Subscribe to RSS feedHow much should a drug cost when public funds help develop it?
The title of this post is one of the many questions that came to mind when I read yesterday’s New York Times story, Cutting Dosage of Costly Drug Spurs a Debate. The article describes the cost of Cerezyme, a drug made by Genzyme (GENZ). As the Times reports:
“The drug in question, Cerezyme, is used to treat a rare inherited enzyme deficiency called Gaucher disease. Some experts say that for most patients, as little as one-fourth the standard top dose would work, saving the health care system more than $200,000 a year per Gaucher patient.”
This raises many questions related to how we pay for very expensive drugs, particularly for rare diseases. Of course, one question is how much should a drug like Cerezyme cost? On the one hand, it’s understandable that a drug that is used by a very small group of patients is going to cost more. But at what point does “costing more” become “exploiting patients who have no other options?”
“With Cerezyme, which is made by Genzyme, the profits are sizable. Gaucher disease, which can have complications like ruined joints, is rare; only about 1,500 people in the United States are on the drug and about 5,000 worldwide. Sales of Cerezyme totaled $1.1 billion last year, making it a blockbuster by industry standards.”
Blockbuster drugs are typically taken by hundreds of thousands, and often millions of people. For a blockbuster drug to have a patient pool of just 1,500 people is incredible.
So how much should Cerezyme cost? Genentech says:
“The company says it needs the high price to make a sustainable business of serving such a small number of patients and to pay for research on new products. Genzyme also says it provides the drug free, if necessary, so that no one goes without the product because of its cost.”
Drug companies often try to play the “research & development card,” arguing that high prices are justified because it supports research into new drugs. But a recent study showed that drug companies still spend twice as much on marketing and administration as they do on researching and developing new drugs (“The Cost of Pushing Pills: A New Estimate of Pharmaceutical Promotion Expenditures in the United States,” PLoS Medicine, 1/3/2008).
Obviously, the amounts vary by company, and the study was of the industry as a whole, not particular companies. So it’s likely that Genzyme doesn’t spend twice as much on marketing as on R&D. Even so, the “R&D card” is a notoriously self-justifying but impossible-to-measure reason for high drug prices. How much is it fair to increase a drug’s price for alleged future R&D? At what point does a drug company sacrifice the financial well-being (and ability to afford the medication) of current patients on the altar of some uncertain and unknown set of future patients?
Then there’s the most interesting question:
What is the public entitled to when our tax dollars helped a drug get developed in the first place?
The article says:
“But critics say the company’s development costs were minimal, because the early work on the treatment was done by the National Institutes of Health, which gave Genzyme a contract to manufacture it. And analysts estimate the current cost of manufacturing the drug to be only about 10 percent of its price.”
There’s a federal law that’s at the heart of this question: The Bayh-Dole Act. This Act allows recipients of government research funding to retain the title to, and file a patent on, an invention that was discovered or created with that government funding. The Act was passed because it was felt that government-financed innovations that would benefit the public were sitting on the shelves at universities and research institutes, because the inventors could not patent and market those inventions.
But there’s a never-used provision of the Bayh-Dole Act that seeks to protect the public’s investment in such inventions, including drugs: The so-called “March-in Rights” (35 USC 203). This allows the government agency that gave the funding (in this case, the National Institutes of Health) the right to “march-in,” ignore the patent, and license the invention to, say, a generic drug maker, if doing so is “necessary to alleviate health or safety needs which are not reasonably satisfied” by the holder of the patent and if the patent holder is not making the invention “available to the public on reasonable terms” [35 USC 201(f)].
Does charging $300,000 a year for Cerezyme qualify? Or, for that matter, does anything? A consumer group, Essential Inventions, submitted two petitions to the NIH in 2004, asking them to “march in” and permit generic versions of two drugs, Xalatan (for glaucoma) and Norvir (an HIV/AIDS) drug, because the price being charged for those drugs was so high. The NIH denied both petitions, saying that “available to the public on reasonable terms” doesn’t mean at a price that the public can afford.
(In the case of Norvir, the manufacturer. Abbott Laboratories (ABT), had unilaterally quadrupled the price of the drug in December 2003. Members of Prescription Access Litigation sued Abbott over the price increase, alleging that it violated antitrust law. The lawsuit survived a motion to dismiss, was certified as a national class action, and is pending in the U.S. District Court for the District of Northern California. More info on that lawsuit is here.)
So the question remains, for a drug like Cerezyme, how high a price is too high? More importantly, if the price is too high, is there anything that we, the public, can do, especially when our taxes help discover the drug in the first place?
March 21st, 2008 at 6:35 PM
According to a Joint Economic Committee of Congress 2000 report, about 75 percent of the NMEs developed during the course of a couple of decades were in fact developed by using knowledge from federally funded reserach. In the same time frame, about 20 percent of newly approved meds were authentically significant and beneficial conceptually. Normally, the entrance of competitors in an industry is economically beneficial for the customer. The pharma industry, however, has created a form of abnormal economics while thier exploitation of thier meds seem to appear to be of a noble purpose.
