"The incremental cost associated with this aspect of medicine is less than a fraction of a percent" of overall healthcare
costs, says Termeer. Excessive healthcare costs, he says, "are associated with what we cannot treat. The costs that are associated
with things that really work are relatively small."
Indeed, effectiveness of treatment is increasingly becoming the number-one consideration in insurance companies' coverage
decisions, says Mohit Ghose, vice president of public affairs for America's Health Insurance Plans, an industry trade group.
"It's not a question of providing coverage for these high-end biotechs," he says. "It's a question of whether a drug is the
best in a particular situation."
In January, the Centers for Medicare & Medicaid Services (CMS) expanded coverage of implantable cardioverter defibrillators,
a move that points to a trend in insurance coverage. With Medicare moving in the direction of paying for higher-end products,
yet requiring comparative analysis and post-marketing surveillance, Ghose says health plans are anticipating a "continued
evolution" toward coverage for the most expensive treatments, as long as they are shown to be best in class.
If that's the case, Genzyme currently is in a pretty good spot. "You're talking about a population for whom the alternative
to not receiving therapy is serious morbidity or mortality," says Antony Pfaffle, an analyst with Black Diamond Research.
That's true—for now— in LSDs, but as Genzyme diversifies itself (see "Diversification"), it'll have to work harder to win
comparative effectiveness arguments. The company currently operates across six business units (see "Joint Effort" ). None
are as lucrative as therapeutics, where LSDs reside, but with Genzyme's prized rare-disease markets attracting competition,
the company must adjust.
Drug companies, traditionally, haven't spent much time battling over patient populations of a few thousand. But Genzyme has
felt some heat from potential competitors. In 2001, as Genzyme's Fabrazyme neared approval, it was running neck and neck with
another Fabry treatment—Replagal, developed by Transkaryotic Therapies (TKT). Both products were approved in Europe in August,
and the companies faced off for US rights. (According to the rules of the Orphan Drug Act, the first product to win approval
for an orphan indication is awarded the exclusivity.) In April 2003, FDA approved Fabrazyme over Replagal, giving Genzyme
a significant advantage in the category. TKT was purchased in July 2005 by another Genzyme competitor, Shire, maker of Fosrenol,
which competes with Genzyme's phosphate binder, Renagel.
Today, Shire Human Genetic Therapies (HGT), as TKT is now known, is targeting Genzyme's most important product, Cerezyme.
While there is at least one other treatment for Gaucher disease—Actelia Pharmaceuticals' Zavesca (miglustat), an oral treatment
for adult Type 1 Gaucher patients for whom enzyme replacement therapy is not an option—that drug has never competed directly
with Cerezyme, because the dose in Zavesca is lower and enzyme replacement therapy is considered the standard of care.
Shire HGT's new product, gene-activated glucocerebrosidase (GCB), also is an enzyme replacement therapy, but it's derived
from human cell lines rather than from hamster cells like Cerezyme—a distinction Shire HGT sees as critical, although it won't
say why. This fall, Shire HGT released positive six-month data from a Phase II clinical trial of GCB, and the company is shooting
for approval in 2008. It poses the most direct threat yet to Cerezyme—and Genzyme.
Shire HGT is tight-lipped about the potential of its product, but Michael Hall, the company's vice president of research,
says competition intrinsically benefits sufferers of rare diseases. "Sometimes patients run into difficulties with one product
and they tolerate a second one better," he says. "There may be preferences in clinical practice that dictate one clinician
wanting to provide one product over another. And in terms of product availability, having more than one in the market may
allow broader formulary access."