Latest Drugwonks' Blog
Leading medical innovation think tank claims CBS is ‘dead wrong’
New York, NY (PRWEB) October 08, 2014
The Center for Medicine in the Public Interest (CMPI.org– a non-profit research organization specializing in promoting medical innovation) criticized CBS’ “60 Minutes” segment on cancer treatment prices as not just distorted but ‘dead wrong.’ “‘60 Minutes’ ignores the contribution new medicines make in reducing health care costs, improving wellbeing and saving lives,” said Robert Goldberg, Vice President for Research of CMPI. “Featuring physicians that argue that treatment prices are too high does not change the fact that the cost of cancer drugs are about 12 percent of what health insurers spend on cancer or that new cancer drugs actually save health insurers money. Yet insurers are increasing oral therapy cost-sharing requirements to actively encourage patients to use infusible products.
While a Milliman study found that shifting to co-insurance would only add about $2 per member per month in private health plans, 60 Minutes never discusses this solution. Instead, 60 Minutes remains silent about the cost shifting and has never advocated for co-pay reforms that could relieve the burden on patients.
Spending on cancer treatments has climbed from $24 billion in 2004 to about $40 billion today. But such treatments represent only 0.6 percent of U.S. healthcare spending, and that proportion has been fairly consistent for the last several decades.
Such medical innovations were largely responsible for a 40 percent increase in cancer survivors (from 9.8 million to 13.6 million) since 2004. Since 2004 the use of new therapies saved $188 billion on hospitalizations, and avoided nearly $100 billion in lost productivity each year. Since 1990, new cancer drugs have helped generate 51 additional years of life, worth nearly $5 trillion.
A doubling in the use of new-targeted therapies will raise the amount spent on medicines as a percentage of total health care spending. But that increase must always be compared to what would be spent on healthcare, disability, unemployment and rehabilitation in the absence of medical innovation.
Peter Pitts, the President and Co-Founder of CMPI noted, “New medicines almost always reduce the cost of living longer and healthier lives and increase the value of such improvements. It is disappointing that “60 Minutes” failed to investigate why some health plans have deliberately made these innovations unaffordable by requiring patients to pay up to half their costs. And it is disheartening to know that doctors are more interested in attacking innovators than in defending patients from such cost shifting.”
Pitts also remarked, “We are happy to talk about the prices of cancer therapies, but only in the context of value and the rising cost and prices of other healthcare services that constitute a substantially bigger portion of total spending. In addition, the discussion should only be in the context of what can and should be done to cut the cost of developing new therapies through smarter, faster regulation.”
CMPI has a website—valueofmedicalinnovation.org—that provides a balanced view of the role new medicines play in our lives.
The Center for Medicine in the Public Interest is honored to join the US Pain Foundation and other patient-centered organizations in offering our support to the FDA in general and Commissioner Hamburg specifically for savvy and strategic management of pain medicine regulation.
Why now? Well for starters because of the unfair, unbalanced, ad hominem and just plain erroneous attacks on the agency’s efforts.
It’s all spelled out in this letter of support just sent to HHS Secretary Burwell. It’s designed for impact.
Have a look and please share. This issue is too important to allow the lunatic fringe to drive the agenda.
BioCentury reports that the EMA's management board unanimously adopted its clinical data transparency policy, to be introduced in two phases starting Jan. 1, 2015. In the first phase, EMA will publish clinical reports supporting MAA submissions while excluding individual patient level data. The policy will apply to any MAA submitted after Jan. 1, 2015.The agency noted that as a practical matter, this would mean the first data for newly approved medicines would become available in 18 months, allowing for review time and approval by the European Commission. For line extensions and extended indications of approved drugs, EMA will publish clinical data for applications submitted as of July 1, 2015. EMA said the second phase, disclosure of individual patient level data, will follow a consultation with stakeholders to determine how such data can be made available in compliance with privacy and data protection laws.The agency said commercially confidential information will be redacted at its discretion with input from sponsors, noting "the starting point of the redaction principles is that clinical reports do not, in general, contain CCI." After reviewing stakeholder concerns that clinical data would only be accessible by viewing it on a screen, EMA amended the policy to allow identified users to download, save and print trial data for academic and non-commercial research purposes. The policy provides two permission routes for access, one for "general information purposes" by individuals and another for "academic and non-commercial research purposes." EMA also published a document addressing frequently asked questions relating to the policy.
