Cough Up Some Cash: Drug Pricing and Development

In August 2015, Turing Pharmaceuticals purchased the rights to an HIV drug that has existed for more than 60 years, and raised its price from $13.50 a pill to $750.00 a pill.[1]  The drug primarily treats toxoplasmosis, a disease that affects AIDS patients, pregnant women and other immunocompromised individuals.[1] Now, with annual treatment costing up to hundreds of thousands of dollars- many patients and hospitals are left without access to this lifesaving drug.[1] The company’s CEO, Martin Shkreli, announced intentions to reverse this price hike only a few days later, largely due to public outrage at the 5000% price increase. Unfortunately, Turing Pharmaceuticals is only one of several pharma companies engaging in the practice of purchasing already existing drugs and raising prices without improving or modifying them in any way.[2]

Gretchen Stroud is an attorney in the intellectual property department of Gilead Sciences, the pharmaceutical company primarily responsible for the Hepatitis C cure and HIV drugs that incorporate multiple active ingredients into one pill.[3] In her words,

“It really is true that some drug companies have done things that aren’t so great. And I think pricing issues have been in the news a lot…Gilead was in the news with the Hepatitis C cure, which… it invented and spent a lot of money creating, while other companies have raised the prices of generic products. In fact, the Hepatitis C cure was priced only slightly more than all the other Hepatitis treatments that had been on the market previously.” [3]

Hep C Cure PicWhittaker, M. (Photographer). (2015, July 16). Gilead Limits Enrollment in its Hep C Patient Program to Pressure Insurers [digital image]. Retrieved from http://blogs.wsj.com/pharmalot/2015/07/16/gilead-limits-enrollment-in-its-hep-c-patient-program-to-pressure-insurers/

Its worth noting that this Hepatitis C cure, Harvoni, costs around $1000- not per month, or per bottle, but per pill, totaling to $84,000 for a standard 12-week treatment.[4,5] This shocking upfront cost evoked a wave of indignant articles that largely ignored the fact that many patients taking the drug wouldn’t be paying the list price. Gilead published information on pricing and accessibility to Harvoni in response to media outrage stating, “Gilead provides the Support PathTM program. Through this program, the majority of commercially insured patients will be able to access Harvoni and Sovaldi for just a $5 co-pay per month.” [6]

It is important to recognize that high prices for recently developed new drugs and price hikes that are not accompanied by changes or improvements to the drugs in question are two entirely different issues. In the past few years, several large pharma companies have engaged in the latter; purchasing existing drugs from smaller companies, rebranding them, and astronomically increasing their list price.[1] Valeant Pharmaceuticals International, one of just many additional examples, acquired the drug Cuprimine, and quadrupled its price overnight.[7] Some patients, who have been taking this drug for decades, suddenly find themselves unable to afford this price hike, even with insurance.[7]  In the last five years, prices for several drugs have sky-rocketed after being acquired by Valeant. The image below shows these drastic price increases.

Valeant Price Hikes.pngThe New York Times,. (2015). List prices for some of Valeant’s prescription drugs [digital image]. Retrieved fromhttp://www.nytimes.com/2015/10/05/business/valeants-drug-price-strategy-enriches-it-but-infuriates-patients-and-lawmakers.html?_r=1

The truth is, all drug companies sell their drugs for much higher than the direct cost of manufacturing them, though this phenomenon is not always motivated by greed. To understand why, let’s take a look at the drug development process.

PhRMA Press.(2011, February 1). The Drug Discovery Process . Retrieved fromhttps://www.youtube.com/watch?v=DhxD6sVQEYc

Drug development is expensive and risky, since many compounds end up being unsafe for human consumption even after going through several stages of costly trials.[8] Furthermore, the FDA grants companies data exclusivity, essentially the right to be the only vendor of the newly developed drug, for only five years after the drug goes to market. Forced to recoup the costs of development in such a short period, companies may artificially inflate prices for the first five years in order to break even and make a profit.[3]

While the cost of drug development is often kept confidential, a source of dissension to those fighting for lower drug prices, most estimates range from 1.3 to 2.6 billion dollars for a single drug, which is by no means, a small sum. Because we rely on drug companies to advance pharmacological science and invent new medicines, it is important that drug companies are able to sell their drugs at prices that will encourage and enable continued research and development. At the same time, companies that increase drug prices without investing in this research usher in an era of simple repackaging of already existing drugs, and stagnation in the field of drug development and world health.

 

 

Interested? Further Reading (and watching!)

 

References:

  1. Pollack, A. (2015, September 20). Drug Goes From $13.50 a Tablet to $750, Overnight. The New York Times. Retrieved November 1, 2015, fromhttp://www.nytimes.com/2015/09/21/business/a-huge-overnight-increase-in-a-drugs-price-raises-protests.html
  2. Mitchell, A., & Helsel, P. (2015, September 23). Drug CEO Will Lower Price of Daraprim After Hike Sparked Outrage. Retrieved November 25, 2015, fromhttp://www.nbcnews.com/business/business-news/drug-ceo-will-lower-price-daraprim-after-outrage-n431926
  3. Stroud, Gretchen. “Gilead Sciences Drug Development and FDA Interaction.” Telephone interview. 21 Oct. 2015.
  4. Walker, J. (2015, April 8). Gilead’s $1,000 Pill Is Hard for States to Swallow. The Wall Street Journal. Retrieved November 1, 2015, from http://www.wsj.com/articles/gileads-1-000-hep-c-pill-is-hard-for-states-to-swallow-1428525426
  5. Hiltzik, M. (2015, June 19). High cost of hepatitis drug reflects a broken pricing system. Los Angeles Times. Retrieved November 1, 2015, from http://www.latimes.com/business/hiltzik/la-fi-hiltzik-20150621-column.html
  6. Gilead Sciences Policy Position: Innovating and Expanding Access to Hepatitis C Treatments. (2014, October 1). Retrieved November 25, 2015, fromhttp://www.gilead.com/~/media/files/pdfs/policy-perspectives/expandingaccesstohcvtreatments10214.pdf?la=en
  7. Pollack, A., & Tavernise, S. (2015, October 4). Valeant’s Drug Price Strategy Enriches It, but Infuriates Patients and Lawmakers. The New York Times. Retrieved November 1, 2015, fromhttp://www.nytimes.com/2015/10/05/business/valeants-drug-price-strategy-enriches-it-but-infuriates-patients-and-lawmakers.html?_r=1
  8. Coury, D. (n.d.). Your Dollars@Work: Accelerating Development of New Autism Medicines. Retrieved November 1, 2015, fromhttps://www.autismspeaks.org/blog/2014/07/03/your-dollarswork-accelerating-development-new-autism-medicines
  9. PhRMA Press.(2011, February 1). The Drug Discovery Process.Retrieved from https://www.youtube.com/watch?v=DhxD6sVQEYc
  10. How the Tufts Center for the Study of Drug Development Pegged the Cost of a New Drug at $2.6 Billion. (2014, November 18). Retrieved November 1, 2015, fromhttp://csdd.tufts.edu/files/uploads/cost_study_backgrounder.pdf
Advertisements