Federal and Private Roles in the

Development and Provision of Alglucerase

Therapy for Gaucher Disease

October 1992

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Foreword

The effort to discover and develop new pharmaceuticals is a risky and costly enterprise.

For diseases that affect few patients, the barriers to development maybe especially great, since

the drugs’ small markets may make it difficult for firms to recoup their initial research and

development investments. The Federal Government has sought to reduce these barriers

through incentives first adopted in the Orphan Drug Act of 1983 (Public Law 97-414). The

transfer of technology from Federal laboratories such as the National Institutes of Health to

the pharmaceutical industry can also reduce the cost and risk of drug development for firms.

Although such incentives may result in important new therapies, their price to patients and

insurers may still be high.

As part of our assessment, Government Policies and Pharmaceutical Research and

Development, requested by the House Committee on Energy and Commerce and its

Subcommittee on Health and the Environment and the Subcommittee on Antitrust,

Monopolies, and Business Rights of the Senate Committee on the Judiciary, OTA

commissioned researchers at Stanford University to examine the development and provision

of alglucerase, an important new treatment for Gaucher disease. Gaucher disease is a rare

inherited disorder in which the body lacks an enzyme necessary to break down fats. This

background paper describes the development of alglucerase, illustrates the role that both the

Federal Government and private sector can have in making new therapies available for orphan

diseases, and lays out some of the tradeoffs that can exist between developing new medical

technologies and controlling health care costs.

X2? A& -

JOHN H. GIBBONS

U Directo r

Ill
OTA Staff—Federal and Private Roles in the Development and Provision

of Alglucerase Therapy for Gaucher Disease

Roger C. Herdman, Assistant Director

Health and Life Sciences Division

Clyde J. Behney, Health Program Manager

Project Staff

Judith L. Wagner, Project Director,

Government Policies and Pharmaceutical Research and Development

Michael E. Gluck, Study Director

Timothy Brogan, Research Assistant1

Arna M. Lane, Research Assistant

Administrative Staff

Marian Grochowski, Office Administrator

Eileen Murphy, P.C. Specialist

Kimberly Holmlund, Word Processing Specialist

1 From July 1991 to February 1992.

iv
Federal and Private Roles in the Development and Provision

of Alglucerase Therapy for Gaucher Disease

Background Paper

This background paper was prepared as part of OTA’s assessment of

Government Policies and Pharmaceutical Research and Development.

Prepared by:

Alan M. Garber

Palo Alto Department of Veterans Affairs Medical Center

and Stanford University

Ann E. Clarke

Stanford University

Dana P. Goldman

Stanford University

Michael E. Gluck

Office of Technology Assessment

U.S. Congress
Glossary of Abbreviations

BCBS —Blue Cross and Blue Shield HMO —health maintenance organization

CHAMPUS--Civilian Health and Medical Program IND —Investigational New Drug

of the Uniformed Services NDA —New Drug Application

DNA -deoxyribonucleic acid —National Institutes of Health

FDA —Food and Drug Administration ODA -Orphan Drug Act

HCFA —Health Care Financing R&D —research and development

Administration SSA -Social Security Administration

HCPCS —HCFA’s Common Procedure Coding

System
Contents

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

DESCRIPTION OF GAUCHER DISEASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Forms of the Disease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Prevalence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diagnosis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

ENZYME REPLACEMENT THERAPY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mode of Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Clinical Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Conclusions Regarding Efficacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Conclusions Regarding Appropriate Dosing Regimens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

THE DISCOVERY AND DEVELOPMENT OF ALGLUCERASE . . . . . . . . . . . . . . . . . . . . . . . .

History of Alglucerase Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Cost of Developing Alglucerase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Conclusions About the Discovery and Development of Alglucerase . . . . . . . . . . . . . . . . . . . . . .

THE COST OF MANUFACTURING, DISTRIBUTING, ANDMARKETING

PLACENTAL ALGLUCERASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

POTENTIAL ADVANCES IN THERAPY FOR GAUCHER DISEASE . . . . . . . . . . . . . . . . . . .

PAYING FOR ALGLUCERASE THERAPY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cost of Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Who Pays the Cost of Alglucerase Treatment? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Insurance Payment for Alglucerase Therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

POTENTIAL CONSEQUENCES OF FEDERAL SUBSIDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

REFERENCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure

Figure

l. Cumulative Per Patient Insurance Costs for Alglucerase Therapy

Dosing Regimens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Tables

Table

l. Incidence of Gaucher Disease in the United States . . . . . . . . . . . . .

2. Clinical Experience With Ceredase . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Under Four Potential

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3. Clinical and Experimental Evidence Supporting Low-Dose Therapy Unfractionated . . . . . . .

4. Scientific Basis for Biweekly High-Dose Unfractionated Versus Low-Dose Fractionated . .

5. The Development of Ceredase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6. NIH Contracts Pertaining to Alglucerase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7. Estimated Annual Per Patient Drug and Ancillary Charges for Alglucerase Therapy

Under Four Potential Dosing Regimens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8. Distribution of Alglucerase Patients by Primary Payer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9. Selected Insurance Characteristics of Full-Time Participants in Employment-Based

Plans at Medium and Large Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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vii
Federal and Private Roles in the Development and Provision

of Alglucerase Therapy for Gaucher Disease

SUMMARY

The drug development and approval process is

time-consuming, risky, and potentially costly enough

to preclude the development and marketing of

treatments for rare disorders. The case of alglucerase, an expensive new therapy for the uncommon

inherited disorder called Gaucher disease, illustrates

how the Federal Government can help manufacturers overcome critical scientific, financial, and regulatory barriers to the development of such treatments. This paper analyzes public and private

investments in the research and development (R&D)

of alglucerase. It also examines uncertainty surrounding the appropriate dosing of the drug and the

cost implications of alglucerase therapy for patients,

their insurers, and the Federal Government.

Gaucher disease is caused by deficient activity of

an enzyme necessary to break down glycolipids,

substances produced by white blood cells. The

accumulation of these glycolipids in the spleen,

liver, bone marrow, and other organs can lead to

abdominal and bone pain, anemia, and other severe

manifestations of disease. Gaucher disease causes

significant disability and can be fatal. Between

2,100 and 11,000 people in the United States are

believed to have symptoms severe enough to warrant

medical intervention.

Alglucerase, marketed under the brand name

Ceredasetm by Genzyme, Inc., a Massachusetts

pharmaceutical firm, is a chemical derivative of the

missing enzyme. Prior to its development, there was

no effective treatment for the disease. Although its

efficacy has been studied in few patients, existing

information suggests that it can reverse some of the

symptoms and physical manifestations of the disease.

The drug was developed after significant investment by both the Federal Government and the

private sector. Most of the scientific research that

led to the discovery of alglucerase had been sponsored or performed by the U.S. National Institutes of

Health (NIH). A critical step was the discovery, by

NIH researchers, of the enzyme defect that caused

the disease. A second milestone was reached when

NIH researchers devised a method for harvesting the

enzyme from human placentae, for which they

received a patent in 1975. A third milestone was the

discovery by NIH researchers of a chemical modification that greatly improved the effectiveness of the

enzyme. The modified form became alglucerase.

In addition to the research that took place in NIH’s

own laboratories, the Federal Government invested

almost $1 million in contracts with the New England

Enzyme Center at the Tufts University Medical

School to supply NIH with sufficient quantities of

the enzyme to continue the research process. In

1981, Genzyme, then a new firm whose founders

included researchers from the New England Enzyme

Center, took over the contract to supply the enzyme.

NIH contracts with Genzyme over the next 11 years

totaled nearly $9 million, a figure that represents

roughly 20 percent of alglucerase)s measurable

R&D costs. This figure does not include the costs

of decades of research by talented NIH scientists or

the work by researchers at universities and private

research institutions whose efforts culminated in

alglucerase.

Because the contributions of NIH included the

discovery of alglucerase, Genzyme could not obtain

a patent for the drug. Therefore, had it not been for

the provisions of the Orphan Drug Act, Genzyme

could not be assured of the exclusive rights to market

the drug. In 1985, Genzyme’s alglucerase received

official designation as an orphan drug, entitling the

company to 7 years of exclusive marketing, and

greatly enhancing the potential profitability of

alglucerase.

On the basis of information supplied by Genyzme, we estimate that the firm spent approximately $29.4 million on R&D for placental alglucerase over the decade prior to its approval for

marketing in 1991. These expenditures represent

cash outlays. They do not account for the time value

of the money tied up in the project or for the

technical risks of failure along the way. Although

Genzyme claims that it spent about $48.6 million in

cash outlays, we include only actual expenditures for

the work, materials, and facilities needed for the

conduct of R&D. The excluded payments are part of

the purchase of the valuable asset that Genzyme’s

–l–
2 ● Federal and private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

alglucerase had become by the time the firm decided

to buy back rights to it from its investors.l

In addition to the large public and private

investment in the development of alglucerase, further revenues came from Gaucher patients and their

insurers. Between 1989 and 1991, patients were able

to purchase the then unapproved drug under the U.S.

Food and Drug Administration’s (FDA) Treatment

Investigational New Drug (IND) program. This

program provides patients not enrolled in clinical

trials with access to experimental drugs for otherwise untreatable conditions. The FDA allowed

Genzyme to charge a price to recover costs associated with the R&D and provision of the drug.

Revenues to Genzyme under the Treatment IND

program exceeded $5 million.

FDA approval of Genzyme’s placental alglucerase in April 1991 was based primarily on the

clinical experience of 12 patients studied at NIH.2

Their work indicated that a dose of 60 units/

kilogram (kg)3 administered biweekly for a year

resulted in rapid patient improvement. After varying

periods of treatment at the initial dosage, researchers

elsewhere have successfully decreased the “maintenance’ dose that some patients receive to as little as

15 units/kg biweekly. Researchers at the Scripps

Institute in California have used an even smaller

dose, 2.3 units/kg, administered three times a week.

Although patients in these studies had clinical

improvements comparable to those of the NIH

patients, there is some uncertainty about whether

they were as severely ill as patients enrolled in the

NIH study.

At the range of potential treatment doses studied

thus far and the retail price of $3.50/unit, a year of

therapy can cost between $71,160 (for 2.3 units/kg

thrice weekly) to $552,760 (for 60 units/kg weekly).

Patients successfully treated with alglucerase will

presumably remain on the therapy all their lives

(albeit at reduced maintenance doses). According to

data supplied by Genzyme, 73 percent of patients on

alglucerase in March 1992 had private health

insurance that covered their alglucerase therapy,

usually with patient out-of-pocket expenses of less

than $2,000. Another 21 percent were covered by

Medicare or Medicaid.4 Part of the reason for the

high price of alglucerase may be its high manufacturing, marketing, and distribution costs, which we

estimate to be $1.90/unit in 1992, based on figures

supplied by Genzyme.

Because the vast majority of private health

insurance policies impose a limit on total benefits

payable for each insuree, somewhere between onethird and one-half of all alglucerase recipients face

a significant risk of exhausting or critically reducing their available insurance benefits over time.

Although Genzyme supplies the drug free to those

patients who exhaust (or otherwise lack) insurance

benefits, for the rest of their lives such patients

remain uninsured for the cost of administering

alglucerase and any other medical expenses they

may incur.

Genzyme’s pricing arrangement means that insurers are typically obligated by contract to pay most5

of the drug’s price for all FDA approved indications;

patients without insurance or other resources, who

would often forgo therapy rather than pay the full

price, pay nothing for the drug. Although the

company gains no revenue on each unit of drug

offered free of charge, the overall pricing strategy

can be profitable. Genzyme's pricing is similar in its

consequences to a policy in which patients are

offered a lifetime supply of alglucerase in exchange for the value of their remaining insurance

coverage and associated copayments.

The drug’s high cost to consumers, private

insurers, and the Federal Government raises questions about the extent to which NIH is acting in the

public interest in providing significant assistance to

some medical technologies ultimately marketed by

the private sector. The actions of NIH can have

consequences far beyond providing new therapies to

combat disease. As is illustrated by this case, such

deep involvement creates the potential for the

1 In exchange for funds to develop alglucerase, Genzyme had transferred rights to the drug in 1987 to a limited partnership. Genzyme was the

managing partner of the limited partnership.

2 Genzyme is currently conducting clinical research using a recombinant form of the enzyme that it hopes will replace the placental form.

3 One kilogram equals 2.206 pounds.

4 Although Medicare pays only 80 percent of therapy, the cost of therapy, the vast majority of these patients have supplement private insurance that pays

at least some portion of the remaining 20 percent. Medicare patients without such supplemental insurance are liable for the 20 percent copayment which

can reach tens of thousands of dollars. Medicaid pays virtually all of the costs of alglucerase therapy.

5 Insured patients typically are obligated to pay a copayment and deductible out-of-pocket for insured medicines and services.
Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease ● 3

Federal Government to pay for such technologies

twice-once through support of the R&D process

and once again as a health insurer. The Federal

Government has no mechanism to ensure that the

prices Americans pay for drugs and other technologies reflect the public’s contribution to their development.

INTRODUCTION

The drug development and approval process is

time-consuming and potentially costly enough to

preclude the development and marketing of treatments for rare disorders. The Federal Government

can help potential manufacturers overcome critical

scientific, financial, and regulatory barriers to the

development of such treatments. Many Federal

laboratories, especially those at NIH, conduct drug

discovery research or develop other vital technology

for the treatment of disease. The availability of this

technology and Federal assistance in its transfer to

the private sector can significantly reduce the cost to

a manufacturer of conducting drug R&D. Governmentsponsored research can also reduce the risk that the

manufacturer’s efforts to develop a drug will fail by

conducting or sponsoring research that helps establish approaches to the treatment of a disease that are

likely to be safe and effective.

Pharmaceutical regulation, so often seen as a

barrier to innovation, is another means by which the

Federal Government can help make the development

of new drugs profitable. The Orphan Drug Act

(ODA) (Public Law 97-414), enacted in 1983, is an

example of a set of pharmaceutical regulations

designed to promote, not impede, the marketing of

new drugs. The act offers firms incentives to develop

treatments for rare disorders. These incentives

include research grants, investment tax credits,

assistance in negotiating the approval process, and,

most importantly, exclusive license to market the

product for a specific indication for 7 years. Drug

manufacturers can already exclude other producers

by obtaining patent protection for their products, but

the period of exclusivity under the ODA does not

begin until the drug receives final approval from the

FDA; as a result, the ODA may extend market

exclusivity after the patent has expired. Furthermore, the ODA can confer market exclusivity even

when a patent is not or cannot be awarded.

Both types of Federal involvement were vital to

the development of alglucerase, a new and expensive drug for Gaucher disease. Gaucher disease is a

serious but rare genetic disorder that results from

insufficient activity of the enzyme glucocerebrosidase. Government-sponsored research conducted

from the mid 1970s to the early 1980s led to the

discovery of alglucerase, an apparently efficacious

chemical derivative of the missing enzyme. To

translate these scientific breakthroughs into better

patient care required large-scale production of alglucerase, which could only occur as part of its

commercial development. Commercial development,

in turn, built upon the scientific discoveries that led

to the discovery of alglucerase and it required the

expectation that the enterprise would be profitable.

Product development might not have proceeded as

quickly, if it proceeded at all, without orphan

designation.

