TAKE ACTION FOR LOWER DRUG COSTS! STOP PHARMA’S BACKROOM DEALS!

Working with consumer advocates across the country, Consumer Catalyst has launched a campaign to stop  ‘Pay-for-Delay’ deals that hurt consumer health!

What you can do:

1. Sign the consumer petition on Change.org
2. Join the discussion on twitter and share your story, using the hashtag: Stop the #RxRacket! And ask others to share their stories too. Also follow us at @postscriptrx.
3. Join our community on Facebook to keep up with the campaign and join our email list of impacted consumers by sharing your story.

You can also tell us your story, if you are interested in joining us as a consumer advocate and speaking out on these issues to local media.

Pharmaceutical companies are colluding to keep drug prices high – and taking that money right out of your pocket.

Did you know drug companies have made more than 160 secret, back-room deals that

• Have kept 100 generic drugs or more off the market for years
• Drive up the cost of each drug by an average of $3,000 a year
• Keep all of our prescription costs high, while divvying up the spoils!

Right now, the Supreme Court is currently deliberating over whether these back-room deals are legal – but we know they’re wrong. Since 2005, as many as 142 different generic drugs have been unfairly kept from consumers, according to government reports. Delaying the launch of a generic drug lets the drug companies make bigger and bigger profits, while patients are stuck footing the bill, or going without the medicines they need.

The Supreme Court heard arguments by the drug companies, and fortunately Justices Kagan and Sotomayor raised consumer concerns – but the Court did not hear the perspective of the thousands of Americans unable to afford their medications. That’s because most people don’t even know that these deals are costing consumers thousands, and our health system billions of extra dollars, each year!

Help us raise awareness of this #RxRacket. The public deserves to know how this decision will affect us all – how thousands of Americans are being forced to choose between skipping their medications or going into credit card debt, just so that drug companies can make even more profit. Not to mention, how health care costs for everyone have gone up, because insurers pay most of these higher costs!

Whatever the Supreme Court decides, help spread the word, so we can help make sure that these deals come to an end, once and for all.

Target drugs: 
If you have taken Cipro, Provigil, or Androgel, you have definitely paid more because of a pay-for-delay settlement. And according to legal experts, it is very probable that many drugs including blockbuster drugs like Lipitor, Plavix and Nexium — have been delayed by pay-for-delay deals.*

We need you to tell everyone you know that this is happening, and help gather and share the stories of people you know that have been negatively impacted. Read the stories shared by two women, Tanna and Karen, who were unable to afford their medications due to pay-for-delay deals that kept generic Provigil off the market for six years. Also, read how the companies’ legal arguments make no sense.

You can find all the information you would ever need about this issue on our Pay-for-Delay info page. Please also feel free to add your thoughts on this #RxRacket in the comments, below.

Thank you for helping us protect your right to affordable medicine!

*The Full List – Drugs Likely to Have High Prices from ‘Pay-for-Delay’ Deals:
Adderall XR, Aggrenox, Altace, Arthrotec, Caduet, Carbatrol, Clarinex, Comtan, Duac, Effexor XR, Eloxatin, Ethyol, Femcon Fe, Fentora, Flomax, Lipitor, Lamictal, Levaquin, Lexapro, Loestrin-24 Fe, Loprox, Lotrel, Lybrel, Namenda, Naprelan, Nexium, Niaspan, Niravam, Olux, Opana ER, Ortho Tri Cyclen Lo, Oxytrol, Plavix, Propecia, Razadyne, Razadyne ER, Rythmol SR, Sinemet CR, Skelaxin, Solodyn, Stalevo, Tricor 145mg, Vanos, Vfend, Wellbutrin XL (150 mg), Xopenex, and Zantac!

The last year has been a roller coaster-ride of both successes and set-backs in the fight to eliminate pay-for delay settlements. These multi-million dollar sweetheart deals have been used more and more by brand-named drug makers to get their generic competitors to agree to delay bringing affordable generics to the market.

A bill to ban these agreements was included in the House’s health care reform proposal last fall, and a similar measure was supported by the White House and considered by the Senate. Unfortunately, the Senate’s procedural and jurisdictional rules kept the measure from being included in the national health reform bill enacted in March.

Undeterred, leaders in the House then included the measure in an appropriations bill approved on July 1^st. But the Senate passed one appropriations bill on July 22 without the provision. In the aftermath of this setback, consumer champion Senator Herb Kohl (D-WI) and others succeeded in including this vital reform as an amendment to the FTC’s budget authorization. Kohl and others then  overcame the next major hurdle yesterday, narrowly stopping  drug industry lobbyist efforts to strip the measure in the Senate Appropriations Committee.

