How much is too much to pay for Provenge?

With Dendreon's hotly anticipated prostate cancer drug Provenge on the doorstep of FDA approval, the company now must answer a tough question: How much can they charge for a drug that extends survival just a few months?

In a study of 512 men, results showed that subjects taking the drug survived a median time of four months longer than those not receiving the therapy. Dendreon has been gearing up for production of the drug--the FDA will make a decision by May 1--and analysts have been forecasting blockbuster sales of Provenge, which would be first in a new class of drugs that boost a patient's immune system.

Those forecasts, however, are based on "best guesses" about what the drug will cost. In a conference call last year, the company said Provenge's cost had not been determined yet, but will probably "be priced similar to other biologics in the space." Read: expensive. Analysts have projected a range of prices from $40,000 per patient at the low end, up to $75,000. Based on seven analyst estimates, Xconomy's Luke Timmerman says the average falls around $62,000.

Dendreon has to walk a fine line here. The company has spent $783 million since its inception on development of Provenge, and that cost has to be recovered through sales. Set the price too low, and Dendreon won't be able to stay afloat, or keep up with patients' demands for the drug. But if Provenge is too pricey, insurers may balk at covering a drug that at best gives dying men just a few more months of life. It will also won't want to come across as greedy in the eyes of supporters who have championed the biotech's work.

"Pricing in the pharmaceutical industry is really more of an art than a science," Mark Monane, an analyst with Needham & Company, tells Xconomy.

- here's the Xconomy article