This infomation was obtained from the book, “Our Daily Meds”, by Melody Peterson, which is a fantastic book.
March 21st, 2008 at 9:42 PM
According to the Joint Economic committee of Congress in 2000, around 75 percent of new molecular entities, new meds, were developed in large part from knowledge acquired from federally funded research. This is almost a necessity for pharma companies, since close to half of thier revenues go to selling and administrative costs due to thier choice. So in a way, one pays for a med twice, the high cost created by the pharma company combined with your tax dollars.
March 24th, 2008 at 1:36 PM
Is an orphan drug considered partially government funded? And if so, do the “March-In Rights” also apply to orphan drugs (like Provigil)? Maybe the NIH would consider Cephalon’s blatant monopoly via antitrust violations and withholding of Nuvigil from the market to be unreasonable terms.
On a side note, Cephalon makes a similar claim as Genentech’s to provide “the drug free, if necessary, so that no one goes without the product because of its cost.” Cephalon’s PROVIGIL Assistance Program is solely administered by the National Organization for Rare Disorders (NORD). The NORD website asserts that their Patient Assistance Programs “assist uninsured or under-insured individuals in securing life-saving or life-sustaining medications. In addition to the estimated 50 million Americans who have no health insurance, an increasing number of insured individuals have policies that do not reimburse for prescription drugs. Others have policies with low annual caps on prescription drug expenditures. NORD works closely with humanitarian-minded pharmaceutical and biotechnology companies to ensure that certain vital medications are available to those individuals whose income is too high to qualify for Medicaid but too low to pay for their prescribed medications.” But it turned out Cephalon was not as “humanitarian-minded” as NORD would have you believe…
…When my health insurance (Blue Cross of California PPO) dropped Provigil from their formulary in 2007, my Provigil copay jumped from $50/month to $234/month in addition to a $500 brand name deductible and my $130 monthly premium. I’m not sure why Blue Cross took Provigil off the formulary (I asked them and they didn’t know either) but I wouldn’t be surprised if it was in response to Cephalon’s prohibiting the generic versions that were supposed to come out in 2006. I realize $234 a month is nothing compared to many HIV and cancer drugs. But $234 is a lot when you consider that my Narcolepsy prevents me from being able to work more than 15 hours/week (with medication) and that I am only 26 and will be dependent on drugs like Provigil for the rest of my life. I was barely scraping by with a $50/month copay so I suddenly found myself unable to front the costs to buy even a one-month supply of Provigil. I had to stop taking my medicine which meant I could no longer work at all.
Desperate to find a way to get my medicine so I wouldn’t end up on welfare, I called Cephalon’s PROVIGIL Assistance Program and requested financial assistance. I was still willing to pay part of the costs, but I hoped they could give me some sort of rebate. Cephalon told me that because I had some form of insurance I didn’t qualify for any assistance, regardless of how high my co-payment is or my financial situation. They told me that if I was uninsured they would pay up to $500 per month (which is the retail cost of a month supply for me). They actually suggested I drop my insurance plan. It seems strange (not to mention unethical) that they would rather I drop my insurance so they could give me $500/month instead of just helping me with a portion of my $235 co-pay. It is cheaper for them if I have insurance. And if they can afford to shell out $500 a month to every uninsured patient, why can’t they just reduce the price for everyone so less people will need their financial assistance in the first place? They would probably make more money if they charged less because patients like me wouldn’t be forced to stop taking the medicine all together.
I actually considered listening to them and dropping my insurance so I could get free medication, but that ultimately wasn’t an option because I have other health conditions and my pre-existing conditions would make it unlikely I could obtain new insurance in the future. I contacted NORD back in December to notify them of the discrepancy between Cephalon’s assistance policies and those implied on NORD’s website. I asked for their help or their clarification if I had misunderstood. 4 months later, I have yet to hear anything from NORD.
My neurologist was kind enough to give me samples which I now ration out for days when I absolutely must function. I can’t afford enough Provigil to work so I have been forced to apply for Social Security Disability Benefits (which I’m told will likely be denied). I’ve tried getting in on clinical trials but I don’t qualify. The thought of spending the rest of my life half-asleep and a burden to the people I love is so depressing I often think I’m better off dead.
Unethical drug companies have managed to take everything I’ve earned in my short 26 years of life and turn it into debt without any hope or means to get back on my feet. I don’t know about Genentech, but Cephalon certainly doesn’t care if their customers go without the product because of its cost. Cephalon has no interest in the well-being of the very consumers that support them.
Sometimes I swear a cocaine habit would be cheaper (and no, I’m not condoning illicit drug use).
March 24th, 2008 at 2:07 PM
Jessica:
What an incredible story and a tragic illustration of what a broken health care “system” we have, in which a drug company’s desire to maximize its profits and market share harms the patients who need the drug the most.
As far as your question: “Is an orphan drug considered partially government funded? And if so, do the “March-In Rights” also apply to orphan drugs (like Provigil)?” The answer is, it depends. A drug that is granted orphan drug status under the Orphan Drug Act of January 1983 can receive a variety of government assistance to help bring it to market. This can include government research funding, but that is not always the case. For more on this, go here.