In this paper, we describe the development of

Ceredase tm, a brand of alglucerase marketed by

Genzyme, Inc. of Massachusetts, and the roles of the

Federal Government in this process. We then focus

on the provision of this drug-its availability and its

cost implications for patients, the Federal Government, and private health insurance. The case of

alglucerase dramatically illustrates the challenges

that Americans face in devising policies to control

health care costs without deterring the development

of efficacious new technologies.

DESCRIPTION OF

GAUCHER DISEASE

Gaucher disease is an inherited metabolic disorder characterized by the accumulation of compounds

called glycolipids, substances ordinarily broken

down by the enzyme glucocerebrosidase (8,18,19,20,

33,78). A set of genetic defects in Gaucher patients

causes decreased activity or absence of this enzyme.

Consequently, glycolipids, which are primarily derived from white blood cells, accumulate in the

spleen, liver, bone marrow, and other organs. The

clinical manifestations of glycolipid deposition include abdominal enlargement, low blood counts,

and severe bone pain. Less frequently, the glycolipids can accumulate in the brain, lungs, heart, kidney,

and Skin.

Forms of the Disease

The clinical severity of Gaucher disease varies

dramatically, but the severity may not be closely

associated with the specific genetic defect. Several
4 ● Federal and private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

genetic mutations cause this enzyme deficiency

(22,26,51,63,75,80,1 10,111) but, according to several researchers, the same mutation may lead to

heterogeneous disease presentations, and patients

with similar clinical manifestations do not necessarily have the same genetic abnormality (8). Other

researchers claim that there is a strong association

between genetic abnormality and disease severity

(20,22,26,61,108,124). As a group, these studies

suggest that there is a link between the two

characteristics, but the strength of this link may be

influenced by environmental conditions and other

unknown genetic factors.

Gaucher disease is classified into three categories

based on its clinical presentation. Type 1, the adult

form, is usually the least severe. Although the name

suggests that this condition is present only in adults,

it may manifest itself at any time. Its presentation is

very heterogeneous; some patients may be asymptomatic or have only minimal symptoms, while others

may suffer severe and chronic life-long disability.

This chronic condition affects the spleen, liver, and

bone marrow. The enlarged spleen is thought to

accumulate and destroy platelets and red and white

blood cells. The bone marrow, the normal site of

production of blood cells, maybe unable to replace

the destroyed cells because it is also infiltrated with

glycolipid. The patient consequently develops anemia, resulting in fatigue and shortness of breath. A

low platelet count causes excessive bruising and

bleeding. The macrophages, cells which eliminate

debris and other contaminants from the blood and

other tissues, become congested with unmetabolized

glycolipids and restrict blood flow to the bones,

thereby decreasing the oxygen supply and causing

the bone pain experienced by many Gaucher patients. This pain can be debilitating, resulting in

frequent confinement to bed. The bones are also

more likely to deteriorate and fracture, sometimes

leading to deformities that restrict the patient to a

wheelchair. Although rare, breathing problems can

be severe enough to warrant oxygen therapy. Child

development can be affected as well; the onset of

puberty may be delayed, and the growth of teeth and

bones may be impaired. It was thought that Type 1

disease tended to follow a progressive downhill

course, but some investigators now believe that

when these patients reach early adulthood, the

disease course stabilizes (20).

Four genetic mutations are responsible for about

97 percent of the cases of Type 1 Gaucher disease in

the Ashkenazi Jewish population (22,25,26). Three

of these abnormalities, designated by geneticists as

1226, 1448, and IVS2+1 result from a single

substitution within the patients DNA (deoxyribonucleic acid). The fourth, 84GG, is due to an insertion

in the DNA template. The 1226 mutation accounts

for 77 percent of the genetic mutations in the

Ashkenazi Jewish population but for only 25 percent

of the cases in non-Jews. It is thought to cause a less

severe form of the disease. The 84GG mutation

causes about 13 percent of the genetic abnormalities

in the Jewish population and much less in the

non-Jewish segment. The IVS2+1 mutation, which

was very recently described, accounts for about 2.5

percent of the mutations in Jews and a much smaller

percentage in non-Jews. Persons with the 84GG and

IVS2+1 mutations do not produce the enzyme and

have severe forms of Gaucher disease. The 1448

abnormality, which is thought to be responsible for

more serious disease and for brain involvement,

occurs in about 40 percent of the non-Jewish

Gaucher population but in only 3 percent of the

Jewish Gaucher patients. These four genetic defects

account for only about 65 to 75 percent of the cases

of Gaucher disease in the non-Jewish population.

Remaining mutations are either unidentified or

sporadic and restricted to a few families (51,63,80).

Type 2, the infantile form, is the most severe of the

3 types. It usually becomes apparent before 6 months

of age and is fatal within 2 years. Central nervous

system involvement distinguishes this form of the

disease from Type 1. Infants with Type 2 disease

have abnormal movements and postures, along with

difficulty handling oral secretions, and seizures.

Type 3, the juvenile form, is of intermediate

severity. Its manifestations are similar to those of

Type 2, and include abnormal eye movements,

seizures, and dementia, but it involves the neurological system later in its course.

Prevalence

The prevalence of each type of Gaucher disease

depends on both its incidence (rate of new cases per

year) and the longevity of patients. The most

common form is Type 1, which affects Ashkenazi

Jews at a greater rate than the general population.

The other two types are rare; they appear to affect no

more than one of 50,000 births (8). The incidence of

Type 3 disease is greater among people from the

province of Norrbotten in Sweden than the popula-
Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease ● 5

tion as a whole. Type 2 does not have an apparent

ethnic predilection.

The specific prevalence of each form of the

disease is uncertain. Most estimates of disease

prevalence are based on the frequency of the disease

genes in the population, a rate which itself is

uncertain. Prior to the recent advent of genetic

technology, estimates of the incidence of Gaucher

disease were imprecise. Thus, as table 1 shows, there

was a wide range of estimates of disease incidence.

These estimates were initially based on the actual

number of Gaucher patients within a sample of the

Ashkenazi Jewish population. Later estimates were

based on detection of carriers using an assay to

assess glucocerebrosidase activity, but because there

is considerable overlap in the level of enzyme

activity between normal individuals and carriers of

Gaucher disease, the assay does not reliably identify

carriers (29). After the precise genetic abnormalities

causing Gaucher disease were discovered, it became

possible to detect the disease more accurately with

a blood test and to determine the gene frequency and

birth incidence with much greater precision. The

genetic tests have been more useful in Jewish than in

non-Jewish populations, since the genetic mutations

causing the disease are better characterized in the

Ashkenazi Jewish population.

Between about 6.6 and 10 percent (1/15 to 1/10)

of the Ashkenazi Jewish population are believed to

carry a form of the abnormal genes that cause

Gaucher disease (20,21,25,123). Disease develops

only in persons who have two such mutations. On

average, this occurs in one-quarter of the offspring

of pairs of carriers of Gaucher disease. If Ashkenazi

Jews only married other Ashkenazi Jews, i.e., there

were 100 percent intramarriage within the Ashkenazi Jewish population, then the birth incidence of

the disease would be between 1/1,000 and 1/400

within this population. If these assumptions are

valid, and affected patients do not have shortened

life spans, among the 6 million Jewish people in the

United States there are between 6,000 and 15,000

with Gaucher disease. Insofar as Gaucher patients

have higher mortality rates than the general population and the intramarriage rate is less than 100

percent, the actual prevalence of the disease maybe

lower.

Limited data suggest that there are as many

non-Jews as Jews with Type 1 disease in the United

States (21). Estimates of the birth incidence of the

disease in the United States are listed in table 1.

Jewish people tend to have a genetic mutation that

results in a less severe form of the disease. By one

estimate, only about 10 to 20 percent of Ashkenazi

Jews with the disease warrant medical intervention

(21). In contrast, of the estimated 10,000 non-Jews

with the disease, about 60 to 80 percent may be

sufficiently symptomatic to require therapy (21),

implying that about 2,100 to 11,000 Gaucher patients

in the United States would be candidates for medical

intervention. Genzyme, Inc., the manufacturer of

alglucerase, has suggested that only 3,000 Type 1

Gaucher patients in the United States (50 percent of

them Jewish) have severe enough disease to warrant

treatment, although there may be as many as 3,000

moderate to severely affected patients outside of the

Table I—Incidence of Gaucher Disease in the United States

Number warranting

Incidence Absolute number affected enzyme replacement therapy

Disease type Jews Non-Jews Jews Non-Jews Jews Non-Jews

1 . . . . . . . . . . . . . . 1 :400-1 :1,000 1 :25,000-1 :100,000 6,000-15,000 2,500-10,000 600-3,000 1,500-8,000

2 . . . . . . . . . . . . . . 1:40,000-1:100,000 1:40,000-1:100,000 60-150 2,500-6,250 NAa NAa

3 . . . . . . . . . . . . . . 1:40,000-1 :100,000 1 :40,000-1 :100,000 60-150 2.500-6.250 NAa NAa

a

It is not yet known if Type 3 will be amenable to enzyme replacement therapy. Recent data suggest that it may be (1 8). Type 2 Currently is not amenable to

enzyme replacement therapy.

SOURCES: J.A. Barranger and El. Ginns, “Glucosyiceramide Lipidosis: Gaucher Disease,” 7?)e Mefabolicfhis of Inherited Disease, 6th Ed., C.R. Scriver,

A.L. Beaudet, W.S. Sly, and D. Vaile (ads.) (New York, NY: McGraw-Hill, 1989); E. Beutler, “Gaucher’s Disease,” New England Journa/ of

MedhAne325:1354-1 360, 1991; E. Beutler, T. Gelbert, W. Kuhl, et al., “identification of the Second Common Jewish Gaucher Disease Mutation

Makes Possible Population-Based Screening for the I-feterozygous State,” Proceedings of the National Academy of Sciences USA

88:1 0544-10547, 1991; Y. Matoth, S. Chazan, A. Cnaan, et al., “Frequency of Carriers of Chronic (Type 1) Gaucher Disease in Ashkenazi Jews,”

American Journa/of Medica/ Genetics 27:561-565, 1987; E. Beutler, Chairman, Department of Molecuiar and Experimental Medicine, Scripps

Research Institute, La Jolla, CA; A. Taunton-Rigby, Senior Vice-President, Bio-Therapeut”kx, Henri Termeer, Chief Executive Officer and David

McLachlan, Senior Vice President and Chief Financial Officer, Genzyme, Boston, MA, personal communications, February 26, 1992; A.

Taunton-Rigby, personal communication, June 12, 1992; A. Zimran, T. Gelbert, B. Westwood, et al., “High Frequency of the Common Jewish

Mutation for Type 1 Gaucher Disease Among the Ashkenazi Jewish Population,” B/ood76:199a, 1990; A. Zimran, T. Geibart, B. Westwood, et

al., “High Frequency of the Gaucher Disease Mutation at Nucleotide 1226 Among Ashkenazi Jews,” American Jouma/ of Human Genetics

49:855-859, 1991.
6 ● Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

United States (107,107a). As described later in this

paper, clinical researchers are currently investigating the potential of alglucerase to benefit less

severely affected patients (10) and sufferers of Type

3 disease (21), as well as to provide prophylaxis to

asymptomatic patients whose disease might otherwise become symptomatic (32,61). The results of

this research could lead to a growth in the potential

market for alglucerase.

Diagnosis

The disease is diagnosed by documenting the

enzyme deficiency in various tissue sources. White

blood cells, which can be obtained from a sample of

blood drawn from a vein, provide a convenient and

reliable specimen. People with the disease have

substantially less enzyme activity than normal

subjects, and thus there is no overlap between the

two groups. Measuring enzyme levels is not a

reliable test for the detection of carriers (i.e., people

with one abnormal gene) since their level of enzyme

activity is similar to that of normal people. Although

assessment of the level of enzyme activity has been

established as a useful and dependable test for the

diagnosis of Gaucher disease, some physicians still

resort to bone marrow examination. This is a more

painful, time-consuming, and costly procedure. It

requires removing a sample of the patient’s bone

marrow either from the hip or sternum with a

specially designed needle and examining the marrow for the presence of certain cells that are

characteristic of Gaucher disease. Bone marrow

testing is imperfectly sensitive, since the abnormal

cells are not distributed uniformly throughout the

marrow and may be absent from one or more

samples. In addition, cells found in other abnormalities may mimic these “Gaucher cells, ” leading to a

false-positive diagnosis (29).

Genetic analysis has improved detection of carriers, facilitating prenatal counseling and diagnosis

(25,26). Since 95 percent of the genetic mutations

causing Gaucher disease in the Ashkenazi Jewish

population can now be easily identified (i.e., 1226,

1448, 84GG6

), there is only 1 chance in about 1

million that a Jewish couple in which one of these

three genetic defects is not found would be at risk for

having a child with Gaucher disease. This risk

decreases to about 1 in 1.6 million if both members

of the couple are examined for all the genetic

mutations currently known to cause Gaucher disease. If one but not the other parent has one of these

three mutations, the risk is 1 in 1,000 that they will

have a child with Gaucher disease (25). If a parent is

a carrier of a Gaucher gene and the other parent tests

negative for these three mutations plus all currently

discovered genetic defects, this risk would fall to 1

in 1,300. For the non-Jewish population, carrier

testing is less sensitive because only 65 to 75 percent

of the genetic defects responsible for the disease

have been characterized.

DNA analysis can be supplemented by measurement of enzyme activity in the potential parent. If the

enzyme level is normal, it is even less likely that a

subject who has no genetic abnormality will be a

carrier. However, this method does not completely

exclude carrier states since, as previously mentioned, the enzyme levels of normal people and

carriers can overlap significantly.

If both members of a couple are known to be

carriers of Gaucher disease, the likelihood that their

child will have the disease is one in four. Prenatal

diagnosis can be performed through determination

of the fetus’s enzyme levels and DNA analysis of

cells cultured from the mother’s amniotic fluid.

Those researchers who claim that there is a strong

correlation between genetic abnormality and clinical

severity believe that genetic analysis of the fetus will

enable them to advise the parents on potential

disease course.

Treatment

Prior to the introduction of enzyme replacement

therapy, the goal of medical care was amelioration of

the symptoms of the disease. Physicians sometimes

recommended splenectomy, surgical removal of the

spleen, either because they believed that it had

enlarged enough to cause symptoms directly, or it

had trapped enough platelets to depress the platelet

count. Splenectomy is now reserved for unusually

severe symptoms, because removal of the spleen

increases the risk of infection, and because unmetabolized glycolipid may accumulate more rapidly in other organs after the spleen is removed. The

anemia of Gaucher disease has been treated with

blood transfusions; the bone pain with pain medica6 The recently discovered IVS2+l mutation mentioned earlier explains an additional 2 to 3 percent of genetic mutations causing Gaucher disease in

the Ashkenazi Jewish population. It is not yet known how this mutation alters the statistics on risk of Gaucher disease presented in this section.
Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease ● 7

tions, oxygen therapy, and bed rest; and other

skeletal problems with surgery.

