Pfizer Seeks Pricing Perfection

Part 1 of 2

Pfizer (PFE Quote - Cramer on PFE - Stock Picks) is about to find out if people who rely on insulin, and the medical insurers who pay for their care, are prepared to spend more for what the drug giant has billed as a significant advance in treating diabetes.

Next month, Exubera, an inhalation form of insulin, will hit the market. Pfizer hasn't said how much it will cost, though SG Cowen says its list price -- the average price that wholesalers charge doctors, pharmacies and managed-care firms -- will be 33% to 40% higher than that of injectable insulin.

Even so, prices in that range would be lower than expected, says Cowen's Ian Sanderson, citing interviews with several managed-care drug buyers. While many managed-care firms will charge a high copayment to patients and impose restrictions, "we expect Exubera adoption to be rapid despite the early prescribing hurdles," Sanderson says in a June 22 research report.

The list price for Exubera, a fast-acting insulin, is $3.73 to $4.67 a day, on the basis of a one-month supply, depending on the dose required by the patient, Cowen says. By comparison, the list price for fast-acting insulin injections is $2.67 to $2.83 a day. Sanderson says that most payers he interviewed were expecting a list price of $5.50 to $6.50 for Exubera.

"Bears forecast a slow market launch and limited long-term success" for Exubera because the drug's efficacy is only equal to injectable insulin while its price is higher, Sanderson says. Skeptics also contend that the insulin-inhaler device is "cumbersome," and that there are concerns about Exubera's effect on the lungs.

Indeed, the Food and Drug Administration says Exubera can't be used by everyone who needs insulin, including smokers or those who have quit smoking within six months of starting the drug, along with people who have asthma, bronchitis or emphysema.

The Two-Year Question

Although the FDA approved the drug on the basis of two years of studies, the agency says Pfizer will conduct long-term safety trials after the drug reaches the market to examine its effectiveness and safety in patients with underlying lung disease.

Still, the bulls, including Sanderson, "believe that patient dissatisfaction with current diabetes therapies has created pent-up demand" for Exubera. Sanderson predicts the drug will have worldwide sales of $1.9 billion in 2010, thanks, in part, to Pfizer's decision to price it below what his managed-care sources had anticipated.

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