Drug companies make money by developing and marketing patented drugs for ailments like hypertension, ulcers or depression which afflict millions of patients. Or at least that is a layman’s understanding of the business model. But Genzyme, a biotech company in Cambridge, Massachusetts, has broken the mould. It has made billions by focusing on drugs for the rarest of rare diseases.

These miracles, however, create unsettling bioethical dilemmas, as an article in the Boston Globe points out. It features a Costa Rican teenager named Tania Gonzalez. She suffers from Gaucher disease, a potentially lethal enzyme deficiency. Fewer than 10,000 of the world's 6 billion people are known to have it. Genzyme, however, has developed an intravenous drug, Cerezyme. However, it costs each patient US$160,000 a year. Tania’s dad earns about US$10,000 a year. Clearly the Costa Rican government had to pay for it.

The government refused. It could not afford to pay US$160,000 a year to treat 1 person when it had 600,000 hypertensive patients and 120,000 diabetics to support. It was a heart-breaking decision. Then Genzyme stepped it. It supported a court case which pitted a photogenic little girl against a stingy government. Tania won -- or rather, Genzyme won. Now there are two Gaucher patients in Costa Rica and the government is paying US$350,000 a year to Genzyme.

This strategy has paid off handsomely for Genzyme. Founded in 1981, it has become a $16 billion company with offices and factories around the world. Its salesmen contact geneticists everywhere, even in the most out-of-the-way places – from Brazil and China to Libya and Bulgaria – and tell them that there is a cure for the Gaucher disease if it is ever diagnosed.

"Genzyme's solution, elegant in its way, was to set a price high enough to earn a substantial profit no matter how small its pool of patients. Then the company surprised the medical world - and its investors on Wall Street - by showing that American health insurers could be persuaded to pay the six-figure price tag. And with the only effective treatment for Gaucher disease, Genzyme never needed to lower the price, even as production efficiencies raised profit margins on the drug to as much as 90 percent."

Genzyme follows an extremely disciplined "full price or free" strategy. It locates patients, donates the drug at first, and then pressures the government to be paid the full retail price. "The president of the firm's international group, Sanford Smith, keeps a brass gong outside his office. Every time a foreign government agrees to pay for one of the company's drugs, he takes out a mallet and rings it," the Globe says. The company now has several other drugs to which it applies the same strategy.

Costa Rica’s health department wants an international agreement to force drug companies to scale their prices to a country's GDP. Costa Rica would pay more than impoverished Nicaragua, but less than the US or France. The Globe reports that such a deal is unlikely. ~ Boston Globe, June 14