Treatment of the underlying enzyme deficiency

was formerly a difficult and risky procedure. Until

the development of enzyme replacement therapy,

the only form of treatment that actually corrected the

underlying disorder was bone marrow transplantation, a process in which the cells of a patient’s bone

marrow are destroyed by radiation and chemotherapy and replaced by marrow from a normal donor

(50,71,74,78,79,81,99,105,109). Because the cellular elements of the transplanted marrow contain a

normal gene for glucocerebrosidase, transplantation

should enable the patient to produce cells that

contain normal levels of the enzyme. This procedure

requires a genetically matched donor, and even then

it remains a potentially lethal treatment for a

frequently nonlethal condition. Fewer than 20 such

procedures have been performed successfully. Hopes

that transplanted spleens and kidneys would similarly serve as a permanent source of the enzyme

proved fruitless (66,67).

ENZYME REPLACEMENT

THERAPY

The lack of success of these therapies for Gaucher

disease led to further efforts to replace the missing

enzyme. Since the mid 1970s, investigators at a

number of institutions had been attempting to extract

glucocerebrosidase from human tissue. Researchers

at the NIH and Scripps Clinic independently developed methods to harvest the enzyme from human

placental tissue (44,96). In 1975, a patent was issued

to two NIH researchers for their method (Application no. 451,300). However, initial efforts to treat at

least 18 patients with the enzyme were unsuccessful.

Investigators were unable to produce sufficient

quantities to administer adequate doses, and it

became clear that the native enzyme would need to

be modified in order to ensure adequate absorption

by the cells in the body needing it most (17,23,

24,34,35,37,64).

During the early 1980s, researchers made significant progress toward overcoming these obstacles

(2,39,45,48,56,57,62,88,90,94,104,106). After devising a more efficient placental harvesting procedure, they developed a modified form of the enzyme

that was preferentially absorbed by macrophages,

the cells that utilize the enzyme to break down

glycolipids. They also designed a more effective

dosage protocol (14). Alglucerase infusions were

found to have therapeutic potential in the treatment

of Type 1 disease. Even now, it is not known whether

this treatment influences the forms of Gaucher

disease that affect the nervous system.

There is a great deal of controversy about the best

treatment regimen to use. It is very difficult to

distinguish the efficacy of alternative regimens

because there are no direct comparisons of the

regimens in randomized clinical trials. Furthermore,

it is difficult to ascertain whether the patient

populations in different studies are truly comparable. Finally, in part because Gaucher disease is an

uncommon condition, the number of patients in

many of the studies is too small to confer adequate

statistical power.

Mode of Administration

The modified enzyme is packaged as a liquid in a

5-milliliter (ml) vial containing 400 units or 80

units/ml. Before patient administration, the concentrated form of the enzyme is diluted with a saline

solution to 100 ml (4 units/ml). Ordinarily the drug

can be administered on an outpatient basis by a

nurse. An intravenous line is started, usually in the

forearm, and each patient is given a 5-ml test dose

and observed for 10 minutes. If no adverse reaction

is noted, the remainder of the predetermined dose is

administered over a 1-to 2-hour period. If the patient

does not experience any ill feelings during this

interval, he or she leaves shortly after the infusion is

completed.

Clinical Experience

NIH, Scripps Clinic, and Mount Sinai Medical

Center have the greatest clinical experience with

alglucerase. Each has pursued somewhat divergent

dosing strategies. This section reviews the clinical

experience of each institute chronologically. Following the presentation of this evidence, conclusions are drawn regarding the efficacy of various

treatment strategies.

Clinical experience with chemically modified

enzyme actually began in 1983 at the NIH, but much

of this early work is unpublished. The FDA considered NIH data in its regulatory review of alglucerase,

along with data from Genzyme acquired during the

IND (Investigational New Drug) phase. The existing

clinical experience with alglucerase is summarized

in table 2.
8 ● Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

Table 2—Clinical Experience With Ceredase

Number of

Institution Date patients Dosage regimen

NIH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1983 8 2-12 units/kg weekly

NIH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1983-present 1 30 units/kg weekly and biweekly (high-dose

unfractionated)

NIH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1986-1988 23 0.6-234units/kg single dose

NIH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1989-present 12 60 units/kg weekly and biweekly for 2 years;

decreased to 30 units/kg for 6 months (highdose unfractionated) and then further reduced to 15 units/kg

NIH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fall 1991-present 40 IO units/kg biweekly (low-dose unfractionated)

Scripps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1990-present 20 2.3units/kg 3 to 7 times weekly (low-dose

fractionated)

Shaare Zedek Medical Center,lsrael . . . . . 1991-present 10 2.3 units/kg biweekly

Mount Sinai Medical Center, New York... 1990-present 41 7.5-60 units/kg biweekly

Albert Einstein College of Medicine . . . . . . 1990-present 1 60 units/kg biweeldy

University of Pittsburgh . . . . . . . . . . . . . . . . 1990-present 1 60 units/kg biweekly

Universityof NewMexico . . . . . . . . . . . . . . . 1990-present 1 60 units/kg biweekly

SOURCES: N. Barton, “Ceredase (Microphage-Targeted Glucocerebrosidase) for the Treatment of Type 1 Gaucher’s Disease,” Proceedings From the

Endocrinologic and Metabolic Advisory Committee 1 :135-248, 1990; N.W. Barton, F.S. Furbish, G.J. Murray, et al., “Therapeutic Response to

Intravenous Infusions of Glucocerebrosidase in a Patient With Gaucher Disease,” Proceedings of the National Academy of Sciences USA

87:1913-1916, 1990; N.W. Barton, R.O. Brady, J.M. Dambrosia, et al., “Dose-Dependent Responses to Microphage-Targeted Glucocerebrosidase in a Child With Gaucher Disease,” Journal of Pediatrics 120:277-280, 1992; N.W. Barton, G.J. Murray, and R.O. Brady, “Hematological

Responses Are Dependent on the Amount of Glucocerebrosidase Administered to Patients With Gaucher’s Disease,” Blood 78:431a, 1991; N.W.

Barton, R.O. Brady, J.M. Dambrosia, et al., “Replacement Therapy for Inherited Enzyme Deficiency-Microphage Targeted Glucocerebrosidase

for Gaucher’s Disease,” New EnglandJournalofMedicine 324:1 464-1470, 1991; N. Barton, Chief, Clinical Investigation Section, Developmental

and Metabolic Branch, National Institute of Neurological Disorders and Stroke, National Institutes of Health, Bethesda, MD, personal

communication, January 21, 1992; E. Beutler, “Gaucher’s Disease,” New EnglandJoumalof Medicine 325:1354-1360, 1991; E. Beutler, A. Kay,

A. Saven, et al., letter, New Journal of Medicine 325:1809-1810, 1991; E. Beutler, A. Kay, A. Saven, et al., “Enzyme Replacement Therapy for

Gaucher Disease,” Blood78:l 183-1190, 1991; E. Beutler, Chairman, Department of Molecular and Experimental Medicine, Scripps Research

Institute, La Jolla, CA, personal communication, February 26, 1992;A. Zimran, I. Hadas-Halpern, and A. Abrahamov, letter, New EnglandJournal

of Medicine 325:181 O-1811, 1991; G. Grabowski, Professor, Department of Genetics and Molecular Biology, Mount Sinai Medical Center, New

York, NY, personal communication, January 28, 1992; S. Fallet, M.E. Grace, A. Sibille, et al., “Enzyme Augmentation in Moderate to

Life-Threatening Gaucher Disease,” Pediatric Research 31:496-502, 1992; H.M. Nitkowsky, A. Madan, and H. Goldman, “Experience With

Intravenous Infusions of Glucocerebrosidase in a Patient With Gaucher Disease,” abstract #560, American Journal of Human Genetics, vol. 49,

1991; T. Ohashi, S. Marchese, D. Pegram, and J.A. Barranger, “Development and Application of a Treatment for Gaucher Disease Using

Glucocerebrosidase Targeted to Macrophages,” abstract #552, American Journal of Human Genetics, vol. 49, 1991; T.J. Gribble and K. Latimer,

“Successful Use of Enzyme Therapy in Gaucher’s Disease,” abstract #556, American Journal of Human Genetics, vol. 49, 1991; R.O. Brady, J.M.

Dambrosia, and N.W. Barton, “Effectiveness of Low-Dose Replacement Therapy in Gaucher’s Disease,” Clinical Research 40:144A, 1992; M.L.

Figueroa, Y. Sate, A. Kay, and E. Beutler, “Efficacy of Frequently Administered Microphage-Targeted Glucocerebrosidase in the Treatment of

Gaucher Disease,” Clinical Research 40:167A, 1992; A. Abrahamov, 1. Hadas-Halpern, E. Levy-Lahad, and A. Zimran, “Enzyme Replacement

Therapy for Children With Gaucher Disease: Low Dose, High Frequency, Lower Cost, High Efficacy,” Pediatric Research 31 :137A, 1992; G.M.

Pastores, A.R. Sibille, and G.A. Grabowski, “Enzyme Augmentation Therapy in Gaucher Disease Type 1: Dosage, Efficacy and Adverse Effects,”

Clinical Research 40:357A, 1992.

The National Institutes of Health

NIH’s first efforts (during the early 1980s) with

the microphage-tmgeted alglucerase involved eight

patients. These participants received a freed weekly

dose of 189 units (9). Only one of these patients, the

smallest, showed any clinical improvement. His

allotment was equivalent to a dose of 9-12 units/kg,

the highest in the study (10). Since that time, he has

continued to receive enzyme replacement therapy

with weekly to biweekly doses of 30 units/kg (9).

His blood counts improved, the size of his spleen and

liver decreased, and his bone is rebuilding. Although

the patient had a more marked response to the higher

dosage of enzyme, he did respond at the lower doses.

The red blood cell count initially rose 11/2 times

more rapidly with the high dose than with the

low-dose regimen. On the low-dose regimen, the red

cell count improved, but did not normalize (12,15).

To refine the dosage regimen, NIH researchers

tested the responses of 23 patients to the administration of single doses of alglucerase. The doses ranged

from 0.6 to 234 units/kg. They measured plasma

levels of the enzyme during the infusion, then

estimated their clearance from the bloodstream after

the infusion was stopped (15). Forty-four hours later,

NIH researchers performed a liver biopsy in 21 of

these patients (9).

From the lowest dose up to approximately 100

units/kg of body weight, the plasma concentration of

the enzyme increased in proportion to the amount of

enzyme infused. Beyond this dose, there was no

further rise in its plasma concentration, suggesting
Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease ● 9

that the enzyme receptors (the sites on the macrophage that actually absorb the enzyme) were saturated. Thus, doses beyond 100 units/kg appear not to

be efficiently utilized by the body.

Liver glucocerebroside levels decreased in 8 of 11

patients who received greater than 30 units/kg,

whereas it decreased in only 1 of 10 patients who

received a lower dose. However, 6 of these 10

low-dose patients had some apparent diminution in

glucocerebroside storage deposits in the liver by

electron microscopy.

Interpreting these findings to mean that a minimum dose of 30 units/kg was required for initial

therapy, NIH investigators enrolled four adults and

eight children with moderate to severe Type 1

Gaucher disease in a study of a higher dosage

regimen (11,89). This is the only case series the NIH

has published about its clinical experience with

alglucerase. Upon entry into the study, all patients

were anemic, had enlarged livers and spleens, and

displayed evidence of bone abnormalities on x-rays.

Study participants received 60 units/kg of alglucerase administered intravenously every 2 weeks.

Two severely affected patients received twice that

dosage in weekly alglucerase infusions of 60 units/

kg. After 9 to 12 months of therapy, all participants

experienced improvement and none suffered signifi

cant toxicity. The red blood cell count increased

significantly in all 12 patients and the platelet count

increased significantly in seven patients. The spleen

size decreased significantly in all patients and the

liver in five. Bone pain responded less dramatically.

All recipients felt that their quality of life had

improved as a result of the enzyme replacement

therapy. In a comparison with 12 untreated Gaucher

patients, all adults with less severe disease, the

treated group performed more favorably. However,

this comparison group cannot be considered a

control group in any conventional sense, because

there was no attempt to match patients in any

fashion.

The dose of 60 units/kg biweekly was continued

in these 12 patients for a second year. NIH researchers (10) observed that the maximum hematological

response occurred after 9 to 12 months of enzyme

replacement therapy and then plateaued. The greatest decline in liver and spleen size seemed to occur

later; after 18 months there was a 55 percent

decrease in splenic size. On the basis of the response

of a child they began treating in 1983, NIH

researchers believe that significant skeletal improvements do not develop until after at least 3 years

of therapy. After 2 years on the therapy, the dose was

decreased to 30 units/kg biweekly for 6 months and

then further reduced to 15 units/kg biweekly. After

4 months at this dosage (July 1992), the clinical

status of the patients had not deteriorated. The

researchers expect to reduce the dosage further to 7.5

units/kg biweekly in September 1992, with further

reductions planned, dependent on the clinical wellbeing of the patients (10).

NIH has two experiences with lower dose therapy

(10). One is a single case of a patient whose dose was

decreased from 60 units/kg biweekly to 7.5 units/kg

biweekly. He continued to show improvement,

albeit modest, on the lower doses. In the other case,

NIH is conducting a two-anneal trial involving less

severely ill patients than the previously described

study. Each arm enrolled 20 patients, none of whom

had undergone splenectomy. The researchers initiated enzyme therapy in both groups using 10

units/kg biweekly. One group was also given a

vitamin designed to enhance the uptake of the

enzyme by increasing the number of microphage

receptors. Of the 12 patients for whom preliminary

results are available (it is not yet known from which

arm they originated), 8 had significant improvement

in their red blood cell count, and 3 of them

experienced a reduction in spleen size after 6 months

of therapy (36). These data imply that treatment can

be initiated at lower doses of enzyme in clinically

stable patients without immediately threatening

medical problems (10). Table 3 summarizes the data

on the efficacy of low-dose (unfractionated) therapy.

Scripps Clinic

Researchers at Scripps Clinic have reported administering alglucerase to 11 patients with moderate

to severe7 Type 1 Gaucher disease for 3 to 24 months

(20,27,28,53). They utilized only one-quarter of the

total dose recommended by NIH (30 units/kg every

4 weeks), but gave it 3 times weekly. Their rationale

for a frequent (or fractionated) low-dose therapy

rests on the hypothesis that there are two types of

receptors on human macrophages for glucocerebro7 Researchers at NIH have claimed that because some of the patients at Scripps do not have a spleen, the amount of glycolipid deposits may be less

than that of patients at NIH and thus the two patient populations may not be comparable.
I

10 ● Federal and private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

Table 3-Clinical and Experimental Evidence Supporting Low-Dose Therapy Unfractionateda

Institution Year Experience

NIH . . . . . . . . . . . . . . . . . . . . . . . . 1983-present

NIH . . . . . . . . . . . . . . . . . . . . . . . . 1986-1988

NIH . . . . . . . . . . . . . . . . . . . . . . . . 1991-present

NIH . . . . . . . . . . . . . . . . . . . . . . . . 1990-present

NIH . . . . . . . . . . . . . . . . . . . . . . . . 1991-present

Mount Sinai Medical Center,

New York . . . . . . . . . . . . . . . . . 1990-present

Genzyme’s international

Collaborative Gaucher

Group . . . . . . . . . . . . . . . . . . . . 1992

Single patient had some improvement in his hemoglobin at doses as low as 9-12

units/kg.