Yesterday’s vote was a dramatic one.  Senator Arlen Specter (D-PA) introduced an amendment to remove the pay-for-delay provision from the Committee bill. When four Democrats voted with Specter  to strip away the pay-for-delay provision, the AP reports that:

“Drug company lobbyists in the audience thought they had the vote won, provided they could win over every panel Republican. But Sen. Richard Shelby, R-Ala., voted against the drug companies, helping give Kohl and Durbin [the author of the Appropriations Bill] a surprise win.”

Recent settlements shielding $9 Billion in drug spending from generic competition

The Federal Trade Commission (FTC), which has consistently challenged these anti-competitive agreements in the courts and through testimonies before Congress, called yesterday’s vote a significant victory. FTC chairman Jon Leibowitz testified before Congress earlier this week that these types of pay-for-delay agreements, which delay the entry of generic drugs, are becoming more common (see graph). Legal decisions permitting these agreements have led to their proliferation from none in 2004 to a former high of 19 such agreements in 2009. The FTC notes that in just the first 9 months, the number of pay-for-delay settlements in fiscal year 2010 has already topped last year’s record high.

Graph: Federal Trade Commission

The FTC’s preliminary analysis of the agreement filed this fiscal year concludes that 21 pay-for-delay agreements entered into this year are protecting $9 billion in prescription drug sales from generic competition. Combined with the earlier agreements in effect, this could mean that as much as $29 billion in annual spending on drugs are improperly shielded from generic challengers.  That is a significant loss of possible savings.  The FTC estimates (conservatively, in our opinion) that these settlements are costing consumers and our health system at least $3.5 billion a year.

FTC has continued to raise the alarm about these settlements, and their effect upon consumers. In a press release coinciding with testimony before Congress, FTC Chairman Jon Leibowitz summed it up:

“That’s almost an epidemic,” Chairman Leibowitz said, “and left untreated, these types of settlements will continue to insulate more and more drugs from competition. Every single FTC Commissioner, going back through the Bush and Clinton administrations, has supported stopping these unconscionable agreements.”

On the legal front, PAL continues to support efforts to do away will these settlements. PAL and AFSCME District Council 37 filed an amicus brief in May in support of the Second Circuit’s reconsideration of the legality of these agreements in the Cipro litigation. And the PAL-member lawsuit challenging the pay-for-delay settlements concerning Provigil continues.

FTC Chairman Leibowitz testified that some of these recent events, such as the Second Circuits Cipro decision and the fact that the House has already passed a ban on these settlements, gives him “reason to believe that the tide may be turning, both in the courts and in Congress.” Yet, Chairman Leibowitz wisely cautioned that bringing about such a reform through the Courts will take time, which means that  “legislation would be the most effective way to stop these deals.”

Thus the successful Senate Committee vote yesterday “means that consumers are one step closer to saving billions on their prescription drugs” according to Leibowitz.  And help can’t come too soon.  The bill’s Senate sponsor, Senator Herb Kohl, points out why:

“The cost of brand-named drugs rose nearly ten percent last year. In contrast, the cost of generic drugs fell by nearly ten percent. At this time of spiraling health care costs, we cannot turn a blind eye to these anticompetitive backroom deals that deny consumers access to affordable generic drugs.”

We view yesterday’s decision as a crucial step  to put legislation in place to end these agreements and foster consumer access to affordable generic drugs.

A surprising decision in the Second Circuit has breathed new life into legal efforts to prevent drug makers from paying to keep generics off the market.

Since 2005, the drug industry has increasingly used multi-million dollar ‘pay-for-delay’ settlements to prevent generic drugs from coming to the market. The PAL coalition has opposed this industry collusion with lawsuits on Provigil, Tamoxifen, and Cipro, and through our support for legislation (introduced by Rep. Rush and Sen. Kohl). The FTC has also been a steadfast opponent of these anti-competitive agreements and their negative impacts on consumers. Unfortunately, the ability of FTC or PAL members to challenge these settlements in the courts has been hampered by a number of unfavorable legal decisions.

