The Betaseron Decision Recently, the United States Food and Drug Administration (FDA) approved interferon beta=1B (brand name Betaseron), making it the first treatment for multiple sclerosis to get FDA approval for over two decades. Betaseron was developed by Berles Laboratories, a United States unit of Schering AG, the German pharmaceutical company. Berles handled the clinical development, trials, and marketing of the drug, while Chiron, a biotechnology firm based in California, manufactured it. The groundbreaking approval of Betaseron represented not only a great opportunity for Berles but also a difficult dilemma. Available supplies were insufficient to meet initial demand, and shortages were forecast for at least the next three years. With insufficient supplies and staggering development costs, how would Berles allocate and price the drug?

The Challenge of Multiple Sclerosis Multiple sclerosis (MS) is a disease of the central nervous system that interferes with the brains ability to control such functions as seeing, walking, and talking. The nerve fibers within the brain and spinal cord are surrounded by myelin, a fatty substance that protects the nerve fibers in the same way that insulation protects electrical wires. When the myelin insulation becomes damaged, the ability of the central nervous system to transmit nerve impulses to and from the brain becomes impaired. With multiple sclerosis, there are sclerosed (i.e., scarred or hardened) areas in multiple parts of the brain and spinal cord when the immune system mistakenly attacks the myelin sheath. The symptoms of MS depend to some extent on the location and size of the sclerosis. Symptoms include numbness, slurred speech, blurred vision, poor coordination, muscle weakness, bladder dysfunction, extreme fatigue, and paralysis. There is no way to know how the disease will progress for any individual because the nature of the course it takes can change over time. Some people will have a relatively benign course of MS, with only one or two mild attacks, nearly complete remission, and no permanent disability. Others will have a chronic, progressive course resulting in severe disability. A third group displays the most typical pattern, with periods of exacerbations, when the disease is active, and periods of remission, when the symptoms recede while generally leaving some damage. People with MS live with an exceptionally high degree of uncertainty because the course of their disease can change from one day to the next. Dramatic downturns as well as dramatic recoveries are not uncommon.

The Promise of Betaseron Interferon beta is a protein that occurs naturally and regulates the bodys immune system. Betaseron is composed of interferon beta-1b that has been genetically engineered and laboratory manufactured as a recombinant product. Although other interferons (i.e., alpha and gamma) had been tested, only beta interferon had been shown, through large-scale trials, to affect MS. Because it is an immunoregulatory agent, it was believed to combat the immune problems that make MS worse. However, the exact way in which it works was yet to be determined. In clinical studies, Betaseron was shown to reduce the frequency and severity of exacerbations in ambulatory MS patients with a relapsing-remitting form of the disease. It did not reverse damage already done, nor did it completely prevent exacerbations from occurring. However, Betaseron could dramatically improve the quality of life for the person with MS; for example, people taking Betaseron were shown to have fewer and shorter hospitalizations. Betaseron represented the first and only drug to have an effect on the frequency of exacerbations. Betaseron is administered subcutaneously (under the skin) every other day by self-injection. In order to derive the most benefits from the therapy, it was important that the MS patient maintain a regular schedule of the injections. Some flu-like side effects, as well as swelling and irritation around the injection, had been noted; however, they tended to decrease with time on treatment. In addition, one person who received Betaseron committed suicide, while three others attempted to kill themselves. Because MS often leads to depression, there was no way to know whether the administration of Betaseron was a factor. Lastly, Betaseron was not recommended for use during pregnancy.

The Betaseron Dilemma In the summer in which the FDA approved Betaseron, the FDA allowed physicians to prescribe the drug to MS patients who were ambulatory and has a relapsing-remitting course of MS. An estimated one-third of the more than 1,000,000 people with MS in the United States fell into that category, resulting in a potential client base of over 300,000. However, the expedited FDA approval process took only one year instead of the customary three years taken to review the drug applications. As a result, Berles was unprepared for it manufacture and distribution in the anticipated amount needed. Chiron Corporation had been making the drug in small quantities for experimental use and did not have the manufacturing facilities to handle the expected explosion in demand. Chiron estimated that it would have enough of the drug for about 36,000 to 75,000 patients by the end of the first year of approval. By the end of the next year, Chiron expected to be able to provide the drug for100,000 patients. Depending on demand, it might take another two years to provide the drug to all patients who requested it. Chirons expanded manufacturing represented the only option for Berles because the process required for another company would take even longer.

In addition, to availability, price was a concern because successes must fund the failures that precede them. Betaseron represented the results of years of expensive risky research by highly trained scientists in modern research facilities. Furthermore, genetically engineered drugs were extremely expensive to manufacture. In the case of Betaseron, a human interferon gene was injected into bacteria, resulting in a genetically engineered molecule. The stringent quality controls on the procedure take time and are expensive. As a result, the price of Betaseron was expected to be about $20,000 per year for each patient. Betaseron brought great hope to people with MS and a great quandary to Berles. The CEO of Berles is meeting with top executives of both Berles and Chiron to determine a course of action with distribution, supply limitations and pricing of the drug.

Assignment: The CEO has approached to develop some recommendations about how Berles should proceed with distribution, the limited supply currently available, and how to price the drug. Prepare a one to two page memo summarizing your recommendations with support for your recommendations. Dont be afraid to think outside the box. This is a new situation for Berles with demand versus supply. Dont be afraid to be innovative.