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Post by lakon on Jun 25, 2016 3:25:43 GMT -5
Opinions vary on this topic, and I have already made my case in other threads. It should be clear with a back of a napkin calculation that Afrezza CAN be manufactured and sold very cheaply at scale. Time will prove this opinion as fact for Technosphere in general. Eventually, cost advantages to improvements to logistics (e.g., storage and distribution) will come to light, as well as long-term storage viability, thermostability, etc. I find the recent statements about price parity for all dosages to be significant since the insulin API is the most significant cost of manufacturing Afrezza. It seems like MNKD is taking the position that a simple flat pricing model is the easiest to understand and market for patients and insurers. It also seems that MNKD is taking the position that they are not going to leave too much money on the table until they have to. Therefore, they are not going to sell Afrezza on the cheap yet. RAA pricing is not cheap. I suspect that they will lower price to be competitive to build market share, but that leaves a lot of juice for MNKD to squeeze, especially at 100%. If they are eventually able to garner a premium, it is scary how profitable they will become. Long-term I still think that many Technosphere "drugs" (including hormones, peptides, proteins, plant extracts, etc.) will be cheap, OTC, and very profitable. That's why I invested long-term. That's why I stayed through the pain. That's why $1/sh or $10/sh is CHEAP if the party gets started. Hakan was not wrong about being the Apple of Biotech if they can get everything in the lab into the market. The R&D remains Aces.
Just because you were robbed once, does not mean that you should give away all of your belongings.
Price will be reduced. Price will be profitable. Price will rise again, like a phoenix, but likely covertly on a relative basis as to be noted in profitability.
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Post by end2war on Jun 26, 2016 10:13:10 GMT -5
I am a strong advocate for low pricing to gain users. I would put the prices below cost to start, in order to beat all competitive products on price. The initial need is to get the doctors prescribing the product and get the users happy with the prices so they will buy it. Then they will find that they can control their A1C with proper titration. If a large base of users gets a chance to find it works well for them, they will spread the word to their doctors, who will begin to use Afrezza in earnest. Once this happens, the battle will be won for adherents, and this can be presented as an introductory price, with price increases that will be tolerated.
As I understand insurance plans, they are independent of each other, and each makes their own deal for prices. I think that MNKD will not want to adopt a standard price to all plans. Some companies bring them several drugs and they negotiate for a package. A plan can press for a low price on a particular drug and pay a higher price on other drugs.
But MNKD will just have Afrezza to offer. So price of that one product will be key. Biggest plans have the most leverage and will be able to negotiate for better prices than small plans. I expect that MNKD will offer discriminatory prices, with the lowest to the bigger plans. However, they are not going to tell plan 1 what their price is to plan 2, even if they have a list price and a price to someone without insurance. The plans will be in competition for the best deal and if Afrezza becomes popular, patients will look for the plan with the lowest prices.
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Post by end2war on Jun 26, 2016 10:34:17 GMT -5
Good source for comparison pricing of Afrezza at different pharmacies. Shows Prices and coupons for 1 kit (30 (4 unit) and 60 (8 unit) cartridges) of Afrezza 4 units and 8 units. Membership warehouse is lowest at $285.38. This still shows the SNY program and the patient savings card while SNY is selling. This site advertises: "With coupons and discounts, Buyers pay $0 for first fill and $30 for each refill." I assume this means that currently MNKD is picking up the slack when insurance does not pay, but not sure I fully understand who pays what. "Manufacturer Coupon Many manufacturers offer programs that will reduce your out-of-pocket costs for this prescription. These programs are free but may have some rules or restrictions, so you’ll want to review carefully. When you’re ready to use this coupon, simply present the coupon to your pharmacist with a valid prescription for your medication. Program Name: Afrezza Patient Savings Card Provider: Sanofi Phone Number: 1-866-991-2840 Website: www.activatethecard.com/7055/How do I get the discount? Register online to request or activate a card. You will be able to download and print your card online. How much can I save? You can pay as little as $0 for your first fill, then as little as $30 for each refill. The maximum savings is $150 per fill. Do I need insurance? No. However, you will pay more without commercial insurance. Number of uses: No restriction. Expiration: 12/31/16 Other notes: Each prescription may include up to two inhalers and a month's supply of cartridges. Fill a 90-Day Supply to Save You may find that filling a 90-day supply will reduce your total cost for this prescription. As an added bonus, you'll make fewer trips to the pharmacy, saving you time and money. A couple of things to keep in mind: first, you may need a new prescription from your doctor that allows you to fill a 90-day quantity. Your insurance plan may also require that you fill through a mail order pharmacy for fills of more than a 30-day supply. LEARN MORE 90 day lowest price is Rite-Aid at $885.07 www.goodrx.com/afrezza?drug-name=afrezza
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Post by matt on Jun 26, 2016 10:52:52 GMT -5
It should be clear with a back of a napkin calculation that Afrezza CAN be manufactured and sold very cheaply at scale. People focus on the wrong question. It is not what the accounting cost of production is, but rather the variable cost of manufacturing versus the incremental revenue. When the accountants made MNKD take a big write-down on assets, they reduced future manufacturing costs because the on-going depreciation and amortization of those assets was charged to the P&L in 2015. That can be a bit illusory in the long-term, since depreciated assets do have to be replaced at some point, but the fully burdened cost of making a single unit of Afrezza in 2015 was higher than it is in 2016 from a pure accounting standpoint.
Scale really does matter. I worked many years for a major industry player and our principal product sold for between $1.10 and $1.25 per unit when I joined the company in the early 1980's, and our manufacturing cost was 65 cents. Along came Medicare DRGs in 1984 and suddenly hospitals would no longer pay $1.25. Ten years later our average selling price was down to 60 cents, and our cost of production was below 40 cents. Last time I spoke to someone in the company, the selling price was headed to 45 cents and manufacturing costs were still declining, and because of inflation the comparison between $1.25 and 45 cents is even more dramatic. When you have scale, seemingly minor projects that take a tenth of a cent out of the unit cost become economically interesting, but if you are stuck with low volumes the cost of the engineering project outweighs the benefits. We could absorb a lot of engineering projects because our daily production volume was over two million units so those little projects that saved a tenth of a penny were each worth $750,000 a year to the bottom line, and over time there were many little projects.
I hope MNKD takes advantage of the new accounting cost to drive penetration, even if it only to break-even, so that they can learn how to manufacture at scale. Even if MNKD never makes a penny off of insulin, that might be OK if they learn to product other products in the delivery system as a far more competitive cost.
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