Speaking of opioids, here are three interesting items from today’s edition of DIA Daily. One thing, however, that remains absent in the debate over how to address the issue is the Hamburg Manifesto – enhanced physician education. Now it's time for the DEA to step up to the plate and mandate specific education as a must-have for prescribing rights.
So far, alas, only silence from the DEA on this topic. This must change.
Pharma Association CEO Offers Possible Reforms To Curb Prescription Drug Abuse.
Mark Merritt, president and CEO of the Pharmaceutical Care Management Association, writes in the The Hill (10/2, Merritt) about options in trying to abate prescription drug abuse issue in the US. Merritt offers “two basic reforms”: first, a “safe pharmacy” or “lock-in” policy in Medicare in which “the small segment of patients who are at risk of abusing opioids would choose – along with their health plan – a single, convenient pharmacy to fill their prescriptions for controlled substances.” This eliminates the possibility of “drugstore shopping,” or “the practice of filling prescriptions for controlled substances...at multiple drugstores to avoid detection.” A recent HHS OIG report called for such an approach. A second option would be to “close the loophole in Medicare that prevents Part D plans from suspending payments to pharmacies suspected of fraud or diversion.” A second HHS OIG report outlined the benefits of this potential reform.
Neurologists Urge Caution With Opioids For Non-Cancer Use.
The Los Angeles Times (10/2, Healy) reports that patients on opioid painkillers for chronic pain unrelated to cancer, such as headaches, may face a situation where the risks of taking the medications outweigh the benefits. The paper notes that patients “are more likely to risk overdose, addiction and a range of debilitating side effects than they are to improve their ability to function,” citing the American Academy of Neurologists. In a new position statement released Wednesday, the group warned that even for patients “who do appear to benefit from opioid narcotics,” doctors “who prescribe these drugs should be diligent in tracking a patient’s dose increases” and should insist as a condition of continued use “that opioids are improving a patient’s function.”
Abuse-Resistant Version Of Controversial Painkiller Unveiled.
The Wall Street Journal (10/2, Burton, Subscription Publication) reports, Zogenix Inc., the maker of the controversial opioid painkiller Zohydro ER (hydrocodone bitartrate), disclosed Wednesday it filed an application with the FDA for a modified version of the medication that it says would be harder to abuse. According to the firm, the new version will be a capsule containing a gel, making it more difficult to snort or inject. Still, some doctors noted that it could be abused by addicts, who could choose to orally ingest the contents.
To the editor:
Per Detailing Financial Links of Doctors and Drug Makers (NYT, October 1, 2014), collaborations between physicians and industry are fundamental to advancing medicine. Without in any way diminishing the governmental and non-profit agencies that support research, it is the partnership between physicians and industry that has created many, if not most, of the major medical breakthroughs that have reduced the rates of death and other serious outcomes in recent years – as any literature search of major medical journals will quickly confirm.
Conducting clinical research has become so rigorous and sophisticated that those who serve as consultants and investigators to industry recognize it as a major commitment or even a primary career path. In addition, as studies are completed, physician researchers add to their professional commitment by becoming the teachers of this new information.
Critics of these collaborations see compensation of physicians as evidence of undue influence on medical practice. But doctors, like all professionals, should be paid fairly for their time and work. The truth is that physicians who are busy with these activities are not as well rewarded as their fellow specialists in full-time clinical practice. Adding to this remunerative divergence is that a key part of research, writing articles for publication, takes weeks of work -- often unpaid so as to avoid any suggestion of bias.
The Sunshine Act will create troubling misconceptions for and about physicians. Payments reported for physicians by industry will likely include funding they didn’t personally receive nor will they take into account costs incurred by these physicians in paying their own staff and covering overhead expenses. Doctors involved in industry-supported research and education may easily get discouraged and frustrated explaining these complexities to an audience already biased and sated by sensationalistic media reports of physicians “on the take.”
