure we don't abuse the monopoly situation we're in."

Indeed, the company argues that it has been steadily reducing the real cost of Cerezyme by holding the price steady in the United States since launch. "As a rule, the pharmaceutical industry will increase its price a couple percentage points every year," says David Meeker, Genzyme's president of LSD therapeutics. "When you factor in CPI [consumer price index] increases, we have had a real price decrease by holding dollars constant."

Not everyone sees it that way. Abbey Meyers, president of the National Organization for Rare Disorders, a coalition of about 130 voluntary health agencies that work for different rare diseases, remembers the switch from Ceredase, the first-generation treatment, to Cerezyme. "Genzyme said, 'Ceredase is so expensive because it's so hard to get these placentas. When we create a way to make it in big vats through biotechnology, it'll be less expensive,'" says Meyers. (Enzymes for Ceredase were produced from human placentas; it took 22,000 placentas to make enough enzyme to treat one Gaucher patient for a year.) "When they came out with Cerezyme, somebody from the company called up saying, 'You're going to be so proud of us. We are not charging any more for Cerezyme.' I could not believe my ears. They're charging the same as they did for the original drug, even though they're manufacturing in larger quantities."

To that, Meeker says, "People get very focused on thinking it's got to be costing us less to make after 10 years. The answer is, yes, it does cost us less to make it, but it still has a significant cost. There are so many different pieces that are part of making sure patients can access the drug."

Manufacturing is a big part of the price tag. LSD drugs are complex biotech products that require expensive equipment and long manufacturing cycles. The company is currently building a six-story, $124 million research lab in Framingham, Mass. The lab is part of a $210 million manufacturing-and research-expansion project that includes a research facility in Waltham, Mass., and $53 million of additions within the company's protein-manufacturing plant in Allston, Mass. Genzyme also is investing in manufacturing overseas, with three expansion projects happening in Ireland and the United Kingdom, and a new plant that opened in September 2005 in Geel, Belgium. Together, the international projects represent capital investments of more than $500 million dollars.


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