23 patients received a single infusion of the enzyme in doses ranging between

0.6-234 units/kg. Although only 1/10 of the patients receiving less than 30

units/kg had a decrease in liver glucocerebroside, 6/10 had structural

changes in hepatic storage deposits.

12 patients who received at least 2 years of enzyme therapy with 60 units/kg

biweekly were decreased to 30 units/kg biweekly for 6 months and their

hematological response was stable. Currently they receive 15 units/kg, and

after 4 months on this dose, their clinical status has not deteriorated.

Single patient was decreased from 60 units/kg biweekly to 7.5 units/kg biweekly.

There was a modest but milder improvement observed at the lower dose.

40 patients are receiving 10 units/kg biweekly; and 20 of these are also receiving

a therapy designed to enhance the uptake of the enzyme. Preliminary data

suggest both groups are responsive.

41 patients are being treated with doses between 7.5 and 60 units/kg biweekly.

The observed clinical responses do not appear to be dose dependent.

Approximately 75 patients throughout the country received initial doses lower

than 60 units/kg biweekly. They demonstrate increased red blood cell counts

and decreased organ volume after 1 to 3 months of therapy.

a Unfractionated refers to Iow-dose therapy being given biweekly rather than three times weekly.

SOURCES: N. Barton, “Ceredase (Microphage-Targeted Glucocerebrosidase) for the Treatment of Type 1 Gaucher’s Disease,” Proceedings From the

Endocrinologic and Metabolic Advisory Committee 1 :135-248, 1990; N.W. Barton, F.S. Furbish, G.J. Murray, et al., “Therapeutic Response to

Intravenous Infusions of Glucocerebrosidase in a Patient With Gaucher Disease,” Proceedings of the National Academy of Sciences USA

87:1913-1916, 1990; N.W. Barton, R.O. Brady, J.M. Dambrosia, et al., “Dose-Dependent Responses to Microphage-Targeted Glucocerebrosidase in a Child With Gaucher Disease,” Journal of Pediatrics 120:277-280, 1992; N.W. Barton, G.J. Murray, and R.O. Brady, “HematoIogical

Responses Are Dependent on the Amount of Glucocerebrosidase Administered to Patients With Gaucher’s Disease,” Blood78:431a, 1991; N.W.

Barton, R.O. Brady, J.M. Dambrosia, et al., “Replacement Therapy for Inherited Enzyme Deficiency-Microphage Targeted Glucocerebrosidase

for Gaucher’s Disease,” New EnglandJournal ofMedicine 324:1 464-1470, 1991; N. Barton, Chief, Clinical Investigation Section, Developmental

and Metabolic Branch, National Institute of Neurological Disorders and Stroke, National Institutes of Health, Bethesda, MD, personal

communication, January 21, 1992; M.D. Grabowski, Department of Genetics and Molecular Biology, Mount Sinai Medical Center, New York, NY,

personal communication, January 21, 1992; S. Fallet, M.E. Grace, A. Sibille, et al., “Enzyme Augmentation in Moderate to Life-Threatening

Gaucher Disease, Pediatric Research 31 :496-502, 1992; A. Taunton-Rigby, Senior Vice President, Bio-Therapeutics, Henri Termeer, Chief

Executive Officer, and David McLachlan, Senior Vice President, Chief Financial Officer, Genzyme, personal communications, Boston, MA,

February 26, 1992; R.O. Brady, J.M. Dambrosia, and N.W. Barton, “Effectiveness of Low-Dose Replacement Therapy in Gaucher’s Disease,”

Clinical Research 40:144A, 1992; G.M. Pastores, A.R. Sibille, and G.A. Grabowski, “Enzyme Augmentation Therapy in Gaucher Disease Type

1: Dosage, Efficacy and Adverse Effects,” Clinical Research 40:357A, 1992.

sidase; one is present in low concentration but has an

enhanced ability to bind the enzyme; the other

receptor is present in much greater quantities but is

less able to bind the enzyme (21,28,53). Consequently, the Scripps researchers believe that when

high doses of the enzyme are administered as

suggested by NIH, it quickly saturates the former or

high affinity receptors. Most of the enzyme then

goes to the low affinity receptors, where it is

degraded without alleviating the patient’s symptoms. The scientists who favor high-dose therapy do

not dispute the existence of a low-affinity receptor;

they only take issue with the idea that it plays a role

in the absorption of the enzyme. They argue that the

high affinity receptors are not saturated with enzyme

until doses exceed 100 units/kg (10,13,15). The

Scripps investigators favor more frequent therapy

because they believe that the intra-cellular half-life

of the enzyme is about 8 hours. Giving large

amounts of the enzyme every 2 weeks essentially

loads the target cells with excessive amount of

enzyme which delivers no therapeutic effect after 1

or 2 days. Table 4 summarizes the chief arguments

on each side of this controversy.

All patients experienced a decrease in the size of

the liver of a similar magnitude to the NIH patients

on the high dose unfractionated therapy. In the

patients who had not undergone spleen removal, the

spleen became smaller. The blood counts increased

in all of these patients but the Scripps study does not

state whether these changes were statistically significant.

Approximately 10 other patients at Scripps and 10

in Israel are also receiving the lower dose regimen.

Their response has been similar to the published

results from the Scripps study (20,21). Results have

been published on only three of these patients from
Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease ● 11

Table 4-Scientific Basis for Biweekly High-Dose Unfractionated Versus Low-Dose Fractionated

Dosing regimen Theoretical basis

80 units/kg for first year of therapy administered . Single type of macrophage receptor for glucocerebrosidase which is not

every 2 weeks saturated at doses below 100 units/kg.

. The glycolipid acoumulates slowly in untreated patients, and giving the enzyme

more frequently confers no therapeutic advantage.

30 units/kg every 4 weeks, usually spread out over . Two types of receptors for the enzyme: a low concentration of high affinity

12 infusions (i.e., 3 times a week) receptors and a high concentration of low affinity receptors; high doses rapidly

saturate the latter receptors where the enzyme confers little therapeutic benefit;

low doses bind preferentially to the former receptors where drug exerts much

greater effect.

● Intracellular half-life of the enzyme is 8hours; therefore giving large amounts of

the enzyme infrequently loads target cells with enzyme which delivers little effect

after a few days.

SOURCES: N.W, Barton, G.J. Murray, and R.O. Brady, “Hematological Responses Are Dependent on the Amount of Glucocerebrosidase Administered to

Patients With Gaucher’s Disease,” B/ood78:431 a, 1991; N. Barton, Chief, Clinical Investigation Section, Developmental and Metabolic Branch,

National Institute of Neurological Disorders and Stroke, National Institutes of Health, Bethesda, MD, personal communication, January 21, 1992;

E. Beutler, Chairman, Department of Molecular and Experimental Medicine, Scripps Research Institute, La Jolla, CA, personal communication,

January 21, 1992; M.L. Figueroa, Y. Sate, A. Kay, and E. Beutler, “Efficacy of Frequently Administered Microphage-Targeted Glucocerbrosidase

in the Treatment of Gauoher Disease,” C/in&/Research 40:167A, 1992.

Israel, all children. The two most severely afflicted

received 30 units/kg every 4 weeks spread out over

12 infusions (three times weekly), while the least ill

received the same 30 units/kg every 4 weeks spread

out over only four infusions. The first two patients

had more dramatic hematologic and organ responses, suggesting that frequency of infusion may

be as important as dose (1,125).

Mount Sinai Medical Center

In a published study conducted at Mount Sinai

Medical Center in New York, researchers administered alglucerase for 6 to 12 months to three children

and eight adults with moderate to severe Type 1

Gaucher disease; two received 30 units/kg biweekly,

three 50 units/kg biweekly, and the remaining six 60

units/kg biweekly (52). Four patients were splenectomized. Within 6 months, the red blood cell count

increased in all patients, the platelet count increased

in eight patients, and the liver and spleen size

decreased in all. The average responses were of

similar magnitude to those observed by NIH after 9

to 12 months of therapy. Furthermore, the Mount

Sinai investigator concludes that responses were

independent of the dose and presence of a spleen.

More recently in a published abstract, the investigator reported his preliminary findings in giving

doses of alglucerase of 15 to 60 units/kg biweekly to

34 patients (age 2 to 71 years; 16 splenectomized)

with moderate to life-threatening Type 1 Gaucher

disease. Red blood cell and platelet counts increased

within 3 to 12 months and hepatic and splenic

volumes decreased by 12 to 18 months. The change

in red cell blood counts and organ (liver and spleen)

size were not clearly related to the initial dose (30 to

60 units/kg biweekly) and the rate of organ decrease

was not related to dosage decrease, thus tending to

reinforce the earlier results. Improvement in blood

counts was slowed in those with the largest spleens.

Conclusions Regarding Efficacy

The existing clinical experience suggests the

following conclusions about the efflcacy of enzyme

replacement therapy:

a)

b)

c)

d)

It is generally accepted that alglucerase injections are beneficial for those patients with

Type 1 Gaucher disease who have sufficiently

low blood counts or enlarged livers and

spleens or bone disease to cause symptoms

(1,11,20,27,36,52,53,61,65,92,93,95,107,125).

No significant toxicity has been observed.

Since the enzyme replacement therapy gradually metabolizes accumulated glycolipids, it

would be of no use in quickly ameliorating

acute crises of severe bone pain or uncontrolled bleeding.

Clinical experience with the treatment has

been too limited to assess its impact on

mortality in the peer reviewed literature. However, according to Genzyme and other researchers, patients who were pre-terminal

prior to the initiation of enzyme replacement

therapy now enjoy a functional lifestyle (10,

61,107).

It is unclear at what stage in the disease a

patient should begin therapy. Alglucerase may

be most effective if it is given to younger

patients, before accumulating glucocerebro-
12 ● Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

side deposits have irreversibly damaged normal tissue. Some researchers advocate initiating treatment before the patient becomes

symptomatic, believing that it might arrest the

development of disease (32,61). As suggested

earlier in this paper, such an approach could

dramatically increase the number of patients

on enzyme replacement therapy. However, at

this time, nothing is known about long-term

adverse effects of alglucerase. It is possible

that the therapy itself will cause adverse

effects in patients who would never experience the symptoms of Gaucher disease. In

addition, such a treatment strategy might also

outstrip the manufacturer’s ability to supply

the drug.8

Conclusions Regarding Appropriate

Dosing Regimens

Much of the published literature has concerned

initial therapy of Gaucher disease with alglucerase.

However, therapy is likely to be given in two phases,

an initial phase (presumably with relatively high

total doses) to remove accumulated glycolipid

deposits from the tissues, and a maintenance phase

(lower dose) to prevent the reaccumulation of the

deposits. Investigators are currently evaluating the

most effective doses and dosing schedule for both

phases of therapy.

Initial Therapy

Uncertainty surrounds the choice of an initial

dosage strategy. Most experts believe that the initial

dose required to metabolize the glycolipid debris in

a moderate to severely ill patient with a spleen must

be about 60 units/kg biweekly (high-dose unfractionated therapy). For those patients with less severe

disease, an initial dose as low as 10 to 30 units/kg

biweekly may be sufficient (10,13). Others suspect

that lower doses administered three times a week

(low-dose fractionated therapy) are more efficacious (20,21,28,53). These researchers base this

claim on two hypotheses summarized earlier: 1) the

enzyme half-life is very short; and 2) there are two

types of receptors that absorb glucocerebrosidase.

The proponents of high-dose unfractionated therapy do not believe that a second low affinity receptor

for glucocerebrosidase plays an important role. They

claim that the rate of accumulation of glucocerebroside in untreated Gaucher patients is slow and that

there is no advantage to frequent infusions. The total

dose of enzyme, not the frequency of administration,

determines the patient’s response to therapy. Furthermore, they argue that the high- and low-dose

trials that have been conducted are not directly

comparable, since some patients participating in the

low-dose fractionated studies did not have a spleen.

The absence of a spleen, the greatest reservoir for

stored glucocerebroside, may have decreased these

patients’ requirement for the drug, thus increasing its

apparent effectiveness. Definite conclusions cannot

be drawn about the relative efficacies of these

regimens because there has been no direct comparison in one study drawing from the same patient

populations. Furthermore, because they enrolled

small numbers of patients, the studies do not have

the statistical power to detect modest differences in

effectiveness.

Maintenance Therapy

There is even greater uncertainty about the

appropriate dose for long-term therapy. Genzyme

believes that the NIH liver biopsy data and recent

NIH dosage reduction studies (10,13), previously

described, suggest that after about 12 months of

high-dose therapy, a maintenance dose of 7.5 to 15

units/kg biweekly (low-dose unfractionated therapy) may be adequate to control the patient’s

problems. However, the NIH investigations are too

preliminary to support such a conclusion (21,61).

The NIH trials did not even attempt to lower the dose

until 2 years of high-dose therapy had been completed, and they have not even begun to treat any

patients with a maintenance dose lower than 15

units/kg biweekly.

In Summary, the clinical evidence supports the

efficacy of two dosing strategies for moderate to

severely ill patients. Because the clinical experience

involves small numbers of patients with varying

degrees of disease severity, and some with and some

without spleens, the relative efficacy of these two

regimens has not been established:

● High-dose unfractionated therapy (30 to 60

units/kg biweekly) for one to two years depending on disease severity, followed by maintenance therapy using a low-dose unfractionated

regimen (probably 15 to 30 units/kg biweekly).

There is as yet no published evidence to support
Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease ● 13

the efficacy of maintenance therapy with a dose

lower than 15 units/kg biweekly.

. Low-dose fractionated therapy (2.3 units/kg

thrice weekly). Researchers investigating this

regimen believe that if the high-dose unfractionated therapy can be reduced after about 1

year, then this low-dose fractionated strategy

can also probably be reduced.9 The minimum

effective dose for such a strategy has not been

established (21).

THE DISCOVERY AND

DEVELOPMENT OF

ALGLUCERASE

To bring a new drug to market, a company must

invest in the research and preclinical and clinical

development required for approval by national

agencies in charge of new drug approval (47). In the

United States, the FDA is the national agency whose

requirements for new drug approval govern entry to

the market. Even after a company files a New Drug

Application (NDA)-a request to market the drug in

the United States—it may conduct additional R&D

on new formulations, drug dosage forms, manufacturing processes, or indications for use. Genzyme is

no exception. The company incurred substantial

costs in developing its placental form of alglucerase

for the market.

In the case of alglucerase, however, direct and

indirect Federal subsidies for R&D had a major

impact on the costs of attaining market approval for

the drug. NIH bore a substantial part of the costs of

R&D. The FDA expedited the review of the drug and

granted Genzyme limited rights to sell the drug

before it was approved for marketing under a

provision known as the “Treatment IND.”

This section outlines the history of the alglucerase

R&D process and presents estimates of the total cost

of obtaining market approval for Genzyme’s placental form of alglucerase (marketed under the brand

name Ceredasetm), including estimates of the portion of the cost borne by three groups: the private

investors in Ceredasetm, NIH, and the consumers

who paid for the drug before it was approved for

marketing. Table 5 contains a brief of the critical

milestones in the development process.

Table 5-The Development of Ceredase

Date Milestone

1965

1974

1981

December 1983

March 1985

September 1987

March 1988

March 1989

October 1989

February 1990

April 1990

April 1991

November 1991

Gaucher disease first attributed to glucocerebrosidase deficiency.

