Regeneron’s Eylea: Pulling Open the Curtain on Drug Costs

Doris is 85 and suffers from moisture build up in her eye, what some call wet eye.   She is on Medicare and gets treated with Eylea, a Regeneron product, every 4-5 weeks.  Each treatment costing $6,200.   That is more than $70,000 per year even though Doris never made more than $40,000 while working.   Her total out of pocket cost is $10.29 per treatment.

Another product, Avistan, costs only $50 per treatment.  Avastin was FDA approved for treating colon cancer in 2004 and since has been used by ophthalmologists to treat wet amd off label with great results.  Half of these doctors prescribe Avistan as a first treatment for wet amd.

Doris Actual Monthly Eylea Invoice – 2017

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The receipt of $3,137 from Insurance is the Medicare reimbursement taxpayers pay.  The receipt from the patient of $784 is from the Gooddays foundation, a tax exempt charity funded by large drug companies that helps offset drug costs.  The adjustment of $2,278 is a discount provided to Doris based upon the bargaining leverage of the major hospital chain that administers her Medicare program.  Therefore the net cost to Doris is only $10.29.  The charges listed as $290 are payments to the physician doing the injection.

Regeneron’s current stock market valuation exceeds $50 billion with gross annual revenues of roughly $5 billion.  Eylea represents 99 percent of Regeneron’s net product sales per its most recent SEC 10K filing.

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Eylea is a Regeneron product yet it has a licensing agreement with Bayer for sales outside the U.S.

A close look at Eylea shows why the current national health care debate makes no sense.  The focus should be on drug costs first and insurance plans second.  There is simply too much financial pressure in the system.

Now let’s walk through this Eylea example starting with an actual invoice from the doctor’s office and see how Doris health is being collateralized into derivatives just as homes were used as collateral to create derivatives during the financial crisis.   And just as no one assumed homes would drop in value, the notion of drugs coming down significantly in price seems ridiculous yet is clearly inevitable.

Cashflow from Doris Eylea Sales Sold to Private Equity Firm DRI Capital 

What happens next is that a certain percentage of the Eylea revenues get directed to a private equity firm who has purchased this cashflow via a royalty agreement.   For example, an investment firm may pay a drug maker $100 million for the right to 5 percent of all future royalties from a particular drug.   In fact, drug companies often sell multiple forms of this participation to investment firms on the same drug.

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DRI Capital then issues bonds using Doris Eylea cashflow as collateral

Bond rating agencies generally rate as these offerings as solid lower risk investments.  Here is S&P’s bond rating report on one DRI Capital offering secured by sales of Eylea. Note below that almost 30 percent of the investment is backed by cash flows receipts from sale of Eylea.  Not exactly well diversified.  Especially if 99 percent of Regeneron’s net product sales are also Eylea,  indicating a level of leverage prior to an additional layer of leverage created by DRI’s issuance of bonds backed by Eylea.

DRI Capital then takes cash from these bond sales and proceeds to purchase the cash flows from another drug.  See related post below on one of DRI Capital’s competitors, Royalty Pharma, that includes a detailed presentation of their business strategy by its CEO Pablo Legorreta.

Link to the blog post on Royalty Pharma:   Royalty Pharma


Tax Exempt Foundations Support to Patients Controversial

Now let’s take a look at the $784 contributed toward the cost of Doris monthly Eylea injection by the Gooddays foundation, one of several foundations funded by large drug companies for this purpose.

These foundations have become controversial because they may indeed be simply sustaining artificially high drug prices, which heavily impact patients who don’t have insurance coverage or large hospitals aggressively negotiating discounts.   These patients end up paying the full $6,200.

Let’s look at Gooddays, which helped Doris pay for her purchase of Eylea, and then a larger similar foundation, Patient Access Network.  Both file annual 990 forms with the IRS to earn tax exempt status yet remarkably they violate the most basic rule by not disclosing their contributors identities.


Bloomberg related story by Robert Langreth on June 29, 2017.


Click below to read the complete Bloomberg story:

Charity Funded by Drugmakers Draws IRS Probe on Tax Exemption – Bloomberg

Patient Assistance Foundations Hides Drug Company Donors

One of the largest foundations providing assistance with drug costs is the Patient Access Network Foundation.  Patient Access Network was able to redact its 990 filing with the IRS and scrub off the detailed “amounts” of contributors, even though these contributors were not listed by name.  That’s how sensitive this information has become.  Several contributions exceed $100 million.  See original, captured on a pdf, and redacted filing now in the 990 database below.

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Public Pensions, Including Oregon PERS, Investing in Patient Cash Flows

The following comment was made at the monthly meeting of the Oregon Investment Council in December 2014.


While many exciting opportunities for investment exist in health care related enterprises, clearly drug costs must come down.  If drug firms want to securitize patient health via the sale of drug cash-flows, clearly more transparency is needed.  Especially when taxpayers are footing most of the bill.