The Second Circuit’s Cipro Decision

The Second Circuit’s April 29th ruling did dismiss the challenge to the ‘pay-for-delay’ settlements totaling $398 million that have prevented a generic version of Cipro from coming to the market. But the Court did so begrudgingly, and then invited the folks bringing the lawsuit to ask the Second Circuit to revisit the question of whether these settlements are legal under anti-trust protections. Even more surprising, the Court then spelled out why. 

In their decision, the three judge panel stated that a review of the binding precedent established under Tamoxifen by the full nine-judge panel for the Second Circuit (called an ‘en banc review’) may be appropriate for four reasons: First, the Court said that United States Department of Justice has urged a review of this decision saying that “Tamoxifen adopted an improper standard that fails to subject reverse exclusionary payment settlements to appropriate antitrust scrutiny.” Second, the Court found that “there is evidence that the practice of entering into reverse exclusionary payment settlements has increased since we decided Tamoxifen.” Third, the panel stated that “after Tamoxifenwas decided, a principal drafter of the Hatch-Waxman Act criticized the settlement practice at issue.” Finally, the Court noted that the Tamoxifen decision was based in no small part on the now erroneous understanding that a pay-for-delay settlement with the first generic competitor would not prevent other generic competitors from attempting to followand file suit.

The 2005 Tamoxifen decision by the Second Circuit Court of Appeals (which covers New York, Vermont, Connecticut) dismissed an FTC order challenging a pay-for-delay settlement. The Tamoxifen Court ruled the practice legal under anti-trust law, because the settlement provided drug maker AstraZeneca with no more protection from generic competition than their patent already did.

This Tamoxifen decision, along with the Eleventh Circuit’s Schering-Plough decision in 2005, and Federal Circuit’s 2008 Cipro decision, have been mounting obstacles to consumer and FTC efforts to oppose these settlements. Only the Sixth Circuit, in its 2002 Cardizem decision, has held that such agreements to “eliminate competition” are a “per se illegal restraint on trade.”

When the Appeals Courts from different US Circuits arrive at differing legal standards, the US Supreme Court should resolve this inconsistency, or ‘split’ between the Courts. Indeed, the PAL-member lawsuits concerning Cipro and Tamoxifen asked the Supreme Court to do just that, as has the FTC. So far, all of these requests have been denied. But a possible reversal in the Second Circuit might change things.

Consumers, legal and medical experts, and the Administration all file briefs in opposition to continued legality of pay-for-delay settlements

Amicus briefs in support of the request for a reconsideration of the Tamoxifen standard were filed by PAL and PAL coalition member AFSCME DC37; AARP, AMA, and the Public Patent Foundation; Consumers Union, US Pirg, Consumer Federation of America, and the National Legislative Associaton on Prescription Drug Prices. Also filing briefs were the American Antitrust Institute, the FTC, and the Department of Justice’s Anti-Trust division.

The amicus brief for the Department of Justice argues that ”by shielding most private reverse settlement agreements from antitrust liability, the Tamoxifen standard improperly undermines the balance Congress struck in the Patent Act between the public interest in encouraging innovation and the public interest in competition.”

The amicus brief from the Federal Trade Commission (FTC) added three additional reasons to those stated by the Second Circuit panel. FTC argued that the Tamoxifen standard gives drug companies an improper incentive to pay off generic drug manufacturers and protect even the weakest patents.

Next, FTC noted that the number of pay-for-delay settlements had grown since 2005, to now insulate “at least $20 billion in sales of branded drugs from generic competition.”

The FTC estimates (very conservatively in our opinion) that these settlements will continue to cost $3.5 billion a year by delaying competition from lower-priced generics, but warned that these costs may grow.

 The amicus brief submitted by PAL and PAL member AFSCME District Council 37pointed out that these settlements have cost consumers and health plans $12 billion or more each year in lost savings on generic drugs, and the costs are likely to increase as brand-name drug prices go up (as they did by 9.2 % in the year ending on March 31, 2010) while generic drug prices decline (as they did by 9.7 % during this time period.) Aside from the effect that higher costs have on reducing access to needed medicines, PAL pointed out how these settlements threaten to reduce the quality of care for consumers by limiting the drug options available to them. PAL pointed out that consumers of the drug Provigil, which is protected from generic competition by a pay-for-delay settlement, end up entering the donut hole faster and paying huge sums out of pocket when their health plans refuse to cover the drug due to its high cost.