And yet the Sunshine Act, paradoxically, could have a positive effect. Despite the near impossibility of reliably interpreting all the reported data, this information might well serve as a yardstick of cooperative achievement --identifying those physicians at the forefront of medical innovation.
Peter J. Pitts
Pitts, a former FDA Associate Commissioner, is President of the Center for Medicine in the Public Interest
I recently had the pleasure of meeting with Captain Valerie Jensen, USPHS, who has led the FDA’s efforts to tackle the problem of drug shortages in the US over the past several years. (She is officially the Associate Director of the FDA’s Drug Shortage program.)
Alas, as the tabloid press reminds us, “if it bleeds, it leads.” The media frenzy surrounding drug shortages has vanished. Why? Because, due in no small measure to efforts from the FDA, the problem is being successfully addressed and ameliorated. Unfortunately, that’s not news – but it should be. Here are some interesting points.
The FDA’s strategy in addressing the issue is to enlarge and empower a drug shortage ecosystem. Rather than seeking more Federal dollars (a fool’s errand), the FDA undertook to combine the resources of the constituent players, manufacturers, hospitals, and large-scale purchasers such as GPOs. Combined with appropriate and savvy use of enforcement discretion, the FDA has taken leadership of the drug shortage ecosystem and is driving a sustainable solution.
The drug shortage ecosystem relies on more than just FDASIA-mandated notification requirements –it’s built on trust. Specifically, that the FDA wants to work with manufacturers to solve the problem rather than simply whack them with 483s. The agency is showing more regulatory flexibility when resolving manufacturing and quality issues.
Curiously, a new cause of shortages has arisen – poor corporate planning. Shortages, for example, in Sodium Chloride IV kits have hit the agency’s radar screen. The problem isn’t due to manufacturing quality, but rather lack of inventory. Hello?
Smart business projections must also be a part of the drug shortage ecosystem.
Speaking of business practices, there remains the 800-pound gorilla of the drug shortage dilemma -- artificially low prices are a major causational problem. And that’s not something the FDA can help fix.
It’s time for our lawmakers to revisit the legislative solution proposed in Senator Orrin Hatch’s Patient Access to Drugs in Shortage Act. There are three key codicils:
1. Price Stability
The Hatch language would change the Medicare reimbursement rate for generic injectable products with 4 or fewer active manufacturers from ASP + 6% to Wholesale Acquisition Cost in order to achieve market price stability.
2. Medicaid/340B Rebate Exemption
Exempt generic injectable products with 4 or fewer active manufacturers from Medicaid rebates and 340B discounts in order to achieve market price stability.
3. Extended Exclusivity
Manufacturers who hold an approved application for a drug that would mitigate a shortage can extend by 5 years any period of exclusivity, even if the drug is eventually moved from drug shortage designation.
So, kudos to Captain Val and her team at the FDA.
Now it’s time to enlarge the eco-system via timely and targeted legislation.
The U.S. Pharmacopeial Convention (USP) endorsed a draft World Health Organization (WHO) proposal to create a unique suffix for biologic drugs, including biosimilars.
A WHO working group proposed a voluntary scheme to create unique identification codes, called "biological qualifiers," that would be distinct from international non-proprietary names (INN). The BQs would be random four-letter codes that would be linked in a WHO-maintained database to the product's INN, trade name, name and address of the manufacturer, and regulatory status. According to the WHO, the scheme could facilitate decision making about substitution and interchangeability and help regulators and physicians track patients' responses to products with the same INN.
In comments submitted to WHO, USP suggested that the BQ system be applied to all biologics, not just biosimilars. BQ codes could be assigned retrospectively.
The endorsement comes as FDA is finalizing its biosimilars naming policy in anticipation of regulatory decisions on at least two pending biosimilar applications. Sandoz, a unit of Novartis AG (NYSE:NVS; SIX:NOVN), has submitted an application for a biosimilar version of Amgen's Neupogen filgrastim and biosimilar version of Remicade infliximab, a mAb marketed by Johnson & Johnson (NYSE:JNJ) and Merck & Co. Inc. (NYSE:MRK)
Superb analysis of the recent NICE draft technology appraisal against the use of Abraxane from the folks at Context Matters. Well worth the read.