Enzyme replacement therapy first attempted

at NIH as a treatment for the disease.

Genzyme begins to supply NIH with the

enzyme

First successful treatment with the modified

form of the enzyme is begun at NIH.

Genzyme receives orphan designation for

the modified placenta-derived enzyme.

Clinical Partnership (Genzyme Clinical Partners, L. P.) established with $10 million to

fund research and development.

FDA allows Genzyme’s IND application for

Ceredase, its trademarked name for the

modified enzyme.

Clinical trials begin at NIH with 12 Gaucher’s

patients.

Treatment IND protocol approved by FDA.

Clinical partnership bought out by Genzyme.

Genzyme files an NDA for Ceredase.

FDA approves Ceredase for the treatment of

Gaucher disease (Type 1).

Genzyme receives orphan designation for a

recombinant form of the enzyme.

KEY: FDA - Food and Drug Administration; IND - Investigational New

Drug; NDA - New Drug Application.

SOURCE: Office of Technology Assessment, 1992.

History of Alglucerase Development

Genzyme Corporation: Background

Founded in 1981, Genzyme is a diversified

pharmaceutical company with four divisions: biotherapeutics, diagnostic products, diagnostic services, and pharmaceuticals and fine chemicals. The

company’s general strategy, according to its 1991

annual report, is to take advantage of its expertise in

carbohydrate engineering, protein chemistry, and

enzymology to develop and sell profitable health

care products. The strategy appears to have been

successful: the price of Genzyme’s stock rose from

less than $13.50 per share in the second quarter of

1986, when the company went public, to $42.00 as

of September 1, 1992. The stock has traded at prices

as high as $66.50. In 1990, the year prior to FDA

approval of alglucerase, the company reported total

revenue of approximately $55 million, derived

mainly from product sales and revenue from R&D

contracts. The company had 1991 revenues of

approximately $100 million. Alglucerase sales accounted for approximately $37.25 million of this

total (73,86,107).

9These researchers have not presented evidence to support this suggestion.
14 ● Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

The company manufactures its products at four

sites in the United States and England, and it

employs approximately 850 people worldwide (650

in the United States). About 40 percent of the

employees are involved in manufacturing and distribution, 25 percent in R&D, and about 18 percent in

marketing and sales. The remaining 17 percent work

in administration or finance.

CeredaseTM, the Biotherapeutics group’s flagship

product, is expected to have sales of $200 million by

1993 (4). At least 12 other products are in various

stages of development, regulatory review, and production. The company is also aggressively pursuing

the development of the recombinant DNA (genetically engineered) form of the enzyme (currently in

clinical trials) and is building a new facility to

manufacture it in larger quantitieslO; clinical trials

using the recombinant form are expected to be

completed by the end of 1992 (107).

Orphan Designation for Alglucerase

The Orphan Drug Act, enacted in 1983, provides

potentially sizable financial incentives for the development of treatments for rare disorders (i.e., those

affecting 200,000 or fewer people in the United

States). When a drug under development is given

orphan status by the FDA, it is eligible for a 50

percent income tax credit on qualifying clinical

research.ll At the time it was developing the

placental form of alglucerase, however, Genzyme

had no current tax liability, so it could not use the tax

credit. The most powerful incentive in the law for a

company such as Genzyme is that the FDA grants a

7 year period of exclusive marketing to the frost firm

whose orphan product obtains FDA approval for a

specific indication. Because NIH had discovered

alglucerase, Genzyme could not rely on patent

protection to ensure an adequate return on its

investment. As a result, without orphan designation,

Genzyme would have had to rely solely upon

proprietary information to give it a competitive

edge. Given the difficulty in maintaining the secrecy

of the manufacturing process, such an advantage

would have been a shaky foundation on which to

begin the development of a new drug. Thus, orphan

drug designation was an important stimulus to the

development of this drug.

Genzyme filed for orphan designation for alglucerase in 1983 and officially received orphan status

from the FDA in March 1985.

R&D Limited Partnership for the

Development of Alglucerase

After the FDA granted orphan status for alglucerase, Genzyme entered into a joint venture with a

limited partnership, Genzyme Clinical Partners, “to

develop, manufacture and sell injectable products

incorporating modified forms of the enzyme. . .’

(59). Genzyme Development Corporation, a whollyowned subsidiary of Genzyme, was designated the

general partner of the venture (the general partner is

the party with unlimited financial liability). Beginning in September 1987, the joint venture made

Genzyme responsible for conducting human clinical

trials, improving the manufacturing process, and

seeking FDA approval for alglucerase (59). The

limited partners contributed $10 million to this

endeavor. In return for undertaking this research, the

corporation was reimbursed by the partnership for its

quarterly projected costs, plus a 7 percent fee. The

agreement also stipulated that Genzyme would

contribute additional research funds, if necessary, to

further develop and market the product (107). The

partnership received an immediate $400,000 cash

payment and a 2 percent royalty on future product

sales for the use of some proprietary technologies.

Under the terms of the joint venture agreement,

any future product would be marketed through

Genzyme, at a cost to the joint venture of 28 percent

of selling prices net of certain expenses. Fifty

percent of the profits from any product sales were to

go to Genzyme and 50 percent to the partnership.

After 36 months, Genzyme had an option to acquire

all rights to the developed technology for $10

million in cash and stock and a 4 percent royalty on

product sales to the year 2000. As part of the initial

partnership agreement, Genzyme granted warrants

to the investors in the partnership. These warrants

entitled the investors to the right to purchase just

over 300,000 shares of common stock at prices

ranging from $18.125 per share to $20.125 per share

from September 1, 1989 through August 31, 1994.

After the Partnership’s initial funding ran out at

the end of 1989, Genzyme bought out the partner10 This facility will also house other Genzyme operations.

11 “Qualifying research” is defined by the Internal Revenue Service as excluding all management and supervision expenses except the direct

supervision of scientists and technicians. Thus, not all clinical research expenditures are eligible for the tax credit.
Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease ● 15

ship in February 1990. From this transaction, the

partners received 1,406,000 shares of common stock

valued at approximately $21 million (59). Genzyme

charged this expense to “purchase of in-process

research and development” in its statement of

operations.

The Regulatory Process

Genzyme received approval for an IND application to begin clinical trials of its modified form of the

enzyme in March 1988 (102). Primarily on the basis

of encouraging results from the l-year NIH study

involving 12 patients (11,89), Genzyme fried its

NDA for alglucerase in April 1990 and received

approval 1 year later. Although the FDA usually

requires randomized clinical trials to establish efficacy, such studies are often impractical for rare

conditions. In approving alglucerase, the FDA relied

almost exclusively on observational studies. The

approval of the NDA was expedited by Subpart E

designation, a new FDA regulation designed to

expedite the review of drugs for life-threatening or

severely debilitating illnesses (115). (This regulation is separate from the provisions of the ODA.)

Genzyme chose not to receive official protocol

assistance from the Office of Orphan Product

Development, relying instead on informal channels

of communication (107).

Treatment IND

Between October 1989 and April 1991, alglucerase was made available to patients around the

country under the FDA’s Treatment IND program.

This program is designed to facilitate access to

experimental drugs for the treatment of otherwise

untreatable diseases. Under this arrangement, Genzyme sold the drug to patients not enrolled in clinical

trials whose physicians agreed to abide by a specific

protocol (107,1 15). As part of Treatment IND regulations, Genzyme was entitled to charge patients a price

sufficient to recover the “costs of manufacture,

research, development, and handling of the investigational drug (115). ” The FDA approved a price of

$3.00 per unit. After final FDA approval signified the

end of the Treatment IND program, the market price

of alglucerase was set at $3.50 per unit (107).

Genzyme and NIH

By the end of 1975, NIH researchers had patented

their method for harvesting the enzyme. Between

1976 and 1981, NIH contracted with the New

England Enzyme Center at the Tufts University

Medical School to supply it with sufficient quantities of the enzyme in accordance with the NIHdevised protocol (107). During this period, the

contracts amounted to almost $1 million. The terms

and amounts of these contracts are summarized in

table 6.

Table 6-NIH Contracts Pertaining to Alglucerase

Year Purpose of contract Principal investigator Amount

1976 Harvest glumcerebrosidase from human placentae using a previously published Henry Blair, Tufts University $ 50,000

procedure, with a slight modification in the ammonium sulfate fractionation step.

1977 Harvest glucocerebrosidase in increased quantities. Henry Blair, Tufts University 185,000

1978 Harvest glucocerebrosidase in increased quantities. Henry Blair, Tufts University 403,373

1980 Harvest glucocerebrosidase in increased quantities. Henry Blair, Tufts University 20,000

1981 Harvest gluoocerebrosidase in increased quantities. Henry Blair, Tufts University 292,500

1982 Harvest glucocerebrosidase from placental tissue. Henry Blair, Genzyme 355,770

1983 Harvest glucocerebrosidase from placental tissue. Henry Blair, Genzyme 545,454

1984 Harvest glucocerebrosidase from placental tissue. Henry Blair, Genzyme 405,985

1985 Harvest glucocerebrosidase from placental tissue. Henry Blair, Genzyme 295,383

1987 1. Harvest enzyme at high purity for clinical trials. Henry Blair, Genzyme 54,964

2. Develop enzyme targeting strategies.

3. Develop methods to enhance current 8-hour half-life.

4. Develop techniques to enhance enzyme delivery to target cells.

5. Produce antibodies to human glucocerebrosidase for use as diagnostic probes

and to facilitate isolation of the human gene.

1988 Same as 1987. Henry Blair, Genzyme 414,006

1989 Harvest glucooerebrosidase from placental tissue. Scott Furbish, Genzyme 551,174

1990 Harvest glucocerebrosidase from placental tissue. Scott Furbish, Genzyme 1,992,060

1991 Harvest glucocerebrosidase from placental tissue. Scott Furbish, Genzyme 2,000,000

1992 Harvest glucocerebrosidase from placental tissue. Genzyme 2,300,000

Total $9,865,669

SOURCE: U.S. Department of Health and Human Services, Public Health Service, National Institutes of Health, 1992.
16 ● Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

In 1981, the center closed down, and Genzyme,

then a fledgling pharmaceutical company, took over

the contract to supply the enzyme. The transition

was easily achieved since Henry Blair, the former

head of the center, was also one of the founders of

Genzyme. In the following 11 years, the NIH

contracts with Genzyme totaled nearly $9 million.

Under the terms of these agreements, Genzyme

supplied enzyme for the clinical trials conducted at

NIH. Between 1983 and 1988, Genzyme furnished

enzyme for two previously described studies, one

involving a single patient and a second enrolling 23

subjects. Between 1989 and 1991, Genzyme supplied the enzyme for a high-dose trial involving 12

participants. For a total of 8 months during this

interval, Genzyme supplied the enzyme free of

charge. Currently, the company is providing modified glucocerebrosidase for a low-dose study and a

protocol involving Type 3 patients as part of its

current contract with NIH (see table 6).

Because NIH and others had published papers

discussing harvesting, purification, and modification strategies, these processes were not patentable.

However, Genzyme claims that its current procedure

for harvesting the enzyme from human placental

tissue and modifying it bears little resemblance to

the original NIH-devised protocol, and that it has

now sufficiently changed the original NIH process to

obtain patent approval (107). It claims the original

process had a much lower yield per unit of tissue,

with a higher degree of impurity (107). Because

Genzyme’s protocol is proprietary, we are unable to

determine the extent to which it differs from

previously published protocols and the 1975 patent.

This patent will expire in October 1992.

The Cost of Developing Alglucerase

To bring a new drug to market, investments are

required in both R&D and manufacturing facilities

and equipment. Most studies of the costs of pharmaceutical R&D do not include the costs of manufacturing design, engineering, or construction in estimates of R&D costs (e.g., 47,68). In the case of

Ceredase TM, a large fraction of the costs associated

with bringing the drug to market were (and continue

to be) for improving the manufacturing process and

assuring quality control, and Genzyme charged

these costs to R&D accounts (107). To the extent

that they can be separately identified, the costs of

investing in manufacturing capacity are excluded

from estimates described in this section but are

discussed in a later section on the cost of producing,

marketing, and distributing the drug.

Three different sets of “investors” bore the costs

of discovering and developing the placental form of

alglucerase: NIH, the investors in Genzyme’s CeredaseTM enterprise (including both the investors in

the R&D Limited Partnership and the owners of

Genzyme Corporation), and the consumers or their

health insurers who purchased CeredaseTM under the

treatment IND.

NIH Investments in Alglucerase

Most of the early costs of identifying, synthesizing, and testing alglucerase were borne directly by

NIH, as either intramural or extramural (contractor

grant) research. Table 6 shows that between 1976

and 1981, a total of $950,873 was spent under NIH

contracts for research pertaining to alglucerase.

These expenditures do not count intramural research

(work funded by NIH on its own campus) expenditures or any extramural grants to researchers other

than Genzyme or the New England Enzyme Center.

NIH accounting systems do not allow estimation of

the intramural spending on Gaucher disease.

The NIH contribution did not end when the drug

entered the clinical testing phase. Some of NIH’s

clinical expenditures were intramural and cannot be

estimated directly. For example, NIH researchers

conducted the pivotal clinical trial for FDA approval. NIH contracted with Genzyme to provide

quantities of alglucerase sufficient to conduct its

clinical research. Between 1982 and 1992, NIH

spent $8.9 million on contracts with Genzyme for

this purpose. The total contribution of NIH, excluding the costs of intramural research, was $9.7

million.

Consumer Investments in

Experimental Alglucerase

The company sold approximately $6 million of

alglucerase between October 1989 and April 1991

under the treatment IND program (102), but the

company has, in total, written off or still has

outstanding receivables totaling about 10 percent of

the IND revenues (73,86,107).

Private Investments in Alglucerase

On the

Genzyme

Genzyme

R&D for

basis of information supplied by the

Corporation (107a), we estimate that

spent approximately $29.4 million on

placental alglucerase on behalf of its
Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease ● 17

investors and its contracts with the R&D Limited

Partnership. These expenditures spanned the decade

preceding the product’s introduction to the market in

1991. They represent only the cash outlays, not the

fully capitalized cost of bringing Ceredase to market. Genzyme claims that much more was spent in

cash outlays for R&D, about $48.6 million, but it

includes in that amount the difference between the

cost of the 1990 buyout of the R&D Limited

Partnership ($20.8 million) and the partnership’s

initial investment of $10 million as well as the net

gain to the holders of the Partnership’s warrants on

the exercise date ($8.4 million). These payments do

not represent actual expenditures for the work,

materials, and facilities needed for the conduct of

R&D. They are part of the purchase price of the

valuable asset that Ceredasetm had become by the

time the partnership was bought out by the company.

12)

With the data available to us, it is impossible to

estimate the time profile of private spending on

R&D. About 14 percent ($4.2 million) of Genzyme’s expenditures for R&D were spent before

1987, the year in which the R&D Limited Partnership was formed. According to Genzyme’s 1991

annual report, the $10 million raised from the

Partnership was fully spent by the end of 1989. A

large part of Genzyme’s R&D expenditures include

part of the cost of purchasing Integrated Genetics,

Inc. in 1989, whose assets were used in part to

further develop and manufacture placental alglucerase (73).