AARP, the AMA, and the Public Patent Foundation filed a brief arguing that these settlements threaten our health care system because they undermine consumer access to generic drugs, which have, on the whole, “saved consumers over $734 billion in the last 10 years.” AARP noted that “[e]ven for those patients who are insured but who are on fixed or limited incomes, having a generic option is often the difference between having access to health care treatment and not having any treatment option at all.”

AARP’s brief warned that the Tamoxifen precedent will have long-term negative consequences on the well being of consumers because “when a generic pharmaceutical’s entry into the market is delayed, it limits treatment access to vulnerable patient populations and prolongs the difficulty that physicians have in prescribing affordable treatment options.”

An amicus brief filed by Consumers Union, Consumer Federation of America, U.S. PIRG and National Legislative Association of Prescription Drug Prices pointed out that the Tamoxifen decision allows the pay-for-delay settlements that “prevents patent challenges” which is contrary to the purpose of the Hatch-Waxman Act to “encourage[] patent challenges…..”

The American Antitrust Institute filed an amicus brief highlighting the anticompetitive nature of these settlements, and the Attorney Generals from 34 States filed an amicus noting that “the Cipro case is also of exceptional importance because the United States Supreme Court has refused to review the split between the Sixth and Eleventh Circuits.”

Industry use of these pay-for-delay settlements has driven up costs and prevented access to needed medicines for millions of consumers. This industry practice has prevented or delayed generic versions of the drugs Cipro, Provigil, Androgel, and many other drugs that amount to $20 billion of our nation’s current $278 billion in drug spending, according to the FTC.

PAL, Community Catalyst, and dozens of PAL coalition members have opposed these settlements through lawsuits and legislative advocacy. Please contact us if you would like to join in our work to oppose these anti-competitive settlements.

 — by Emily Cutrell and Wells Wilkinson

This past Tuesday, PhRMA was before Congress.  Not  lobbying to block price negotiations or generic competitors, but attending a hearing in their honor (click here for details of the hearing).  Chairman Henry Waxman, of the House Energy and Commerce Committee, has called upon PhRMA to explain their recent price increases exposed by AARP  mid-November in its Rx Watchdog Report.

At Tuesday’s hearing, Rep. Waxman put the price increase in perspective. He said:

Our nation is trying to recover from the largest economic downturn since the Great Depression. The Consumer Price Index has actually dropped over the last year. Social Security checks will remain stagnant. Millions of Americans have lost their jobs and their health insurance.

Yet, the brand-name prescription drug industry raised prices by more than 9% over the last year.

Rep. Waxman also noted that the health reform bill passed by the House last month will both provide insurance coverage to “36 million citizens who would otherwise be without it” but he cautioned legislators must not “write the pharmaceutical industry a blank check as we reform the health care system.”

Rep. Waxman also praised the approach under the House bill:

The House health care reform bill strikes an important balance that puts consumers and taxpayers first. In return for the billions of dollars in new market opportunities, we require that the drug industry provide additional discounts for the Medicaid program. And we end the multi-billion dollar windfall that the industry received when dual-eligible enrollees were switched from Medicaid to Medicare Part D drug coverage.

The House bill uses the money raised from these industry concessions to help millions of Americans afford health care coverage and to close the Part D donut hole.

At the hearing, Kathleen Stoll, Deputy Executive Director, Director of Health Policy at Families USA, testified that:  “In recent years, Americans have spent a significantly larger amount on prescription drugs. In fact, total spending on prescription drugs in the United States nearly doubled between 2000 and 2007, rising from $120.6 billion to $227.5 billion.”

Ms. Stoll praised the House health care reform bill, noting that it would improve access to prescription drugs by requiring coverage for drugs in all health plans sold in the individual market, and by eliminating annual and lifetime caps on benefits, and capping out-of-pocket costs.

The  chair of the board of AARP, Bonnie Cramer, also testified about the effect of rising drug prices on AARP members, seniors, and other consumers. She noted the costly impact of rising drug prices on government spending for subsidized seniors under Medicare Part D, and for seniors or others on Medicare Part B.  Her testimony noted that the specialty, or biologic drugs covered under Part B are the biggest current drug cost.  for the program’s entire $17 billion spend on drugs in 2007.

The top six biologics represented $7 billion of the total [$17 billion in Part B drug costs in 2007], or 43 percent of all Part B drug spending. To put this in context, Medicare Part B spending for one biologic drug – Epoetin alfa – in 2007 ($2.6 billion) was greater than FDA’s , with over 10,000 employees, entire FY2008 budget (2.3 billion).

