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Novartis CEO's Dilemma: Is $475,000 Too Much for a Leukemia Breakthrough?

Joseph Jimenez, the chief executive of Novartis, is celebrating a triumph. The Food and Drug Administration approved Kymriah, a new treatment for kids with leukemia. But he's also taking heat from all sides over his decision to charge $475,000 for the treatment, and, in a major first, to negotiate deals that charge only patients who go into remission.

Novartis CEO's Dilemma: Is $475,000 Too Much for a Leukemia Breakthrough?

For Wall Street, the sum is 36 percent less than investors expected, and could stunt a whole field. For patients, it is still far too expensive.

Jimenez admits the number is big “in the absolute.” But he says medical science can’t advance unless companies will invest in it, and companies can only do that if they get an adequate financial return. “I think in this instance we priced at a point where we can get a return, although I have to tell you that the cost of goods, the cost of manufacturing these cells and processing is very, very high.”

One person not buying it: David Mitchell, a cancer survivor and the founder of Patients For Affordable Drugs, an advocacy group. “While Novartis’ decision to set a price at $475,000 per treatment may be seen by some as restraint, we believe it is excessive,” he said in a prepared statement. “Novartis should not get credit for bringing a $475,000 drug to market and claiming they could have charged people a lot more.”

Novartis is claiming exactly that, but a lot more. Jimenez sees Kymriah as his chance to put into practice new ideas about drug pricing he has advocated for years as a solution to the pharmaceutical industry’s bad reputation and unsustainably rising prices: "indication-based" or "value-based" pricing. Drugs, he says, should be priced on the value they bring to the healthcare system, and insurers and governments should pay based on whether the medicines work. That’s why Novartis has approached the Centers for Medicaid and Medicare Services and insurers about schemes where only patients who have responded to Kymriah in a month will incur a charge, despite the high cost of administering the treatment.

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