Are drug companies killing the goose that lays their golden eggs?
In this ancient fable, a farmer and his wife discover that their goose is laying golden eggs. They become so greedy that they slaughter the goose hoping to retrieve the big lump of gold that they assume must be inside her. Instead, they find nothing special. Killing the goose meant no more golden eggs.
The Daraprim Debacle:
The latest example of drug company greed grabbed headlines because it was shameless. A 62-year-old drug called pyrimethamine (Daraprim) is used to treat a potentially life-threatening parasitic infection called toxoplasmosis.
This medicine was originally developed by an acquaintance of ours, Gertrude Elion. She was working for the drug company Burroughs Wellcome at the time. Trudy went on to win the Nobel Prize for her many amazing drug discoveries. She would be turning over in her grave to know what has happened to the compound she developed for treating malaria and the parasite Toxoplasma gondii.
Rights to this very old medication were acquired in August, 2015, by the startup firm Turing Pharmaceuticals. The price shot up from a fairly high $13.50 per tablet to $750 per pill shortly after the drug was acquired by the new company. That brought the cost of treating a case of toxoplasmosis to as much as $73,500, an increase of more than 5,000 percent almost overnight.
This case stood out because the cost of manufacturing is low, estimated at less than $1 a pill. After all, this drug has been around for more than 60 years. Its research and development costs were amortized decades ago. There was no justifiable reason to hike the price so much. Imagine a cup of coffee going from $2.50 to $125 a cup overnight. No one would stand for it.
The media attention and public outcry were so great that eventually the company announced it would roll back the price hike on Daraprim. What that final price will be, however, remains to be seen. Once the media furor dies down, will the price go back to $13.50 a pill or something substantially higher?
The Cycloserine Crisis:
Pyrimethamine isn’t the only old generic drug to have its price boosted suddenly. A medicine for tuberculosis called cycloserine recently jumped over 2,000 percent almost overnight. This medication was first marketed in 1955. The price went from $15 a pill to $360. The drug is used to treat a rare form of multi-drug resistant TB that could pose a public health hazard if not controlled.
Because outraged physicians spoke up, the deal that gave Rodelis Therapeutics rights to the drug were reversed. The nonprofit that now owns the license to cycloserine will reportedly “only” charge $35 per capsule.
Valeant Avarice:
Valeant Pharmaceuticals has seen its stock price skyrocket from a little over $50 a share in 2013 to over $250 a share this year. That’s partly because the company has also jacked up drug prices on some old generic products. Isoproterenol (Isuprel) is a very old drug that is crucial for certain kinds of life-threatening heart rhythm problems. It is also essential when a patient develops serious breathing problems during general anesthesia.
According to the Wall Street Journal, Valeant increased the price of Isuprel by 525 percent to $1,347 a vial. By the way, the New York Times reports that top executives made out very well:
“While other multinational pharmaceutical companies spend well into the double digits as a percentage of sales, Valeant’s 2014 annual report shows that the company spent $246 million on research and development — just 3 percent of sales. Another way to think about that: Valeant paid its five highest-paid executives 1.5 percent of sales, or $123 million, last year.”
Drug Company Greed Overwhelms the Orphan Drug Act:
Historically, generic drugs have been a bargain. But these examples show that just because a drug has lost its patent does not mean it will be inexpensive. This seems to be especially true when it comes to medicine for relatively rare conditions like toxoplasmosis, which can be fatal if untreated. In such cases, company executives may feel entitled to charge what they think the market will bear.
When the Orphan Drug Act was passed by Congress in 1983 it was supposed to encourage drug companies to develop medicines most people assumed would not be profitable. That’s because such drugs treat rare diseases that affect a relatively small number of people. In fact the FDA initially referred to these medications as “significant drugs of limited commercial value.”
In those days, drug companies could not have imagined charging hundreds of dollars for a course of treatment, much less hundreds of thousands. The assumption was that the American public wouldn’t stand for price gouging. An executive within the pharmaceutical industry told us decades ago that if a cure for cancer were developed the company would have to virtually give it away. Otherwise drug company greed would be the undoing of the industry. Other Pharma execs were in agreement, but that was a long time ago.
Congress created incentives so companies would invest in rare diseases for which they might not break even. The government offered substantial tax breaks and in some cases subsidized clinical research. Patent and market exclusivity were also big bonuses for orphan drug development.
Orphan Drugs Now Worth More Than Gold:
Sadly, the original intent of this humanitarian orphan drug initiative has been undermined by drug company greed. Major brand name manufacturers discovered that they could charge whatever they wanted and the public would not complain.
When the hepatitis C drug Sovaldi was marketed, the price was $1,000 a day. A full course of treatment requires 12 weeks of daily dosing.
New melanoma drugs cost unimaginable amounts: treatment with Yervoy (ipilimubab) can run nearly $120,000 while a competitor, Keytruda (pembrolizumab), approaches $150,000 a year.
The FDA has just approved the use of Yervoy and and another immunotherapy drug called Opdivo (nivolumab) together to treat metastatic melanoma. This combination is substantially better than either drug alone. Opdivo costs roughly $150,000 a year. A patient receiving both Opdivo and Yervoy could face a bill of $270,000 a year. Even if insurance would cover this combination, the co-pay could be overwhelming.
The Gouging of Gaucher Patients:
A rare genetic condition called Gaucher’s disease causes untold suffering. Without treatment patients develop cognitive impairment, seizures, broken bones and many other life-threatening complications. A biotech drug that can help control this disorder, Cerdelga, has been reported to cost over $300,000 a year.
Oncologists and infectious disease experts are finally speaking up about the unsustainable costs of drugs. Perhaps it is time for the American public to tell the pharmaceutical industry that the goose is about to stop laying its golden eggs.
We welcome your thoughts about the cost of orphan drugs in the comment section below. You may wish to let your Congressman know how you feel or contact PhRMA, the voice of the pharmaceutical industry. The president and CEO of the Pharmaceutical Research and Manufacturers of America is John. J. Castellani.
Pharmaceutical Research and Manufacturers of America
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