NICE: Draft Guidance in Context
In early September, the UK’s National Institute for Health and Care Excellence (NICE) released a draft technology appraisal recommending against the use of Celgene’s Abraxane (nab-paclitaxel) for Pancreatic Cancer. NICE often releases drafts prior to their final reports, giving pharmaceutical companies and other stakeholders the opportunity to offer further information, evidence, and comments. This preliminary decision inspired a number of news articles—PMLiVE, Fierce Pharma, The Telegraph, PharmaTimes, and other news sources all added to the headlines about the agency’s initial report.
Although each of these articles states at least once that the appraisal is draft guidance, not a final decision, it is important to emphasize that NICE’s draft decisions are subject to change. This past May, for example, another Celgene drug, Revlimid (lenalidomide), received a negative draft decision for the treatment of myelodysplastic syndromes. Months later, in August, NICE released a new draft with a positive decision based on additional information provided by Celgene. In March, NICE issued a draft guidance against Alexion’s Soliris (eculizumab), but requested more information justifying the cost. At the beginning of September, NICE, satisfied with Alexion’s addendum, released new positive draft guidance. These three instances alone occurred in 2014; there are more in NICE’s history.
Publishing draft guidance brings up an important point about NICE in particular and HTA agencies in general. NICE’s efforts toward transparency are admirable, but decisions can change until the final guidance is released. Each of the above news articles represents a single data point—a single update in an ongoing process toward a final decision. Only the final decision is binding. Although following the news is certainly valuable, these brief updates do not tell the entire story. Furthermore, though influential, NICE’s decisions do not determine how other countries will make their decisions. NICE is a high-profile agency, but there are others that provide insight into global HTA and reimbursement policies and decisions.
Draft Guidance from NICE: Not the Last and Final Word
Indeed, NICE issued negative draft guidance about Abraxane; but the story does not end there. Abraxane has also been reviewed for Breast Cancer and Ovarian Cancer, and it has been reviewed multiple times by other agencies: HAS in France, PBAC in Australia, CCO in Canada, and SMC in Scotland have all reviewed the drug for at least one indication.
The Snapshot, generated here by the Context Matters Reimbursement Risk Tracker (RRT) database platform, shows that Pancreatic Cancer reviews currently comprise only a small percentage of all HTA reviews for Abraxane. The news about a NICE draft provides manufacturers and stakeholders an opportunity to present additional data and commentary, but it does not include the necessary and complete context to understand the market access status of the drug around the world, or for other disease conditions. Informed action requires more context than that included in the drafts alone.
Furthermore, the draft does not represent all that NICE has decided about Abraxane in the past. NICE recommended Abraxane for the treatment of Ovarian Cancer in 2005; but in 2006, the agency issued a negative decision for its use in Breast Cancer.
The Scottish Medicines Consortium (SMC) has already reviewed Abraxane for Pancreatic Cancer. The agency issued a negative recommendation, finding it more efficacious/effective, but less cost effective than its comparators.
To be sure, draft guidance reviews from NICE provide insight and are valuable issuances to read once published in the news. However, they do not guarantee future and final outcome, nor do they tell the whole story.
America's other drug war
By Philip Klein
Critics don't dispute the drug's effectiveness, they take issue with the cost: $1,000 per pill.
Winston Churchill famously described an appeaser as "one who feeds a crocodile, hoping it will eat him last." Today, in a very different context, his remark captures the plight of the American pharmaceutical industry.
Roughly five years after lobbyists for drugmakers worked to help pass President Obama’s healthcare law in hopes it would fend off greater government intervention, the industry finds itself under attack.
As the nation focused on Obamacare’s implementation this year, a civil war has erupted within the healthcare industry over a miracle drug named Sovaldi.
