The Cost of Enzyme Replacement Therapy

From the beginning, we have been transparent in our approach to setting a price for these products, and we have openly explained the factors affecting their cost with physicians, patients, insurers, government authorities, journalists and others. Given the interest in this subject, we feel it is important to share our perspective even more broadly by providing answers to some frequently asked questions:

What drugs has Genzyme developed for rare diseases?

Treatment	Disease	First Approved	Patients on therapy as of January 1, 2008
Cerezyme (imiglucerase for injection)	Type 1 Gaucher disease	1991 (first-generation product Ceredase)	5,200
Fabrazyme (agalsidase beta)	Fabry disease	2001	2,200
Aldurazyme (laronidase) with BioMarin Pharmaceutical	MPS I	2003	600
Myozyme (alglucosidase alfa)	Pompe disease	2006	900

What contributes to the cost of these products?

There are three principal factors involved: the cost of developing these products, the cost of manufacturing them, and the rarity of the diseases they treat.

Development costs The cost to develop these treatments is just as high as for most other drugs on the market today. For example, our investment to develop Myozyme totaled $500 million prior to approval. Post-marketing commitments required by regulatory agencies mean that development costs continue even after products are approved. We also continue to make significant investments in potential second-generation treatment approaches that could provide additional benefits for patients.

Manufacturing costs Creating an enzyme replacement therapy using recombinant DNA technology is among the most time-, labor- and resource-intensive drug manufacturing processes in use today. This type of manufacturing is far more costly than the manufacturing of a pharmaceutical pill. We continue to invest hundreds of millions of dollars to build manufacturing plants to ensure that we can supply our products to all patients who need them.

Rarity The most significant factor affecting the cost of these treatments is the rarity of the diseases they treat. Our development and manufacturing costs are supported by a patient population that is a small fraction of the population who use most drugs. The U.S. Orphan Drug Act, for example, defines a rare disease as one affecting fewer than 200,000 people in the United States. If even half that number of Gaucher patients were on Cerezyme today—or even the 20,000 that were originally anticipated at the time the product was introduced—rather than the current 1,500 U.S. patients, the cost of therapy would be significantly less.

How much do these products cost?

The average annual cost of therapy for patients receiving these products is approximately $200,000. For Myozyme, the average annual cost is approximately $300,000 because the dose of the product is significantly higher. Dosage for all of the products is based on a patient’s weight, meaning that the annual cost of treatment for children is less, and the cost for heavier adults is higher. Because so few people require these products, the cost to individual health care systems and insurance plans is very small.

How do you set the price of these products?

We take a highly responsible approach in establishing the price of our products. We charge a single price throughout the world for each of our enzyme replacement therapies, and we provide the drugs for free to those who cannot pay for them.

How many patients receive these products for free?

Approximately 10 percent of patients on Cerezyme receive the product for free. Genzyme provides Cerezyme free of charge through programs that include the Gaucher Initiative, our collaboration with Project Hope. Through this program, we make the drug available to patients in developing countries where government reimbursement has not been established. We also provide our three other enzyme replacement products free of charge through several Genzyme charitable access programs in the United States, Europe, Latin America and Asia.

What is the profit margin on these products?

Like most companies, we don’t report the profitability of individual products. However, our overall corporate profit margin is public. Currently, it is approximately 77 percent of our annual revenue. We have consistently reinvested our profits in the development of innovative new therapies for unmet medical needs. We have never chosen to distribute our profits as a dividend to shareholders.

Why can’t you lower the cost of these products?

Genzyme has established prices for these therapies that allow us to operate as a sustainable business. Our ability to build a business providing a treatment for Gaucher disease allowed us to make the significant investment in developing treatments for Fabry and MPS I diseases, which in turn supported the development of a treatment for Pompe disease. Operating as a sustainable business also ensures that we can fulfill our commitment to continue making and distributing our life-saving treatments to patients around the world. Finally, we continue to reinvest in research on new treatments. We are completing a phase 2 study of a small-molecule drug for Gaucher disease. This product, which would potentially offer patients a more convenient treatment option, has been in development for more than ten years. We have also invested more than $200 million in pursuing gene therapy research over the past decade, an approach that holds tremendous promise for patients.

Did Genzyme benefit from publicly funded research when it developed a treatment for Gaucher disease?

The U.S. National Institutes for Health conducted the initial discovery work on a potential approach to treating Gaucher disease. Genzyme partnered with the NIH very early on to produce the enzyme for research and clinical studies. Any company could have pursued this opportunity but none came forward. Genzyme took tremendous financial risk to develop a treatment for Gaucher disease, which involved not only the clinical development, but the complicated manufacturing of placental derived protein at the height of the AIDS epidemic. In addition, Genzyme made the $200M investment in recombinant manufacturing prior to approval of Cerezyme and with no evidence that a business model could be established. We bet the company to take this step for patients recognizing it would be years (10 or more in some cases) before a country might reimburse us for the medication. With regard to clinical development much of the costs are born post approval in the context of disease registries and post marketing requirement of regulatory agencies.

Has Genzyme encouraged physicians to prescribe higher doses of Cerezyme?

No. We have been very clear in our position that physicians make decisions about patient care, including decisions about dosing. Among Gaucher physicians, it is now widely accepted that Cerezyme doses should be tailored to each patient based on disease severity, much as the dose of insulin is individualized for patients with diabetes. This is because Gaucher disease is highly variable. Many patients suffer potentially disabling and life-threatening symptoms while others experience few complications. Genzyme strongly supports this individualized approach, which is based on a substantial body of clinical evidence developed over the past 15 years.

Is it worth the $200,000-$300,000 annual cost to treat these diseases?

The diseases our products treat are severe, progressively debilitating, and potentially fatal. They have a profound impact on patients and their families. Untreated, these diseases are also costly because they require significant medical intervention. Our treatments have proved to be highly effective and safe and have helped many patients lead a relatively normal life. The products have broad reimbursement support in the United States and globally because of the clinical value they provide.

What is Genzyme’s view on follow-on biologics?

We support the creation of a pathway for the regulation of follow-on biologics. Any regulatory pathway must incorporate processes and requirements that ensure patient safety will be protected. To protect patient safety, the standards for approval of follow-on biologics must be as rigorous as those for innovator products. This is especially important because biologic products are much more complex than small molecule drugs, and their safety and effectiveness are critically dependent on the methods used to manufacture them.

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