Genzyme’s development of treatments for Gaucher

disease are not over. Research and development are

currently underway for a recombinant form of

glucocerebrosidase that would potentially be both

safer and cheaper to produce. We did not analyze the

financing costs of the research leading to this

potential new product.

Conclusions About the Discovery and

Development of Alglucerase

The cost of developing alglucerase for FDA

approval was borne by three parties-the Federal

Government NIH), private investors in the Ceredase enterprise, and consumers or their insurers who

paid for the drug while it was still experimental. The

relative contributions of these three parties cannot be

estimated, because NIH’s intramural costs have

gone uncounted. Of the costs that were counted, NIH

paid for at least 20 percent.

THE COST OF MANUFACTURING,

DISTRIBUTING, AND MARKETING

PLACENTAL ALGLUCERASE

Since it was approved for marketing in April

1991, the price of Genzyme’s alglucerase has been

$3.50 per unit. The cost of producing alglucerase

may be higher than that of many other drugs because

of the complicated process of harvesting placentae

and extracting and purifying the enzyme from

placental tissue. Genzyme Corporation provided us

with estimates of the cost of producing placental

alglucerase in 1991 and 1992(107). The cost per unit

before taxes was estimated at $2.34 in 1991 and

$1.90 in 1992.13 The unit costs decreased in part

because the volume of production increased dramatically between 1991 and what is estimated for 1992.

Based on revenue data and the price of the drug,

production rose from approximately 11 million units

in 1991 to at least 27 million units in 1992. As a

result, fried costs are allocated across larger production and distribution volumes. If the volume of

product increases over time, the unit cost can be

expected to decrease further, although probably at a

decreasing rate. Genzyme contends that its current

production arrangements with the placentaharvesting organization limit its total production of

the placental form of alglucerase to 40 million units.

The per-unit costs also include a relatively high

percent of sales expected to be bad debts and free

goods. In 1992 bad debts and free goods together are

projected to constitute 14 percent of revenues.

Although few accounts have to date been written off

as uncollectable (86), Genzyme does not expect to

collect the full amount of the purchase price from all

patients or their insurers.

The per-unit cost estimates provided by Genzyme

include charges for depreciation on facilities and

12 Conservative accounting procedures demand that payments for rights to market drugs not yet approved by the FDA be accounted for as the purchase

of in-process R&D and not shown as assets. Once a drug is approved by FDA, the purchase is recorded as a purchase of product technology and may

be amortized over its expected life.

13 Genzyme claims its unit costs are higher than the numbers presented here, but the company allocated the Cost Of ongoing R&D expenditures (not

related to placental alglucerase) to the cost of the product.
18 ● Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

equipment used in manufacturing, distributing, and

selling placental alglucerase. Genzyme invested in

freed manufacturing capacity early, before the product was marketed, and continues to incur freed

manufacturing expenses. Genzyme estimates that its

expenditures for freed manufacturing assets between

1981 and 1994 will total over $11 million (107a).

Depreciation charges probably do not reflect the true

economic cost of such facilities, however, because

they are only a very rough and imperfect approximation of the actual loss of market value of the assets

in each year. It is impossible with the information at

hand to determine the extent to which depreciation

expenses included in the unit cost estimates understate or overstate the true costs of manufacturing and

marketing alglucerase.

Genzyme’s estimates of unit costs imply that each

unit sold will contribute about $1.60 in 1992, and

somewhat more in future years, to repaying the

investors in placental alglucerase R&D. This estimate does not take the effect of taxes into account.

Analyzing the after-tax contribution of alglucerase

revenues to repayment of the investors in alglucerase

R&D is complicated. Taxes must be paid on the

taxable income from sales of alglucerase, but tax

deductions and credits were also earned on the R&D

that Genzyme undertook either on its own or on

behalf of the alglucerase R&D Limited Partnership.

Such tax deductions and credits effectively reduced

the net cost of R&D. Although Genzyme had net tax

losses in its early years, a large proportion of these

losses could be carried forward and charged against

its net income in future years. Because of the

disparities in amount and timing of tax liabilities,

deductions, and credits, it is impossible to estimate

the after-tax contribution of alglucerase revenues to

the repayment of the after-tax private investment in

alglucerase R&D.

We do not report the internal rate of return14 to the

private investments in alglucerase because it is

impossible to determine the true contribution of

alglucerase revenues to repaying the R&D investment. Placental aglucerase is only one of many

projects that the company was involved in, and many

arbitrary decisions are required to allocate costs to

any single project. Although we did not attempt to

assess the project’s rate of return, for many successful R&D projects the returns must be high to

compensate for the risks of failure. In the case of

alglucerase, however, the risk was probably not

commensurate with the risk associated with the

development of most other pharmaceuticals. Much

of the basic research was performed by NIH, and the

probability of success by the time the Limited

Partnership was formed must have been quite high.

POTENTIAL ADVANCES

IN THERAPY FOR

GAUCHER DISEASE

Currently, NIH is exploring ways to increase the

amount of infused enzyme absorbed by the macrophage cells (10). NIH is also planning to examine the

effects of alglucerase on the nervous system in

patients with Type 3 Gaucher disease, particularly

those who are unable to voluntarily move their eyes

from side to side (10). This latter research could lead

to an expansion in the market for alglucerase.

A recombinant form of glucocerebrosidase has

recently been developed by putting the genetic

information necessary to create the enzyme into a

non-human cell, usually from an animal (103). Both

Genzyme and an NIH researcher have applied for

patents covering this process. Although no patent

has been issued yet, NIH has awarded licenses for

the use of its process to both Genzyme and Enzon

Inc., a pharmaceutical company in Plainfield, New

Jersey. Genzyme is currently producing a recombinant form of the enzyme. Enzon has not indicated

when its form might be ready for clinical trials (101).

NIH and Mount Sinai Medical Center initiated trials

with recombinant therapy early in 1992 (10,61). This

recombinant form of the drug is potentially safer

because it poses less risk of viral contamination than

when the enzyme is harvested from the biological

materials of several million different people, such as

from their placentae.

It is possible that in the future genetically

modified animals may be utilized to produce human

proteins such as glucocerebrosidase in their milk.

For example, scientists have developed transgenic

goats whose milk produces a variant of human tissue

plasminogen activator, a substance used to destroy

14 The internal rate of return is defined as the rate of interest at which the present value of expected cash inflows is equal to the present value of expected

cash outflows. Put another way, it is the interest rate at which a company could borrow money to fund the project and still break even.
Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease ● 19

the blood clots obstructing the coronary arteries

during a heart attack (49).

Other researchers hope that gene transfer will be

a means for treating Gaucher disease. In this

technique, scientists would develop a means to

introduce the normal glucocerebrosidase gene into

the tissues of a Gaucher patient in the hope the gene

will be incorporated into the patient’s DNA and

reproduced indefinitely (72,77). One of the most

promising such strategies would use a type of virus

known as a retrovirus. Scientists would remove the

parts of the virus’s genetic material necessary for

reproducing itself and replace it with a normal

glucocerebrosidase gene. Physicians would mix the

virus with bone marrow cells that have been

removed from the patient and then reinfuse them into

the patient. Prior to reintroducing the genetically

modified bone marrow cells, physicians must obliterate the patient’s own bone marrow because cells

carrying the abnormal glucowrebrosidase gene would

otherwise survive and continue reproducing. Because elimination of the bone marrow leaves the

patient susceptible to infection, anemia, and uncontrolled bleeding during the recuperation period, this

procedure would be risky (7,20).

Further compounding the problems associated

with gene transfer is the difficulty of infecting very

immature forms of human blood cells. Although

researchers have been able to correct the enzyme

deficiency in a small number of patients by infecting

more mature blood cells with the normal glucocerebrosidase gene (54,103), they have not yet succeeded in incorporating the gene into immature cells

with the capacity to reproduce themselves. Therefore, any normalization of the enzyme activity

achieved by gene transfer will only be temporary,

and the procedure (called transection) will need to

be repeated periodically.

Other therapies under consideration include: techniques to enhance the efficiency of the enzyme by

synthesizing a compound to enhance its activity;

methods to inhibit the body’s ability to synthesize

glucocerebroside; and methods to inhibit the release

of toxic substances from the macrophages already

engorged with glucocerebroside (7). These toxic

substances are believed to cause some Gaucher

symptoms.

PAYING FOR

ALGLUCERASE THERAPY

This section examines the cost of alglucerase

therapy, the current system of paying for it, and the

implications of this system for patients, their families, and their insurers.

Cost of Treatment

The cost of alglucerase therapy depends on the

particular regimen used, varying with dosage (measured in units per kg), dosing interval (number of

doses per year), weight of the patient (in kg), and

price per unit of alglucerase. To understand better

the cost and financing of alglucerase, we examine

the four treatment regimens that were reviewed

above. The estimates that follow are not meant to

imply that all patients follow one of these exact

regimens. However, these dosing schedules do yield

the range of costs associated with enzyme replacement therapy for Gaucher disease. All regimens are

consistent with the FDA-approved labeling for alglucerase (which is discussed in greater detail below):

(a) High-dose unfractionated-60 units/kg each

week (1 1);

(b) High-dose unfractionated followed by maintenance therapy-6O units/kg biweekly for 1 year, 30

units/kg biweekly thereafter (10,11);

(c) High-dose unfractionated initial dose followed

by lower dose maintenance therapy-30 units/kg

biweekly for 1 year, 15 units/kg biweekly thereafter

(10,52,61,95);

(d) Low-dose fractionated therapy-30 units/kg

monthly administered three times weekly (as used in

Scripps Clinic and in Israel). This regime is equivalent to a dose of 2.3 units/kg per infusion (1,20,

27,53).

Table 7 shows the cost of treating each patient for

the first year of therapy, by component of therapy

and by regimen type, for a 50-kg individual at the

current price of $3.50 per unit. Under the initial

dosing protocol for a moderate to severely affected

patient (regimen b), the annual cost of alglucerase

for a 70-kg individual is $382,200. This price does

not include the costs of administering the biweekly

injections, nor the cost of associated diagnostic

evaluations. The costs of ancillary services like

outpatient infusion of the drug and laboratory tests
20 ● Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

Table 7—Estimated Annual Per Patient Drug and Ancillary Charges for Alglucerase Therapy Under

Four Potential Dosing Regimens

Dosing regimen

First year (units) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 60 30 2.3

Subsequent year (units) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 30 15 2.3

Frequency(annual). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 26 26 144

First year drug cost ($/year)a 

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $546,000 $273,000 $136,500 $57,960

Subsequent year drug cost ($/year)a . . . . . . . . . . . . . . . . . . . . . . . . . $546,000 $136,500 $68,250 $57,960

Anciilary chargesb

Infusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,640 1,820 1,820 10,080

Complete blood count . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 720 720 720 720

Liver function tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 1,200 1,200 1,200

Magnetic resonance imaging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,200 1,200 1,200 1,200

Total ancillary charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,760 $4,940 $4,940 $13,200

Total first year cost of therapy (annual) . . . . . . . . . . . . . . . . . . . . . . . $552,760 $277,940 $141,440 $71,160

Total subsequent year cost of therapy (annual).. . . . . . . . . . . . . . . $552,760 $141,440 $73,190 $71,160 . . .

aThese figures assume a unit price of $3.50, the cost of alglucerase for privately insured patients.Thereare discounts available to Medicaid recipients and

those who exhausted their insurance benefits, as discussed in the text. Costs are computed using an average patient weightof 50 kg, a figure which was

computed from a distribution of patient weights provided by Genzyme.

b The charge for each infusion is $70.All regimens include a complete blood count twice a month($30 each),a liver function test twice a month($50each),

and magnetic resonance imaging twice a year($600 each). Charge data are average allowed charges from Blue Shield of California.

SOURCE: Office of Technology Assessment, 1992.

range from $4,940 to $13,200 annually, depending

on the treatment regime (87).15

The cost of treatment can be greatly reduced by

lowering the dosage. Genzyme advocates a maintenance dosing therapy of as little as 7.5 units/kg

administered biweekly. An NIH researcher is using

10 units/kg biweekly as initial therapy in patients

who are not severely ill (10). For these regimens, the

annual cost of therapy for an average patient would

be between $34,125 and $45,500 (without ancillary

costs). However, as noted earlier, there are no

published reports of responses to therapy among

moderately to severely ill patients treated with

maintenance doses of less than 15 units/kg biweekly. Furthermore, although the per-patient costs

of the 10 units/kg biweekly regimen are relatively

low, this regimen would be unlikely to reduce

aggregate expenditures on alglucerase. It would add

the expenditures for treating the large population of

patients with less severe forms of Gaucher disease to

the expenditures for treating more severely ill

patients with a higher dose regimen. Thus, one could

view this regimen as an approach to expanding

treatment to a broader population, not as an approach

to reducing costs of treating severely ill patients.

Who Pays the Cost of Alglucerase Treatment?

Table 8 shows the distribution of the first 301

patients to receive alglucerase injection therapy

according to the type of health insurance that paid all

or part of their alglucerase expenses on December

31, 1991 and a similar distribution for all patients

receiving alglucerase on March 31, 1992 (3). Most

patients (60 percent) have indemnity insurance

either through commercial insurers (25 percent),

Blue Cross and Blue Shield (BCBS) plans (21

percent), self-insured employer groups (9 percent),

or plans available to Federal employees (4 percent).

Fourteen percent receive their medical care through

a health maintenance organization (HMO). Almost

13 percent have Medicare coverage either because

their medical condition has rendered them disabled

or because they are older than 65 years of age. Eight

percent have Medicaid coverage, and the remaining

6 percent either have some other type of insurance or

none at all. This last group includes patients who

receive alglucerase free of charge through the

Genzyme Access Program because they lack health

insurance.

This picture of coverage may not be representative of the insurance status of all Gaucher patients

who will ultimately receive alglucerase therapy. The

15 These costs remain the same for patients in dosing regimens b and c regardless of whether they are receiving initial treatment or a lower maintenance

dose since both doses involve the same number of infusions.
Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease ● 21

Table 8-Distribution of Alglucerase Patients by Primary Payer

Percent of patients Percent of patients

Type of payer as of December 31, 1991 as of March 31, 1992

Medicare . . . . . . . . . . . . . . . . . . . . . . . . . 12.8% 12.5%

Medicaid . . . . . . . . . . . . . . . . . . . . . . . . . . 8.0 8.9

Private health insurance

Blue Cross and Blue Shield . . . . . . . . 21.1 20.9

Commercial insurers . . . . . . . . . . . . . . 25.9 24.3

Health maintenance organizations. . 13.6 13.2

Self-insured groups . . . . . . . . . . . . . . 8.8 8.7

Federal employee insurers . . . . ... , . 3.7 4.1

Other including Genzyme’s free

drug program . . . . . . . . . . . . . . . . . . . . 5.9 7.5

Total . . . . . . . . . . . . . . . . . . . . . . . . . 100.0 100.0

Number of patients . . . . . . . . . . . . . . . . . 301 NAa

aGenzyme did not provide data on number of patients receiving alglucerase as of March 31, 1992.

