Economy & Tech

FDA Approves Japanese Alzheimer's Drug, Sparks Important Discussions on the Value of Medicine

Lecanemab is the first drug proven to slow the progression of Alzheimer's. Its manufacturer Eisai calculated its societal value to determine a suitable price.

Published

1 year ago

July 20, 2023

Takashi Otani

Leading Japanese pharmaceutical company Eisai created the drug Lecanemab, sold under the brand name "Leqembi," for the treatment of Alzheimer's disease. (Provided by Eisai)

The United States Food and Drug Administration (FDA) granted official approval to Leqembi, a new Alzheimer's disease drug developed by Eisai, a major Japanese pharmaceutical company. The drug lecanemab, marketed as Leqembi, has shown promising results in slowing cognitive decline in patients with mild Alzheimer's. This breakthrough offers new hope to patients and their caregivers.

A review for approval in Japan is expected to be completed by autumn. But the focus now shifts to pricing, which is always difficult for a brand-new drug. People have varying perceptions of what would be a fair price. Therefore, the societal value of the drug must be considered.

Calculating the Value of Medicine

"How do we determine whether the price of a drug is too high or appropriate? The assessment of whether the drug's effects justify its price varies from person to person. As such, there is no definite right or wrong judgment," highlighted Takeshi Ikeuchi, a professor specializing in dementia at Niigata University.

Currently, the price of lecanemab in the United States is around $26,500 USD per person per year. The drug is effective in removing the harmful protein amyloid-beta (Aβ) from the brain, preventing the formation of plaques that damage nerve cells. It can reduce the progression of cognitive decline by 27%. Calculations based on this figure show that it could delay memory impairment and other symptoms in moderate Alzheimer's patients by two to three years.

Perceptions of a drug's price and effectiveness vary among people. And establishing what would be an appropriate price must be based on reasonable grounds.

The Societal Value of Medicine

Lecanemab was approved by the FDA through an accelerated process in January 2023. But interestingly, more than six months earlier on May 30, 2022, Eisai published a paper on the societal value of lecanemab. It means that the economic benefits of lecanemab had been indicated even before the drug's fast-track approval.

The paper considers two aspects of the drug's societal value: direct care costs, such as the costs of medical visits and hospitalization, as well as productivity loss due to nursing care provided by the patient's caregivers, including family members.

By considering factors such as willingness to pay (WTP), the paper estimates lecanemab's potential annual value in the US healthcare system to range from $9,249–⁠$35,605 USD or $10,400–$38,053 USD when factoring in societal perspectives.

Based on this, the paper suggests that lecanemab provides an annual value of $37,600 USD per person in the United States. Eisai has set the launch price of the drug at $26,500 USD.

*CEO Haruo Naito of Eisai (© Sankei by Hideyuki Matsui)*

The Caregivers' Quality of Life

Ataru Igarashi, an associate professor of public health at Yokohama City University, commends Eisai for demonstrating the value of the drug even before FDA approval.

"The company voluntarily demonstrated the societal value of the drug by releasing data, without being told to do so. The fact that they did this before approval adds to the impact," he said.

According to Igarashi, the societal value of lecanemab is derived from two main factors. Firstly, the reduction of expenses associated with the progression of dementia. Secondly, the extension of life due to health improvements facilitated by lecanemab. To calculate the annual societal value of lecanemab, these combined factors are divided by the average number of doses administered, with health improvements being quantified in monetary terms.

However, assessing the value of medication can be challenging as a diverse range of factors must be considered. Specifically, when looking at cost reductions in the context of dementia, should the focus only be on the patient's treatment and drug expenses? For instance, the patient's condition could negatively impact a caregiver's employment or emotional well-being. These could be alleviated or minimized if the new drug effectively curbs the advancement of symptoms.

Igarashi explains, "A decline in an elderly patient's quality of life also leads to a decline in the quality of life of those close to the patient."

Value in Monetary Terms

At a press conference on July 7 held in response to the official US approval of lecanemab, Eisai's CEO Haruo Naito said, "After careful consideration of various factors, we have calculated that lecanemab can provide a value of $37,600 USD per person to American society. We hope that its total value can be assessed by multiplying this figure by the number of lecanemab's recipients."

*CEO Haruo Naito of Eisai at a press conference in Bunkyo Ward, Tokyo, on July 7, following the approval of Leqembi (lecanemab) in the United States. (© Hideyuki Matsui)*

Furthermore, in May, Eisai revealed that lecanemab's societal value in Japan could reach up to ¥4,675,818 JPY ($33,000 USD) annually.

However, once drugs are introduced to the market, they undergo price modifications after achieving a certain level of sales. This applies even to blockbuster drugs that generate profits well beyond their development expenses. Whether the drug's usage expands and its market size increases is irrelevant. Eventually, the drug's price will also be lowered when similar drugs become available in the market.

Drug Pricing Based on Value

"What is significant is that Eisai quantified the societal value [of lecanemab] in monetary terms, allowing others to understand it clearly, instead of engaging in vague discussions. Since they are aiming to market an expensive medicine, they will likely be required to continue providing explanations [just as they did before approval]," says Igarashi.

He continues, "I believe that we should establish a drug pricing system based on value. To bring about significant changes within the current system, we need concrete examples and a way to capture public attention. In this regard, lecanemab presents an exceptional opportunity."

Lecanemab has opened up important discussions on the value of medicine. What factors should be included when considering healthcare cost reductions? And how should innovative solutions, capable of transforming society, be evaluated?

(Read the article in Japanese.)

Author: Takashi Otani