The medicine has been shown to cure about 90 percent of common cases of hepatitis C, a condition that affects roughly 3 million people in the United States and can lead to severe liver problems. Sovaldi achieves this with fewer side effects than any previously available treatment, and it works more quickly, too.
Critics don’t dispute the drug’s effectiveness. But they are taking issue with the sticker price: $84,000 for a 12-week course of treatment, or $1,000 per pill.
The seemingly simple question, "Is a pill worth $1,000?" has triggered a fierce debate over drug pricing and the future of American medical innovation at a time when the healthcare system is undergoing radical transformation.
Critics led by insurers and pharmacy benefit managers (which help administer drug plans) have argued that Sovaldi’s price is completely unreasonable, putting a strain on the budgets of individuals, businesses, and state and federal governments.
If half of the estimated population in California with hepatitis C were treated with the drug, it would increase spending on the disease within the state by $22 billion in a single year, according to a report from the insurance industry-affiliated California Technology Assessment Forum.
Critics argue that Sovaldi is just the beginning of a wave of new high-priced specialty drugs that will trigger an explosion in medical spending in the years to come.
"If [Sovaldi] is prologue to future pricing decisions, we are talking about blank-check pricing that is simply not sustainable," lamented Karen Ignagni, president and CEO of lobbying group America’s Health Insurance Plans, which has launched a furious public campaign intended to shame drugmakers.
Express Scripts, the nation’s leading pharmacy benefit manager, has also jumped into the fray. "We’ve taken a strong stand on Sovaldi, because it’s the canary in the coal mine," said Steve Miller, the company’s chief medical officer. "If we let this price stand unchallenged and we don’t fix the system ... the system will not sustain itself. And we will not stay the innovative country we are today."
The pharmaceutical industry counters by arguing that beyond the costs associated with researching and developing new drugs and going through the arduous federal approval process, there is the tremendous long-term value created by breakthrough medicines.
For a long time, criticism of pharmaceutical companies focused on the fact that they merely created "me-too" drugs and were interested only in treating symptoms. But that’s where Sovaldi is different.
"We’re curing people of a disease,” said Gregg Alton, executive vice president for corporate and medical affairs at Gilead Sciences, which manufactures the hepatitis C drug.
Sovaldi launched in December 2013 and the Foster City, Calif., company reported sales from the drug totaling $5.8 billion for the first six months of 2014. The company’s profit nearly quadrupled during those six months compared with the same period a year earlier.
Although Gilead isn’t a member of the Pharmaceutical Researchers and Manufacturers of America, the industry lobbying group has taken to defending the pricing of Sovaldi because of the broader principles involved. The group argues that by curing a disease that is the leading cause of liver cancer and liver transplants, Sovaldi is making a significant contribution to public health and eliminating long-term costs associated with more severe medical interventions.
Lori Reilly, PhRMA’s vice president for policy and research, noted that the stepped-up attacks on drug pricing are coming at a time when society should be focused on how science and technology could usher in a new era of treating, even curing, destructive diseases.
“We’re never going to get there if we have price controls in effect or if we send chilling signals to pharmaceutical companies that we’re not going to value innovation when innovation happens,” Reilly said.
Though there haven’t been any proposals for direct government intervention to hold down the cost of Sovaldi, public pressure has begun to be felt on Capitol Hill. In June, Rep. Henry Waxman, D-Calif., and Diana DeGette, D-Colo., ranking Democrats on the House Energy and Commerce Committee, called for a congressional hearing on Sovaldi's price.
In a bipartisan letter to Gilead Chairman and CEO John Martin in July, Senate Finance Committee Chairman Ron Wyden, D-Ore., and Sen. Chuck Grassley, R-Iowa, wrote that Sovaldi’s “pricing has raised serious questions about the extent to which the market for this drug is operating efficiently and rationally.” The senators directed their staffs to investigate the matter due to its potential impact on federal spending and made extensive document requests of Gilead.
Such moves do not suggest an immediate threat to pharmaceutical companies from the federal government. But they need to be seen as a warning shot because this conversation over price is occurring when government is becoming a much bigger player in the nation’s healthcare system.