SOURCE: Genzyme, 1992.

patients treated first may differ clinically or in other

essential respects from the entire Gaucher population. For example, given the relative expense of the

therapy, those patients with the most complete

coverage may begin therapy earlier than those who

are less well-covered. Furthermore, because insurance status can change over time, the distribution of

insurance coverage among these 301 patients could

be very different 2 or 3 years in the future. However,

these are the only data available that describe

insurance coverage of recipients of alglucerase

injections.

Insurance Payment for Alglucerase Therapy

For those Gaucher patients with health insurance,

payment for alglucerase therapy depends on several

factors. These include the status of alglucerase as a

covered benefit, the split between the insurer’s and

patient’s responsibilities in paying for covered

benefits, the patient’s lifetime insurance benefit, and

other logistical and administrative issues. To compile this information, we contacted Genzyme, private insurance plans, representatives of Federal

health insurance programs, and insurance trade

associations.

Coverage

Patients usually receive coverage for alglucerase

through the general outpatient medical benefit

provisions of their insurance. These benefits cover

medically-necessary, FDA-approved drugs administered under a physician’s supervision in a medical

office or clinic. As described above, alglucerase is

usually administered by infusion in a physician’s

office. l6 Most insurance plans define “medically

necessary” to include therapies administered for

indications described on the drug’s package insert.

Although we found that most private (commercial, BCBS, and HMO) insurers accept a physician’s

prescription as sufficient evidence of medical necessity, several insurers, especially BCBS plans, subject alglucerase claims to greater scrutiny. Representatives of these plans cited the drug’s high price and

ambiguity in the labeling of FDA-approved indications and dosing regimens as reasons for their close

consideration of claims (5,30,41,46,69,82). The

label indicates that alglucerase is indicated for Type

1 Gaucher with: “a) moderate-to-severe anemia; b)

thrombocytopenia with bleeding tendency; c) bone

disease; [or] d) significant hepatomegaly or splenomegaly.” However, the label does not provide

any more detailed clinical guidelines to interpret

these indications. The dosing regimen, based on the

clinical evidence discussed earlier in this paper, also

lacks specificity:

Dosage should be individualized for each patient. An

initial dosage of up to 60 unit/kg of body weight per

infusion may be used. The usual frequency of

infusion is once every two weeks, but disease

severity and patient convenience may dictate administration as often as once every other day or as

infrequently as once every four weeks. After patient

response is well established, dosage maybe adjusted

downward for maintenance therapy. Dosage can be

115 A handful of patients tivc the drug infused in their homes, although insurance coverage of this form of administration tends to be less common

than for infusion in the physician’s ofllce. Genzyme anticipates that home infusion of alglucerase will increase over time (3). Another recent OTAreport

examines Home Drug In@ion Therapy Under Medicare in greater detail (114).
22 ● Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

progressively lowered at intervals of 3-6 months

while closely monitoring response parameters. Ultrastructural evidence suggests that glucocerebroside

lipid storage may respond to doses as low as 1

unit/kg.

As described earlier in this paper, the potential

dosing regimens for alglucerase consistent with this

label imply a wide range of expenses for patients and

their insurers.

Private Health Insurers—The most intensive

scrutiny of alglucerase claims appears to occur

among BCBS plans. Several plans, including those

in New York and Massachusetts, require an assessment of patient progress every 6 months in consultation with the patient’s physician to determine

whether doses might be reduced without compromising the efficacy of the therapy (30,82). The New

York plan has also adopted specific clinical guidelines for interpreting anemia, thrombocytopenia, and

the other indications for therapy .17 Blue Shield of

California recently took the more restrictive step of

limiting coverage to the dosing regimen tested at the

Scripps Clinic (regimen c in table 7) (5). Based on a

review of scientific literature and a meeting of its

medical advisory committee, the plan concluded that

there is insufficient evidence that more costly

regimens are any more effective (i.e., medically

necessary) than the Scripps dosing. One plan, BCBS

of Connecticut, reported that it is not currently

paying any claims until the insurer’s medical review

committee has studied the drug more carefully

(46).18 Among the commercial plans contacted by

the authors, only Aetna has developed its own

guidelines for determining the medically necessary

indications for alglucerase. Under plans requiring

precertification of prescription drugs, such as Aetna’s

HMOs, these guidelines call for an assessment of

patient progress every 3 months (69). The reviews of

claims and related patient data required by these

plans are more intensive than that performed for

most other drug therapies or physician services,

undoubtedly as a consequence of the relative infrequency of alglucerase claims, the drug’s high costs,

and the wide range of potential dosing therapies.

Medicare and the Civilian Health and Medical

Program of the Uniformed Services (CHAMPUS)—

Medicare covers injectable drugs approved by the

FDA when they are provided as part of a physician’s

professional services for indications specified on the

label. For indications other than those on the label,

the Health Care Financing Administration (HCFA)

allows its “carriers” (private insurance firms and

BCBS plans that pay claims for Medicare outpatient

services under contract from HCFA) to make

coverage decisions. Hence, there can be differences

among carriers regarding the coverage of unlabeled

uses of drugs like alglucerase (31). Although HCFA

can issue national coverage guidelines that supersede carriers’ decisions, it has not done so for

alglucerase, citing the relatively small number of

Medicare beneficiaries receiving alglucerase19 and a

query of carriers which indicated that all currently

cover alglucerase claims (123).20 CHAMPUS, the

Federal health insurance program run by the U.S.

Department of Defense for dependents of uniformed

U.S. Defense Department personnel, has not yet

received any claims for alglucerase therapy. Since

CHAMPUS tries to coordinate its coverage policies

with those of HCFA, this program expects to pay for

alglucerase therapy needed by its beneficiaries (6).

Medicaid—With the exception of certain federally mandated benefits, States can opt to exclude

services from coverage even if a physician considers

them to be medically necessary (112). However,

those States with Medicaid prescription drug benefits (all States except one) must cover every drug for

6 months following FDA approval (55). According

to HCFA, all States that have received claims for

alglucerase therapy have continued to pay beyond

the 6-month anniversary of approval in October

1991 (70).

17 Genzyme has suggested that these interpretation are overly restrictive because they indicate disease more Severe than that found among some of

the patients followed in NH’s clinical studies of alglucerase (107a).

18 As of March 1992, BCBS of connecticut had received alglucerase claims for two patients --one who actually held insurance from BCBS and another

who held insurance through a self-insuring employer that had contracted with BCBS to administer its claims (3).

19 HCFA expects that there would never be more than 1,000 to 2,000 Medicare beneficiares on alglucerase therapy at any one time. HCFA also

believes that because the therapy will enable Gaucher’s patients to work in the long run, most Medicare beneficiaries receiving alglucerase will be over

65 years old rather than disabled (31).

20 HCFA usually only makes national coverage decisions when controversy arises among carriers over particular services or therapies (114).
Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease ● 23

Cost Sharing Between Patients and

Insurers for Alglucerase Therapy

Table 9-Selected Insurance Characteristics of

Full-Time Participants in Employment-Based Plans

at Medium and Large Firms

Even patients with insurance that covers alglucerase may have to pay out-of-pocket for some of the

expenses associated with their therapy. Medicare

requires patients to pay 20 percent of the approved

fees for physician office visits, including the infusion of drugs and diagnostic laboratory tests. However, about 71 percent of all Medicare enrollees have

supplemental health insurance (sometimes called

“medigap” policies) that covers all or part of this

copayment (43,9 1); Genzyme indicates that a greater

fraction, 90 percent, of Medicare beneficiaries

receiving alglucerase in March 1992 had supplemental insurance. The benefits that such plans offer

vary greatly, so there is little basis for estimating the

out-of-pocket expenses of covered individuals. It is

clear that the out-of-pocket for Medicare patients

who lack supplemental coverage is substantial.

Based on the cost estimates in table 7, the expenses

could total more than $50,000 per year for a 50-kg

Medicare patient who paid the full copayment. In

addition, some providers bill patients for more than

“allowed” charges and seek payment directly from

patients for the difference between the billed and

allowed amounts. To the extent that providers

“balance bill” for ancillary services,21 patients’

out-of-pocket expenses could even exceed the 20

percent copayments described here.

Most private indemnity insurance plans carry an

annual deductible and a copayment (123). Hence,

privately insured Gaucher patients also face some

out-of-pocket expenses for their alglucerase therapy.

However, most private policies place limits on the

patient’s total annual financial liability for covered

services. According to recent national estimates

presented in table 9, 83 percent of all beneficiaries

of such plans have a limit on out-of-pocket expenses

each year (not including premiums) after which the

insurer pays 100 percent of covered medical services

(123). Almost three-quarters of indemnity benefici1. Maximum annual

out-of-pocket expense Percent of beneficiaries

No specified maximum . . . . . . . . . . . 17?40

$100-$699 . . . . . . . . . . . . . . . . . . . . . 19

$700-$1,299 . . . . . . . . . . . . . . . . . . . . 38

$1 ,300-$2,099 . . . . . . . . . . . . . . . . . . 16

$2,100 or more . . . . . . . . . . . . . . . . . 8

Based on earnings . . . . . . . . . . . . . . 2

100

Il. Lifetime maximum benefits Percent of beneficiaries

<$500,000 . . . . . . . . . . . . . . . . . . . . . =$500,000 . . . . . . . . . . . . . . . . . . . . . $500,001-$999,999 . . . . . . . . . . . . .

= $1,000,000 . . . . . . . . . . . . . . . . . . .

>$1,000,000 . . . . . . . . . . . . . . . . . . . .

No lifetime maximum benefits . . . . .

Policy has both lifetime and annual

maximums; Iifetime maximum

not given . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . .

14%

12

3

40

2

21

6

100

SOURCE: U.S. Department of Labor, Bureau of Labor Statistics, Emp/oyee

Eenefits in Medium and Large firms, 1989, Bulletin 2363

(Washington, DC: U.S. Government Printing Office, 1990).

ties have maximum out-of-pocket expenses of

$2,100 or less. Genzyme has indicated that as of

March 1992, 80 percent of its privately insured

customers had a limit of $2,000 or less (107a). As

with Medicare, this limit does not include billed

charges disallowed by the insurer. The 17 percent of

private indemnity beneficiaries without a cap on

out-of-pocket expenses would face copayments

similar to those borne by Medicare beneficiaries.22

Medicaid and HMO beneficiaries, who represent

about 22 percent of all current alglucerase recipients,

face little to no out-of-pocket expense. Under some

circumstances, States may charge the Medicaid

beneficiaries minimal copayments (usually under

$5.00) for physician visits and outpatient drugs

(112). Many HMOs also require a copayment

(usually under $10) for each physician visit (60).23

21 For ~glucer~e patients OnM~iC~, balance billing applies only to ancillary costs associated with the therapy because HmA Pays the wtu~ cost

or average wholesale price (rather than an ‘‘allowed charge’ for the drug itself) (107a).

22 According to the U.S. Depment of Labor estimates, 80 percent of people with employment-based k-cc fiOm medium id lage h ~ve

a 20 percent copayment rate (after paying any annual deductibles), 4 percent face a 15 percent copayment rate, 8 percent face a 10 percent copayment

rate, and the remaking 7 percent have some other or no copayment rate (118). Oenzyme claims that 92 percent of its non-Medicare, non-Medicaid

privately insured customers as of March 1992 had faced a 20 percent copayment or less after meeting au annual deductible (107a).

‘Taking $lOasa maximum likely copayment per infusion and assuming amaximum annual number of infusions of 144 (according to the dosing

regimen being tested at the Scripps clinic), the maximum potential out-of-pocket expenses for HMO patients would be $1,440. With only two infusions

per month (as tested at NIH and Mount Sinai Medical Center in New York City), themaximum out-of-pocket expenses would fall to $240 per year.
24 ● Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

Threats to Lifetime Maximum

Insurance Benefits

The vast majority of private health insurance

policies impose a lifetime limit on the benefits

payable for each insuree. According to recent U.S.

Department of Labor estimates, at least 26 percent of

beneficiaries of private employment-based insurance plans at medium and large firms have a lifetime

maximum benefit of $500,000 or less and another 43

percent have a maximum benefit between $500,001

and $1 million (table 9). Genzyme indicated that as

of March 1992, only 54 percent of its privately

insured customers had a maximum of $1 million or

less while 39 percent had no lifetime maximum at

all.24 The high cost of alglucerase therapy puts many

Gaucher patients at risk of reaching these lifetime

maximum benefits within a few years. Furthermore,

Genzyme has indicated that many of its customers

have begun therapy with their lifetime maximum

benefit already significantly eroded, hastening the

termination of their insurance coverage. By exhausting their insurance benefits, patients would not only

lack coverage for future alglucerase therapy, but

they would have no coverage for any other medical

expenses they incur over the rest of their lives.

Although Genzyme’s free drug program (discussed

in the next section) would cover the cost of future

alglucerase, it would not pay for the drug’s administration or any other medical expenses.

Figure 1 shows how the four different dosing

regimens laid out in table 7 would use up lifetime

insurance benefits. Even conservatively assuming

that patients must pay $2,000 annually toward their

alglucerase therapy and that they have no previous

medical expenses, all four dosing regimens would

significantly erode or completely use up a $500,000

maximum within a few years. A 60 units/kg weekly

dose would use up a $1 million maximum in less

than two years, while a 60 units/kg biweekly dose

reduced to 30 units/kg biweekly after the first year

would use up over $800,000 in benefit in less than

5 years. If patients have incurred significant medical

expenses prior to beginning alglucerase therapy (as

Genzyme indicates is the case), they risk exhausting

their insurance benefits even more quickly.

Insofar as 71 percent of current alglucerase

recipients have some form of private health insurance, and assuming that between 54 percent (Genzyme’s estimate) and 69 percent (U.S. Department

of Labor’s estimate) of them have a lifetime

maximum benefit of $1 million or less, somewhere

between one-third and one-half of all aglucerase

recipients face a significant risk of exhausting or

critically reducing their available insurance benefits

over time. Although patients may change health

insurers as they change jobs or as their employers

change insurance contracts (and hence, receive a

‘‘new’ lifetime maximum), in many cases, the new

insurance policies may exclude any expenses for

Gaucher treatment as a preexisting condition (58).25

These constraints may also lock Gaucher patients

into their current jobs for fear of losing needed health

insurance coverage. In addition, even if an employer’s insurance does not exclude preexisting

conditions, some firms may be unwilling to hire

Gaucher patients for fear that the high cost of

alglucerase therapy and related medical expenses

will lead to higher insurance premiums for the firm

as a whole.

Genzyme’s Drug Access Program

Genzyme maintains a staff of “reimbursement

specialists” to help patients determine the extent of

their insurance coverage for alglucerase therapy, to

obtain payment for alglucerase-related expenses,

and, if necessary, to help find providers willing to

administer the therapy (3). In addition, Genzyme has

established a program to provide alglucerase free to

Gaucher patients who lack health insurance to cover

the therapy or who have reached their lifetime

maximum benefits. However, the free drug program

does not cover the ancillary costs of alglucerase

therapy. As shown in table 7, these costs can range

from $4,800 to $13,200 for the average patient.

When patients cannot afford these substantial charges,

either they or Genzyme must find providers willing

24 Some of the difference between the Department of Labor and Genzyme figures may reflect the fact that the Genzyme figures include the 17 percent

of alglucerase recipients enrolled in the Federal Government employees’ insurance program and HMOS, which have traditionally not had lifetime

maximum benefits (3).

