Health Care

The Impact of Biogen’s Price Increases for Tysabri on Pharmaceutical Innovation

Over a 10-year period, Biogen more than quintupled the price of multiple sclerosis drug Tysabri.
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The pharmaceutical industry has long argued that high drug prices are a good thing because the profits from these price hikes allow companies to spend more on research and development to discover and launch the cures of the future.

To test the claim that higher drug prices drive innovation, we gathered data from the industry, individual companies, and the FDA to conduct a counterfactual analysis: what would happen at some of the largest pharmaceutical companies in the world if prices on certain blockbuster drugs had remained constant over the last 10 years?

The following case study examines drug pricing at Biogen, a large pharmaceutical firm that focuses on neurodegenerative disorders. This analysis is part of a larger study on the impact of pharmaceutical price increases on medical innovation. To read the full study, click here.

Biogen Case Study

  • Headquarters: Cambridge, Mass., United States
  • Drug Analyzed: Tysabri (natalizumab)
  • 2021 Company Revenue: $11.0 billion
  • 2021 R&D Spending: $2.5 billion
  • Other Key Products: Tecfidera (dimethyl fumarate), Spinraza (nusinersen)

Founded in 1978, Biogen focuses on treatments for neurological disorders, including multiple sclerosis and Alzheimer’s disease. The company experienced controversy with the troubled launch of Aduhelm due to questionable efficacy and a high initial launch price of $56,000 annually. Since Medicare’s decision not to cover Aduhelm except for a limited few participating in a clinical trial, the company’s future is uncertain.

We analyzed Biogen’s pricing behavior for Tysabri, a biologic for the treatment of both multiple sclerosis and Crohn’s disease. From 2011–2021, Biogen consistently increased the price of Tysabri. In 2021, the drug’s net price stood over 422 percent higher.

Tysabri’s revenue is completely driven by price increases over the last decade, given the drug’s slow but steady decline in prescribing volume. As such, 100 percent of the drug’s revenue growth came from price increases, totaling $7.2 billion over 10 years.

If the price of Tysabri remained flat since 2011, the loss of $7.2 billion in revenue would have resulted in $1.5 billion less in R&D spending. We estimate that, based on the drug development scenarios used in our analysis, Biogen spends $6.2 billion (IQR: $5.1-$7.0 billion) in R&D per new drug developed. Therefore, the loss of Tysabri’s revenue would lead to 0.24 fewer drugs developed.

The results are further evidence that profit growth driven by price hikes on older, branded, monopoly drugs like Tysabri rarely leads to the development of innovative new medicines.

ABOUT THE AUTHOR
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Resident Fellow, Health Care