It was just a week of two ago that Turing Pharmaceuticals CEO Martin Shkreli was vilified for raising the price of a 62 year-old drug by 5,000 percent.
What was interesting to me at the time, was the way in which medical groups and industry associations distanced themselves from Shkeli and turned him into a pariah. As it turns out (in the industry’s eyes), was that Shkeli’s biggest mistake was that he was caught.
Though he reversed his position He reversed course under pressure Tuesday night, but not before the national attention struck fear into the hearts of biotech investors over increased scrutiny of drug prices, sending stocks plummeting
In an article by Meg Tirrell for CNBC entitled: Drug prices: Which companies may be the next targets? We are treated to a whole litany of companies who have pushed up prices. In the article, Ronny Gal, an analyst with Bernstein & Company stated:
“They take drugs that have largely been underpriced before—or that’s the way they’d call it. They buy a drug that does not have good alternatives and they raise the price sky-high. And because it’s very hard to say no to those patients; because there’s no alternative, people cover this.”
Gal gave the following examples: Jazz Pharmaceuticals’ drug Xyrem, Questcor’s Acthar and Mylan’s EpiPen. States the article:
“Jazz, an Ireland-domiciled company, acquired Xyrem in 2005 in its $122.6 million purchase of Orphan Medical. The drug was approved in 2002 for daytime sleepiness and sudden attacks of muscle weakness, or cataplexy, in people with the sleep disorder narcolepsy. The company reported revenue from Xyrem of $29 million in 2006, the first full year after its acquisition. Last year, Jazz posted Xyrem revenue of $778.6 million.”
While the cost to produce the drug has increased an average of 29 percent a year, it is still hard to justify the rate hikes. Another example given was Acthar Gel, a drug initially approved in 1952. It is hard to justify research costs associated with a product introduced more than 60 years ago. It is said to treat infantile spasms and multiple sclerosis symptoms in adults.
In 2007, a vial of the product was raised in price from $1,650 to $23,000.
Finally, the article explains that Mylan’s EpiPen has “increased 27 percent a year, on average, from 2011 to 2015, to more than $300 each dose…from 2011 to 2014, according to data from IMS Health. Sales in that time, rose an average of 42 percent a year, to more than $1 billion.”
Process of elimination
The manufacturers of these so-called “orphan drugs,” understand there are often no good alternatives. How the process often works is that Company “A” buys out a product, or an entire product line from Company “B.” While several of the drugs in Company “B’s” product line might have a lot of competition, they might note that one of the drugs really has no significant competitors. For that sake of this discussion, we’ll call this pharmaceutical “Gouge.”
This effective drug was first produced in 1948 and while there are a number of patients who might potentially need Gouge, it is not a huge number, so nothing good has ever replaced it and no other company ever bothered to find a competitive product. This creates the perfect “storm.” Overnight, Company “A” decides to raise the cost of Gouge from $15 a tube to $1,500 a tube. They will claim it has gotten more expensive to produce.
Initially, the physicians know that insurers will balk at paying $1,500 a tube, so they suggest lower cost alternatives that they know won’t be nearly as effective. Meanwhile, sales reps for Company “A” bombard physician’s offices with all kinds of giveaway’s and free-stuff for prescriptions written for Gouge. Sooner or later, they will write prescriptions for Gouge because the alternatives were all exhausted.
The entire process, from start to finish is unethical. Last week, as Congress started looking into the concept behind the pricing of “Gouge” and many other actual products, shares of pharmaceutical company stocks plummeted (they have since recovered).
It was as if a group of greedy school children were caught with their hands in a cookie jar. The analogy is not so far-fetched. The opportunity for greed is there, and many take advantage of it. Unfortunately, there are many players in on the game. Except it is no fun for the most vulnerable of the players.
The pharmaceutical industry badly needs ethical accountability. As patients, sooner or later, we should demand it.
YOUR COMMENTS ARE WELCOME!
I sincerely don’t understand this logic or the argument that the price increase is to raise money for R & D. Does no one understand how much profit pharmaceutical companies are currently making? You can’t convince me that a 62-year old medication is now suddenly worth $750.00 per pill. They have a lot of funds available for R & D….perhaps cutting some salaries would raise even more money that could be dedicated for research. At $750.00 per pill it is not affordable and all that increase will do is help to further raise the cost of purchasing insurance. My husband receives a needle and the medication in that needle is priced at $2,000.00. This medication keeps him alive but at what cost to our ability to live day to day. Someone is getting rich off the pain and suffering of others, doesn’t seem right. I realize we need pharmacology development but look at your own house first.