25 Many States allow insurance companies to exclude either particular preexisting conditions or individual patients who have preexisting conditions

from coverage when an employer changes insurance contracts. Federal law allows firms that self-insure to make such exclusions no matter what the

relevant State’s statute requires. Such exclusions are most commonly found among small employers. Insurers can also exclude preexisting conditions

for new employees, although a growing number of States are considering legislation to end this practice (58).
Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease . 25

1.50

1.25

1.00

%=

43

% 0.75 (n

A5

=

z

0.50

0.25

0.00

Figure l-Cumulative Per Patient Insurance Costs for Alglucerase Therapy Under

Four Potential Dosing Regimensa

1.50

1.25

‘ --------------------- -

‘

------------------------------- ‘------------------ ” 1.00

6=

k ~

0.75 ~

E

LQ

=

z

‘

-------- -

”

- -

” -------------------- ‘

----------- - 0.50

0.25

m I I I I 0.00

0 1 2 3 4 5

- - -

Years of therapy

 Dosing Regimen A--all 5 years: 60 units/kg weekly

 Dosing Regimen B -- first year:60 units/kg biweekly; subsequent years: 30 units/kg biweekly

 Dosing Regimen C--first year: 30 unit/kg biweekly; subsequent years:15 units/kg biweekly

 Dosing Regimen D -- all 5 years: 2.3 units/kg three times a week

aAssumes patient out-of-pocket expenses of $2,000 per year and treatment costs as outlined in table 8.

SOURCE: Office of Technology Assessment, 1992.

to administer the therapy at reduced or no compensation.

This program establishes two prices for alglucerase: a price of $3.50/unit for patients with

insurance or other resources, and a price of zero for

those who cannot pay. By charging insurers the full

price, Genzyme has substantial revenue and, at least

until they exhaust their lifetime medical benefits,

covered patients have access to the therapy and to

ancillary services.

It is not uncommon for pharmaceutical companies

to charge different payers different prices. This

strategy, which economists call price discrimination, can maximize profits. Price discrimination can

only occur when a monopolist is able to establish

different prices for different buyers. The rationale is

straightforward: buyers vary in their willingness or

ability to pay for drugs and other products. If the

drug manufacturer or other producer can set a higher

price for buyers who are willing to pay more, the

revenues will be greater than if all buyers must pay

the same price. It is more profitable to make a sale

at a reduced price, as long as the price exceeds the

production cost, than not to make a sale at all.

Companies usually do not want information about

discounted prices made public because other buyers

will demand discounts as well, eroding the ability to

charge different prices.

Price variation for medical treatments may take

unusual forms. One way to price discriminate is to

forgive (or fail to pursue aggressively) the patient’s

share of the price of a drug. The forgone revenues are
26 ● Federal and private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

sometimes treated as bad debt for accounting

purposes. The free drug program may similarly

represent a sophisticated form of price discrimination. Although the company loses money on each

unit of drug offered free of charge, the policy of

charging full price to insurers (who are typically

obligated by contract to pay the insured percent of

the drug’s price for all FDA-approved indications)

during the initial treatment period can be profitable.

In the context of Genzyme’s complete pricing

scheme, the free drug program is similar in its

consequences to a policy in which patients are

offered a lifetime supply of alglucerase treatment in

exchange for the value if their remaining insurance

coverage and associated copayments. Patients may

be willing to pay the full price of alglucerase as long

as they have insurance coverage; when coverage

ends, they may be willing or able to pay little if any

of the cost. If Genzyme had opted against making the

drug available for free at the end of insurance

coverage, resistance to the pricing among patient

advocates would probably have been intense.

Other Issues in Medicare and Medicaid Payment

for Alglucerase Therapy

Medicare Coverage of Disabled Individuals—

According to estimates provided by Genzyme,

approximately half of current alglucerase recipients

with Medicare coverage have this Federal insurance

because their Gaucher disease has rendered them

disabled (3).26 However, because alglucerase therapy has the potential to eliminate the physical

disabilities associated with Gaucher disease, patients could lose their Medicare coverage if the

Social Security Administration (SSA) deems them

able to work.27 HCFA anticipates a reduction in the

Medicare rolls because of the effectiveness of

alglucerase (31). These patients’ ability to get

private insurance directly from an insurer or through

an employer will also be limited because prospective

insurers would likely exclude Gaucher treatment

from coverage as a “preexisting condition. ” Without other resources, these patients will receive

alglucerase through Genzyme’s free drug program,

but they will still bear the expenses of its administration and any other medical expenses related to their

Gaucher disease. As of April 1992, one Medicare

beneficiary has expressed an interest in returning to

work, but has not done so yet (3).

Securing Payment and Providers for Medicare

Beneficiaries---Genzyme and the National Gaucher

Foundation report some instances of Medicare

carriers rejecting, suspending, or delaying claims for

alglucerase (especially during the early months after

FDA approval) despite the fact that the carrier covers

the therapy (3,40). In addition, Genzyme reports that

a few Medicare beneficiaries have had difficulty in

finding medical providers to administer alglucerase.

Some physicians have been reluctant to purchase

and stock the drug in their offices because of its cost.

These physicians tend to refer their Gaucher patients

to hospital outpatient clinics to receive their infusions. However, some hospitals have also been

reluctant to administer the drug because they initially receive only a portion of the Medicare

payments to which they are entitled; they receive the

balance through a reconciliation process that takes

place as long as a year after they administer the

drug.28 Because of the drug’s high cost, the difference between initial payments and the amount to

which the hospital is ultimately entitled can be

substantial (3,123).

Medicaid Rebates—In 1990, Congress enacted

legislation (Public Law 101-508) requiring pharmaceutical manufacturers who supply drugs to Medicaid beneficiaries to pay rebates to States according

to a formula based on volume of drug supplied under

Medicaid and 1) a percentage of the average

manufacturer’s price or 2) the ‘‘best price’ offered

to any purchaser of the drug (whichever is greater).

Drugs administered as part of a physician’s office

visit are usually exempt from this Medicaid rebate

law. HCFA generally grants this exemption by

designating the drug with a “J-code” upon recommendation of the HCFA Common Procedure Coding

26 The other half qualify for Medicare because they are over 65 years old.

27 SSA withdraws disability status from any beneficiary known to engage in "substantial gainful activity" which is defined as earning more than $500

per month. SSA also periodically reviews the condition of all ‘disabled’ people to determine whether they are still unable to work and expects recipients

of Federal disability benefits to no@ the Government of any changes in their medical condition or work status (1 17).

28 Although hospitals are entitled to 80 percent of allowed charges for outpatient prescription drugs, their initial reimbursements for drugs are bundled

together with reimbursements for other outpatient services and reduced by a hospital specific cost-to-charge ratio calculated by a prescribed methodology

using historical data. Hospitals could mark up the cost of alglucerase to recover the 80 percent to which they are entitled more quickly. However, this

strategy would lower the cost-to-charge ratio for all future outpatient Medicare reimbursements (3).
Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease . 27

System (HCPCS) Committee.29 HCFA expects to

add alglucerase to the list of exempt drugs before

1993 (98). Genzyme currently participates in the

Medicaid rebate program and provides rebates to

States based on the prices it charges for alglucerase

and the volume of drug provided to Medicaid

patients as reported by the States. The exact amount

of rebates provided by Genzyme to States is

considered proprietary information by both HCFA

and Genzyme.

POTENTIAL CONSEQUENCES

OF FEDERAL SUBSIDIES

Congress’s express intent in passing the Orphan

Drug Act was to overcome disincentives to invest in

new health care technologies. Implicit in the law is

a conviction that firms need substantial guarantees

of monopoly power and subsidy of research costs in

order to undertake risky and expensive drug development for rare conditions. Drug development is a

risky process. Drug companies bear costs for a large

number of unsuccessful projects. Therefore, overall

profitability requires a relatively high return to the

projects that are successful. If high development

costs and risks of failure make high returns an

essential incentive to invest, high prices may be

necessary for companies to make such drugs available. As shown earlier in the paper, other Federal

involvement, like NIH research, also helps make the

development and provision of pharmaceuticals more

attractive to industry.

To those who will pay for alglucerase and to those

who are interested in controlling health care expenditures in general, the price of alglucerase and its

cost of production are subjects of keen interest.

According to Genzyme, the drug has high production costs due to an unusually intensive manufacturing process and expensive material inputs; treatment

of one moderately to severely ill adult for a year can

require 10 tons of placental material (107). Furthermore, the existence of public and private insurance

distorts the individual’s decision to undergo treatment. It does so by breaking the link between

payment and consumption of health care. Because

insured patients do not pay the actual cost of the

drug, they (and their physicians) may not be deterred

by its cost. Economic theory suggests that in this

situation-a monopoly market in which production

costs are high and demand does not vary substantially with price-a high price is inevitable. With

other pharmaceutical products, the structure of

demand is similar, but production costs usually are

much lower. This may explain why alglucerase

therapy is relatively expensive compared with most

medical technologies.

Another important question for policymakers is

whether alglucerase injections are worth their cost.

From the perspective of moderately to severely ill

Gaucher patients, who have had very limited therapeutic options in the past, the answer maybe clear.

However, from the perspective of society as a whole

which must allocate limited health care resources,

this is a serious and difficult question. The limited

experience to date strongly suggests that alglucerase

reduces the morbidity of moderately to seriously ill

Type 1 Gaucher disease, but its effects on mortality

are essentially unknown. Even if Gaucher disease

were uniformly and rapidly fatal, and alglucerase

eliminated all mortality due to the disease, it would

still cost up to $350,000 for each year of adult life

saved. At this price, alglucerase is not only one of the

most expensive treatments ever introduced, but its

cost per year of life saved (or per year of life saved

adjusted for the quality of that life) would be well

above the range of commonly accepted therapies

(100). If it does not affect mortality, then any

enhancement in the quality of life comes at even

greater cost to society.

A related question is whether granting orphan

status to the placental form of alglucerase delayed

the development of alternative treatments that may

have been superior to placental alglucerase in terms

of cost, efficacy, or safety. The newly developed

recombinant form of alglucerase may be less costly

to manufacture (20). Furthermore, Genzyme has

claimed that the recombinant form is less likely to be

contaminated with viruses than the placental form

(107).

However, the placental form of alglucerase may

have developed first because the development of

recombinant technology often poses greater financial risk to the manufacturer than conventional

chemical purification and synthetic techniques. In

the presence of this uncertainty, Genzyme may have

devoted its initial efforts toward a less efficient but

29‘MMdly, the HCpCS committee establishes five-digit codes for procedures provided to Mediczue and Medicaid patients. M1 injectable tigs,

including those exempt from the rebate law, have HCPCS codes that begin with the letter “J” (98).
28 ● Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease

more predictable production technique. If so, it is

natural to ask whether Genzyme’s orphan protection

for its placental product delayed development of less

costly recombinant technology. In addition, other

manufacturers may have delayed research into

recombinant technology if they believed that the

original FDA market exclusivity awarded to alglucerase would exclude their own recombinant form of

the enzyme (21) or given Genzyme a natural

advantage in achieving FDA approval and market

exclusivity for its recombinant form. If so, the

granting of orphan designation to the alglucerase

may have deterred the development of a less

expensive manufacturing process.

CONCLUSION

In the case of alglucerase, Federal policy, in

combination with insurance reimbursement policies,

helped to create and promote a therapy that is very

effective, very costly, and potentially very profitable. The Federal role was multifaceted. NIH performed or financed most of the research leading to

the discoveries of the enzyme defect that caused

Gaucher disease, the infeasibility of treatment with

the naturally occurring enzyme, and the structure of

alglucerase. NIH licensed its process for the recombinant form of alglucerase to Genzyme and another

company. It also performed or funded much of the

clinical research that produced evidence regarding

effectiveness of treatment, and that helped establish

dosing guidelines. Through a series of contracts,

NIH has purchased alglucerase from Genzyme in

order to carry out these trials and to perform further

studies. Thus the Federal Government supported or

performed much of the research that made it possible

to develop this unique treatment for Gaucher disease, and removed much of the risk that pharmaceutical companies face when they decide to develop a

drug.

Another government agency, the FDA, also

played a critical role in making alglucerase available

to patients with Gaucher disease. Although the FDA

is sometimes portrayed as an obstacle to pharmaceutical innovation, in this case, the FDA, in administering provisions of the Orphan Drug Act, gave

Genzyme a 7-year monopoly in the sale of alglucerase. Because alglucerase had been discovered by

NIH, which had published its structure, and because

the NIH held a patent for the purification process,

Genzyme could not rely upon patent protection for

a monopoly position. Without the market exclusivity provision of the ODA, there would have been no

monopoly, and the revenues and profits from the sale

of alglucerase would presumably have been more

modest. The orphan drug law and the NIH’s

involvement together significantly reduced the cost

and uncertainty customarily associated with a manufacturer’s pharmaceutical development project.

Genzyme could not maintain the very high price

of alglucerase if insurance companies did not pay for

the therapy. In fact, most insurers-including the

Medicare program administered by the Federal

Government and the Medicaid program administered jointly by the Federal Government and the

States—are bound by their contractual obligations to

cover drugs administered according to FDAapproved labeling. Most private insurance policies

place a limit on lifetime benefits, and patients with

severe forms of Gaucher disease who receive

alglucerase may exhaust their insurance coverage in

a few years. At that time, Genzyme will supply the

drug without payment, but patients will no longer be

covered for their remaining health care, including

the costs of administering alglucerase as an intravenous infusion.

The commercial development of alglucerase is

unusual insofar as the company that produced it was

able to obtain a monopoly in the production of a

compound that had already been discovered and for

which much of the development work had been

performed by the Federal Government and other

researchers. Furthermore, it is not representative of

all drug development; this is an unusually successful

and profitable product. Nevertheless, it raises questions that are common to many new products: What

is the appropriate Federal role in the development of

a commercial product? Should the potential costs of

the product be considered when the Federal Government supports basic and applied research, especially

if the Federal Government is itself a payer of such

therapies through its own health insurance programs? How should the Federal Government consider impacts on patients and insurers when supporting such work? As the range of new therapeutic

products expands, with the promise of unprecedented effectiveness and expense, such questions

will arise more and more often. The costs of new

diagnostic procedures and treatments may be so high

that insurers cannot cover them and patients cannot

pay for them. Furthermore, this case illustrates that

such deep involvement of agencies such as NIH in

the development of medical technology creates the
Federal and Private Roles in the Development and Provision of Alglucerase Therapy for Gaucher Disease ● 29

potential for the Federal Government to pay for such

technologies twice-once through support of the

R&D process and again as a health insurer. The

Federal Government has no mechanism to ensure

that the process American pay for drugs and other

technologies reflect the public’s contribution to their

development.

Perhaps the most significant lesson to emerge

from the case of alglucerase is that cost considerations cannot be ignored in the development and

diffusion of any treatment. Payments for alglucerase, like expenditures for any other treatment

ordiagnostic procedure, divert health care resources

from other uses. Less expensive treatments, however, are unlikely to attract comparable scrutiny

from insurers, and few other treatments will so

predictably deplete insurance coverage. The high

price of alglucerase threatens to put this promising

treatment out of reach of many patients, even those

who are well-insured.

1.

2.

3.

4.

5.

6.

7.

8.

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