Ms. Cramer also voiced concerns for the “millions of Americans … that fall into the donut hole each year.” And she noted that the number of part D plans charging 33% co-insurance for the very high priced specialty drugs has risen from only four of the nearly national plans to “more than half” of the Part D plans today.  This means that drug price increases are felt directly by the patient. Ms. Cramer put this in perspective as follows:

… rheumatoid arthritis medicines such as Enbrel and Humira averaged $1,633 per prescription in 2008. The average cost of a multiple sclerosis drug was $2,006. At 33 percent coinsurance, enrollees cost would exceed $500 per prescription. Most patients with either of these conditions filled at least eight such prescriptions in 2008.

The AARP report revealed the shocking price increase of 9.3 % for brand-name drugs, 10.3% for specialty drugs.  This is contrasted to the 7.8% decrease in the price of generic drugs during the same 12-month period ending September 30, 2009.  The report notes that all but one of the top 25 selling brand name drugs used by Medicare Part D plans rose from between 4.8% and 19.7%, and all but two of the top 25 specialty drugs also rose in cost, some by as much as 28.2%. Ten of these best-selling specialty drugs rose by more than 12%. This is happening at a time when the economic recession had driven the prices of most other goods and services down.

The New York Times covered the reports release, and noted that  the drug industry’s own major consulting firm, IMS Health, reversed their earlier market prediction of a 1% declines in sales for 2009, and now predicts a 4.5% growth in drug sales.  This means $21 billion in added drug costs in 2009, a windfall profit for the industry as the rest of the country grapples with record unemployment and ongoing recession.

Impacts of the price increase:
The new price increases have reversed the trend and produced two results — an immediate profit increase for 2009-2010; and a significantly higher base price for their future revenues once the approximately 30 million newly insured customers are added through the passage of health reform.  Drug companies set the price for the drugs they sell, and can raise or lower them at any time.  Additionally, the companies offer rebates and other discounts based on their price to different insurers, state Medicaid agencies and federal agencies.  The higher the base price, the more leverage for the drug company in negotiating with purchasers.  The result of this market manipulation is an approximately $120 Billion profit.

PhRMA appears to have gone back on their deal by changing the prices so radically and shifting an $80 Billion loss into a $120 Billion profit-grab.  PhRMA has been one of the most vocal supporters of health reform—they should be given that they have literally billions to gain if the law passes.  Drug industry  ads in support of reform, rather than in opposition, have been a welcomed on Capitol hill.  But the good will PhRMA generated supporting reform may have been    shaken by the recent price increase.

This profiteering has caught the attention of Congress.  The House Energy and Commerce’s subcommittee on Health is investigating this price increase, presumably with an eye towards strengthening the drug cost containment measures in the health reform bill.  Up until now, many drug cost containment initiatives have been off-limits due to the ‘PhRMA deal’.  PhRMA made a deal with President Obama and some Congressional leaders last Spring that was to  provide $80 billion in drug savings over the next 10 years, mainly through discounts to brand name drugs in the Medicare D doughnut hole..  In exchange, they would support health reform.  One of the biggest potential areas for savings that was declared off-limits by industry is the ability for Medicare to negotiate drug prices.

Even Senator Baucus, who chairs the Senate Finance Committee, and brokered the deal with Pharma on behalf of the Senate, has said that the total amount in future saving legislators will require from Pharma is “still in discussion.”

Tuesday’s Congressional hearings may help influence the current Senate debate, and the negotiations in the conference process (which would reconcile the differences between the legislation passed by the House and any future Senate bill.) We hope our Congressional leaders will see the stark reality exposed by the AARP Watchdog Report – that Pharma’s control of drug prices makes their proffered discounts illusory and holds us all hostage to their profiteering.

Recently, we posted an entry here titled “What is Abbott trying to hide? Maker of Norvir asks Court to deny public the right to see documents.” We’re pleased to report that the Court denied Abbott’s motion to keep some documents under seal. We analyze these documents below.

In 2003, Abbott Laboratories (NYSE:ABT) raised the price of its HIV/AIDS drug Norvir (ritonavir) by 400% overnight. Norvir is used in combination with other “protease inhibitors,” (PIs) and it “boosts” the effectiveness of the PI it’s used with. Abbott also makes a combination pill called Kaletra that includes both Norvir and its own PI – when they raised the price of Norvir, they didn’t raise the price of Kaletra.

