Pharmaceutical drugmaker Genzyme (NASDAQ: GENZ), based in Cambridge, Massachusetts, specializes in creating drugs for rare diseases. Despite the small market, the Orphan Drug Act gives the company tax credits and enhanced patent protection, virtually guaranteeing that its drugs become blockbusters, like it's Gaucher's disease drug Cerezyme.Recently, the company has halted production of the drug after a virus was discovered in production equipment at its Allston plant. Since the company expects a shortage in the supply of the drug, Genzyme said it would ask some consumers to conserve their stocks of the drug by temporarily skipping or reducing doses. The missed doses will not cause significant health problems, Genzyme said.
Cerezyme contributed over a quarter to the company's revenue last year, but now is in jeopardy of much lower sales due to the expected shortage. What's interesting, however, is the somewhat different attitude the company has taken. For years it has been criticized for pushing higher, unnecessary dosage, with the average cost to patients of $200,000 a year, often as much as $400,000 a year. Now, with the shortage, patients will be asked to take a "vacation" from the higher dose. If patients feel well enough on the lower dosage, they might opt to make it a permanent vacation, which could cause further hurt Cerezyme sales in the future.
Meanwhile, the FDA is also pushing approval of two competing drugs to accommodate patients during the shortage, again possibly affecting Genzyme.
The medical community, whose primary responsibility should be patient care, also seems to have gotten carried away when it comes to Genzyme. While usually it's the competitive environment that provides checks and balances, with no current meaningful competitor, doctors were left to fend off for themselves with Genzyme. Health professionals, known to be more affected by promotions, free samples and gifts than they believe they are, do not appear to stand up to Genzyme as they should.
More on this story here: Big dosage, big profit: Does Genzyme encourage larger dosages than we need?
Comfort Zone Investing: Buffett buys Burlington
Six top trades for the rest of 2009
Senator Sanders proposes legislation to break up large banks
