Now that Bristol-Myers Squibb is acquiring Celgene, the company will largely disappear into Bristol-Myers Squibb, but a legacy of bold risk-taking and questionable price hikes remain.
Now that Bristol-Myers Squibb is acquiring Celgene, the company will largely disappear into BMS, but a legacy of bold risk-taking and questionable price hikes remain.
Bristol-Myers Squibb is paying $74 billion for the oncology company. The deal was announced on January 3, 2019. The combined companies will have nine products that each rake in more than $1 billion in annual sales, with a deep cancer pipeline led by Opdivo, Revlimid, Pomylyst and Yervoy. It will also have a strong cardiovascular pipeline led by Eliquis and an immunology and inflammation franchise led by Orencia and Otezla.
Celgene spun out of a company called Celanese in 1986. The goal was to search for microbes that digested toxic waste. The company shifted gears in 1991, when one of its chemists, Sol Barrer, heard about thalidomide from a researcher at Rockefeller University.
Thalidomide was first marketed as an over-the-counter sedative in West Germany in the 1950s under the trade name Contergan. A little later it was marketed as an anti-nausea medication and to alleviate morning sickness in pregnant women. In 1960, the U.S. Food and Drug Administration (FDA) rejected the drug for morning sickness over concerns about side effects.
It was also marketed in the UK, Australia and New Zealand as Distaval. Not long after it was approved in Germany, children began being born with phocomelia, a malformation of the arms and hands. Approximately 40 percent of those afflicted survived. Worldwide, about 10,000 cases were reported, with a global survival rate of 50 percent. The most common defects were “flipper-like hands” or even stumps. There were other effects as well, including eye and heart deformities.
It was pulled from the market but studied in several different diseases. It was eventually used to treat leprosy in other parts of the world. In the 1990s, it was suggested as a possible treatment for HIV-related weight loss. And because it was an immunomodulator, it was considered for blood cancers, such as multiple myeloma.
Celgene licensed Rockefeller University’s thalidomide intellectual property in 1992. Part of the story behind that relates to attorney Beth Wolmer, whose husband, Ira, a cardiologist, was diagnosed with multiple myeloma. Beth Wolmer spent a lot of time next to her husband’s bedside reading medical journals, and according to a STAT article, “talking with researchers, seeking a treatment that might work for him. She said trying thalidomide in myeloma was her idea, based on those discussions.”
Celgene and the FDA let Wolmer’s physician try it, and although it did not work for him, his myeloma specialist, Bart Barlogie, tested the drug in more patients. In 1999, Barlogie published a study of 84 patients treated with thalidomide in the New England Journal of Medicine.
Celgene invested in more myeloma studies using thalidomide. They eventually developed Revlimid, a version of thalidomide, now a standard of care for myeloma.
It was this kind of brash, smart risk-taking that gave Celgene its reputation for cutting-edge research that also increased its share prices by more than a 100-fold.
But along with that came another type of innovation. When Celgene launched thalidomide for leprosy in 1998, it priced it at $6 per pill. STAT notes, “As it became clear that it was also an effective cancer drug, Celgene slowly raised the price, quadrupling it by the time it received approval for an improved molecule, Revlimid. Then, it slowly increased the price of Revlimid by a total of 145 percent, according to Sector & Sovereign LLC, a pharmaceutical consultancy.”
Now, Revlimid runs $693 per pill. As STAT writes, “Want to know why an industry that views itself as lifesaving and heroic is viewed by much of the public as price gouging and venal? Look here.”
In a 2004 front-page Wall Street Journal article, Celgene’s then-chief executive officer John Jackson, said, “When we launched it, it was going to be an AIDS-wasting drug. We couldn’t charge more or there would have been demonstrations outside the company.”
But once thalidomide became a cancer treatment, Celgene slowly shifted the price in keeping with other cancer drugs, for example, Takeda Pharmaceutical’s Velcade, which in 2003 was priced at twice that of thalidomide. Jackson told WSJ, “By bringing [the price] up every year, it was heading toward where it should be as a cancer drug.”
Thalidomide was approved for multiple myeloma in 2006. Revlimid, a next-generation version of thalidomide, had fewer side effects, and Barer, the researcher behind the thalidomide strategy at Celgene, became chief executive officer. With his strategies, Revlimid created $8.2 billion in 2017, and another cancer drug developed from thalidomide, Pomalyst, generated $1.6 billion. Otezla, used to treat psoriasis and psoriatic arthritis, is also based on thalidomide activity. It generated sales of $1.3 billion in 2017.
Celgene, STAT notes, also “pioneered something else: what Wall Street calls ‘modern pricing.’ Cancer drug prices have risen inexorably. In 2006, Genentech felt the need to cap a lung cancer drug’s annual cost at $55,000 a year. By 2009, cancer drugs approached the $100,000-a-year mark. Now, breakthrough immunotherapies touted on TV cost $150,000 per patient per year.”
Drugs and medicines always fall into a controversial area, a balance between the economics of what-the-market-will-bear and for what many in the world view as a human right, access to healthcare.
Like many drug companies, Celgene has patient access programs, and dumps much of its profits back into research and development. And Celgene, in its defense, notes that R&D expenses have increased 36 percent a year, about five times the annual rate of the price increases for Revlimid.
Celgene also uses a Risk Evaluation and Mitigation Strategy (REMS) as a way to affect drug costs, largely by tightly controlling a drug’s supply. This has the potential to prevent generic drug companies from obtaining samples need for copies. Critics have accused the company of exploiting this over-aggressively. In fact, in 2018, 31 generic drug companies complained to the FDA about restricted access to Celgene’s drug, more than any other branded drug company.
Celgene, in a more upbeat way, was also noted for signing research partnerships with biotech companies, essentially buying innovation, definitely a trend within the industry. It has signed deals with Agios and bluebird bio.
As Celgene disappears into BMS, it will be remembered—if it’s remembered at all outside the industry—as an innovative, risk-taking biopharma company whose aggressive and controversial pricing strategies changed the industry.