Prescription Access Litigation coalition member SEIU Health and Welfare Fund filed a national class action lawsuit against Abbott. The lawsuit claimed that Abbott violated federal anti-trust laws, alleging that Abbott raised Norvir’s price in order to boost sales of Kaletra, at the expense of competing PI drugs that require Norvir as a booster. In a nutshell, the lawsuit argued that Abbott tried to “leverage” its patent-protected monopoly over Norvir into a monopoly over the market for protease inhibitors.

As we’ve discussed before, Abbott has fought throughout the litigation to keep documents regarding the price increase of Norvir sealed. Abbott’s lawyers recently argued that a set of documents that they wanted shielded from public view contain “highly confidential information related to … how Abbott analyzes, views and makes strategic business decisions in the HIV pharmaceutical market.” [Order, p2.

But after a Judge recently ordered some of the documents unsealed (a copy of the Judge’s order is here) it became clear why Abbott wanted to keep what was in these documents hidden from public view.

First, these documents revealed Abbott’s disregard of how a price increase would affect HIV/AIDS patients. An email from Abbott executive Jesus Leal shows three strategies that Abbott considered to drive up sales of Kaletra, despite the potential interference with patients’ existing or future treatment regimens.

One strategy was to sell Norvir in three ways: as an ingredient in Kaletra, as a separate pill priced at five times its former price, or at the original price in a liquid form that Abbott executives admit tasted “like someone else’s vomit.” Given that many protease inhibitors have nausea as a possible side effect, even considering a strategy that would force the many HIV patients who could not afford a five-fold price increase resort to taking the foul-tasting liquid Norvir is reprehensible.

Another strategy considered was to stop selling Norvir altogether, and offer only Kaletra. But switching to Kaletra is not medically appropriate for many HIV/AIDS patients, because they eventually have to change to different PI drugs as the virus mutates and becomes resistant. A premature switch to Kaletra would deprive patients of a treatment option that they would otherwise have held in reserve until absolutely necessary.

Further, one side effect of Kaletra is hyperlipidemia (high cholesterol), which leads to higher risks of heart attack and stroke. Thus Kaletra may be less appropriate for some HIV patients than other treatments which combine Norvir(ritonavir) and other PI drugs as necessary.

Abbott considered – and eventually adopted -- a third strategy – continue selling Kaletra, but increase Norvir’s price to five times its former price. Since this time, Kaletra sales have grown significantly, from $400 million in 2003, to between $682 and $900 million in 2004, and $1.14 billion in 2006.

Exhibit 18 also reveals that Abbott planned to argue that their price increase was necessary because it was “no longer feasible for Abbott to provide a production line of Norvir capsules at the current price.” Abbott executives speculated that a price increase had a notable weakness - the company would face “exposure on price if forced to open books.” They were right. Their own released documents show that it was profit motivations and market factors, not ‘feasibility’ that caused Abbott’s unconscionable 400% price increase of the widely needed drug Norvir.

It is apparent from these documents that patient and consumer concerns were secondary to, if not absent from, Abbott’s financial considerations. One released document [Exhibit 39] has a chart summarizing a proposed slide presentation on the price increase. Not surprisingly, the one slide summary labeled “Public Relations and Activist Slide” has no summary at all, just a question mark “(?).” This shows that Abbott knew that it would be lambasted by activists for its unconscionable price increase, and that there was no good response to this criticism.

The only remorse or reservation shown in these documents was a comment by Abbott’s Vice President of Global Pharmaceutical Development, John M. Leonard, M.D. He responded to Abbott’s proposals to limit access to Norvir “I think we are on the right (but uncomfortable) track.” [Exhibit 28] ‘Uncomfortable’ is a gross understatement given that the price hike Abbott was proposing increased the annual cost of Norvir for an uninsured patient from $1,300 to $6,600 a year.

The true purpose of the price increase demonstrated: Boost Kaletra sales

The documents also showed that Abbott quintupled the price of Norvir in response to the declining market share of Kaletra relative to protease inhibitors made by competitors. Kaletra sold almost $400 million in 2003 but new PI drugs having fewer side-effects made by other drug companies threatened Kaletra’s future sales.

One slide summary in Exhibit 28 shows that Abbott knowingly increased Norvir’s price in order to push the cost of using a competing drug Reyataz to a “significantly higher price.” This, Abbott speculated, would create “formulary pressures” i.e. pressures on insurers to cover Kaletra instead of Reyataz, or to increase the co-payment that consumers would have to pay for Reyataz.

Another slide summary showed that Abbott saw the treatment improvements from Reyataz not as a boon to HIV/AIDS treatment and to patients, but as a form of unfair gain by their competitor Bristol-Meyers-Squibb (BMS) at the expense of Abbott. Ironically, Abbott didn’t consider raising its price by 400% to be unfair gain at the expense of HIV/AIDS patients.

These released documents don’t reveal much about Abbott’s price hike that wasn’t already known (see, for instance, an article that originally ran in the Wall Street Journal here) but they do reinforce how coldly calculating Abbott was in considering how best to put profits before HIV/AIDS patients.

Abbott recently submitted a Motion for Summary Judgment to the Court hearing the Norvir class action. If this motion is denied, a trial in the case is currently scheduled for August 2008.

Readers, what do you think of the released documents? Do they change your opinion of Abbott? Or just reinforce it? Please post your thoughts in the comments.

And by the way, here are links to all the documents the Court agreed to unseal:

• Exhibit 1 (Rebuttal Expert Report of Joel W. Hay, PHD.)
• Exhibit 4 (08-09-2004 Depisition of Abbott executive Jesus Leal)
• Exhibit 5 (08-11-2004 Deposition of John Leonard)
• Exhibit 8 (12-19-2005 Deposition of Jodi Devlin)
• Exhibit 14 (9-3-03 Strategic Plan)
• Exhibit 18 (09-12-2003 Email from Jesus Leal re three pricing options for norvir)
• Exhibit 20 (07-13-2003 Email from Michelle Jones re 07-13-2003 PR article regarding Reyataz efficacy with Norvir)
• Exhibit 27 (09-10-2004 Deposition of Abbott executive Heather Mason)
• Exhibit 28 (09-22-2003 Email from Dr. John Leonard re Kaletra’s decline and Norvir’s growth with introuction of competitor pi’s)
• Exhibit 29 (08-04-2003 Emails from William Dempsey and John Thomas)
• Exhibit 32 (09-10-2003 Email from Joseph Serio Jr re decline in Kaletra market share)
• Exhibit 38 (Notice of Rescheduled meeting dated 09-25-2003)
• Exhibit 39 (09-29-2003 Email from Jesus Leal re Slide list)
• Exhibit 45 (2006 Jan Monthly Market Research Report re HIV drugs)
• Exhibit 47 (03-24-2006 Declaration of Michael P. Hannan, Product Director, Protease Inhibitors, Glaxo-Smith-Kline)
• Exhibit 49 (12-14-2007 Deposition of Douglas F. Greer, PHD re Profitability of PI’s developed for use with Norvir)
• Exhibit 50 (08-08-2007 Deposition of Dale Kempf re Patent issues)
• Exhibit 51 (07-24-2007 Deposition of Dr. John M. Leonard, Abbott VP)

Julie Appleby at USA Today has a story in today’s edition, “Drug costs rise as economy slides”. In it, she says:

People with health insurance are having more trouble paying for prescription drugs as higher out-of-pocket costs for medications and a slowing economy strain family budgets, according to surveys and health care analysts….

“Incomes aren’t going up, but co-payments are,” says Gary Claxton of the Kaiser Family Foundation, which studies health policy.

In some cases, the patient’s share of drug costs is no longer a flat dollar amount, but a proportion that can range from 20% to 70%.

What appears to be happening is that insurers are coming full circle on how they deal with drug costs. Up until the mid-90s, many patients had insurance that had them pay a percentage of the cost of their prescription drugs (often 20%). When “managed care” became the trend (which limited people to seeing only doctors in the insurer’s network, required referrals for specialists and is most famous for health plans denying coverage for various treatments), there was a move to the “fixed copayment.” Back then, most health plans had one fixed copayment for all drugs — brand-name or generic, new or old, expensive or cheap.

Direct-to-Consumer Advertising of prescription drugs took off after the FDA loosened the rules on drug advertising in 1997. Health insurers saw the costs of the drugs taken by their members skyrocket, and sought to discourage the use of expensive newer brand-name drugs, and encourage the use of older, less expensive generic drugs. So health plans moved to the “tiered” copayment, where cheaper generics had one copayment (say $5), the “preferred” brand-name (i.e. often the one that the insurer got the best deal on from the drug company) had another (say $10), and “non-preferred” brand-names had the highest (say $20).

Over time, as drug costs went up, and as promotions to doctors and consumers led many more people to use prescription drugs on a regular basis, copayments crept up too. Gone are the days of the $5 copayment. Many people now have copayments of $10-$15 for generics, $20-$25 for preferred brand-names and $40+ for nonpreferred brand-names. Plus, more people are facing separate and much higher copayments for “specialty” drugs (i.e. drugs to treat serious illnesses like cancers).

There’s also been something of a trend towards “high deductible” health plans, which make consumers responsible for all of their medical costs until a deductible (say $1500) is met. This was supposed to make people more “responsible” about the cost of their health care but can perversely have the opposite effect, by making people delay medical treatment until it’s an emergency, when of course the treatment is far more expensive.

Medicare Part D has resulted in millions of senior citizens now paying for a percentage of the cost of their drugs, rather than fixed copayments. Which means when the cost of their drugs goes up, so do their out of pocket payments.

The end result of this is that it’s no longer just patients without insurance who can’t afford their prescription drugs — more and more people with insurance can’t afford them either. Someone with a chronic illness who takes, say, 8 or 10 drugs everyday can face hundreds of dollars a month just in copayments. And more and more health plans are putting annual maximums on what they’ll pay for prescription drugs. After you hit the maximum, you’re on your own.

Many drug companies have patient assistance programs that can provide free or discounted drugs to people who can’t afford them. But as a recent post on this blog illustrates, many of those drug company programs are closed to people who have insurance — even if they still can’t afford even the copayments on their drugs, or if their health plan doesn’t even cover the drug in question. In Jessica’s story: No help from Cephalon for cost of Provigil, a young patient with Narcolepsy describes how she couldn’t get any help from Cephalon to get the Provigil she needs. She was ineligible for their program because she had insurance.

As long as drug prices continue to rise, and drug companies convince millions of doctors to prescribe and millions of patients to take expensive, newer brand-name drugs instead of equally effective and much less expensive generic drugs, we’re going to see more and more insured patients, not to mention the uninsured, face drug bills they can’t afford.

The most recent issue of Health Affairs (subscription required) has an intriguing proposal on how we might pay for drugs to maximize the number of people who need drugs actually taking them while minimizing cost. (“Drug Licenses: A New Model For Pharmaceutical Pricing”). The authors introduce the problem:

High drug prices are a major barrier to patients’ access to drugs and compliance with treatment. Yet low drug prices are often argued to provide inadequate incentives for innovation.

While their analysis of whether prices really influence R&D is, in my opinion, flawed, their underlying point is accurate: High drug prices reduce patients’ compliance (i.e. whether patients actually take the drugs they’re prescribed). For conditions where drug treatment has a significant impact, that can affect the patients’ health and also increase health costs overall. The drugs the authors focus on are a good example: statins for high cholesterol. Ensuring that patients who actually needs statins can afford to take them can prevent heart attacks and hospitalizations, which are of course far more expensive than the drugs. The authors point to studies showing that even modest increases in the copayments that patients have to pay for statins under their insurance can significantly reduce patient compliance.

The authors’ proposed solution is to change how we pay for drugs like these. The main costs associated with a producing a drug are upfront: the research, the clinical trials, the steps to get the drug approved, etc. Once approved, the cost of producing each tablet or capsule is, for most drugs, very low. Thus, paying by the pill it is not necessarily the only, or the best, way to compensate the drug company. We already pay for certain products the way the authors propose, the most familiar example being computer software and cable TV:

The licensing model we propose is referred to by economists as “two-part pricing.” Numerous examples of this exist in the nonmedical world, including Internet service, cable and satellite television, all-you-can-eat buffets, country club memberships, and cell phone plans. But perhaps the most relevant example is software. Instead of charging a fee every time a person starts his or her computer, Microsoft charges a one-time fee for the use of Windows. What makes pharmaceuticals similar to these products—and distinguishes them from other health services—are the very low costs of production and the existence of few good substitutes.

Uncoupling the cost of the treatment from each pill (or each monthly supply of pills) ensures that patients won’t stop taking the drug, or stop filling the prescription because of the cost of a particular bottle of pills.

It’s an interesting model to consider: That patients purchase not the pills themselves, but the right to as many pills as they need for a given year.
Whether this is the right model, or whether there are others that are better, remains to be seen. But our current system in which drug companies hyper-market drugs to consumers regardless of whether those drugs are truly needed, in which many consumers are shielded from the true cost of those drugs, and in which ironically many patients who actually need certain drugs can’t afford them, clearly isn’t working. This is one alternative worth considering.