With governments under constant pressure to cut costs, it could only be a matter of time before drugmakers find themselves targeted by lawmakers. And on this front, the pharmaceutical industry cannot avoid blame.
On June 3, 2009, fewer than five months into the Obama presidency, Nancy-Ann DeParle, then director of the White House Office of Health Reform, emailed PhRMA’s chief lobbyist. As healthcare legislation was still being drafted in Congress, DeParle reported that the administration had decided, “based on how constructive you guys have been, to oppose importation on this bill.” This was a reference to allowing the importation of cheaper drugs from Canada, something favored by many Democrats but strongly opposed by drugmakers.
The email, one of many unearthed by a 2012 investigation by the House Energy and Commerce Committee, exposed the deal-making between the White House and the pharmaceutical industry during debate over Obamacare. It involved a journey for both sides.
During his 2008 presidential campaign, Obama attacked the cozy relationship between the drug industry and government. In an ad titled “Billy,” Obama highlighted the fact that Billy Tauzin, who helped push the 2003 Medicare prescription drug bill through Congress as chairman of the House Energy and Commerce Committee, became the president and chief executive of PhRMA shortly afterward. “I don’t want to learn how to play the game better, I want to put an end to the game-playing,” Obama vowed.
But once in the White House, Obama changed tack. As administration officials crafted their strategy for pushing national healthcare legislation, they determined that co-opting health industry lobbyists was crucial if they were to get the bill across the congressional finish line and to the president’s desk for his signature. In 1994, fierce industry opposition had helped wreck the Clinton administration’s healthcare initiative, and Obama didn’t want history to repeat itself. So he played the game he had sworn to eschew, and made a deal with Tauzin after all. (PhRMA has undergone a leadership change since the passage of the healthcare law, and is now headed by John Castellani.)
The pharmaceutical industry has had its own complicated relationship with government. Its business model depends on a vigorous defense of capitalism — of the right of innovators to reap profits based on the value they bring to the free market. But government has the industry in a chokehold, given its control over patent law. Drugmakers enjoy a limited period of exclusivity for their inventions, an idea that is rooted in the vision of America’s Founders to promote the arts and sciences.
In the modern era, the Drug Price Competition and Patent Term Restoration Act of 1984, known as Hatch-Waxman, helped establish a balance between allowing drugmakers to profit from their innovations for a period of time and introducing lower-priced generic alternatives into the market.
During the Bush era, PhRMA lobbied for passage of the Medicare prescription drug law, which brought billions of dollars of business to the industry, but also made the federal government a larger purchaser of prescription drugs. Drugmakers lobbied successfully to prevent the government from directly negotiating drug prices.
When Obama came to Washington in 2009 after a landslide election victory that also cemented huge Democratic majorities in both chambers of Congress, he created an air of inevitability about the passage of a national healthcare plan.
Facing the prospect of a bill passing over its objections and without regard to its concerns, the drug industry decided it was better to cut a deal. PhRMA agreed to support the law, take out ads promoting it, and produce $80 billion worth of taxes and other savings to help finance it. In exchange, Obama would protect drugmakers from liberal Democrats who wanted the federal government to drive down drug prices by negotiating with the manufacturers and by allowing imports from Canada. The law produced millions of newly insured Americans who became customers for prescription drugs.
Peter Pitts, who served as an associate commissioner of the U.S. Food and Drug Administration during the Bush administration and is now president of the Center for Medicine in the Public Interest, has been defending the drug industry during the Sovaldi fight. But he said PhRMA’s short-term calculation to save itself from Obamacare complicates the industry’s arguments.
“By saying, ‘We support Obamacare’ and all the things it means, both in terms of what was on paper and what it means spiritually to a lot of people, they really gave away the high ground on a free-market healthcare system and what that means relative to the ability to exist and produce innovation and reap the rewards,” Pitts said.
He explained: “You can’t cut a deal with a group of people who are fundamentally against your business model and expect that it’s going to save your bacon.”
The pharmaceutical industry had also overestimated the inevitability of Obamacare’s becoming law. By the summer of 2009, there was a strong public backlash against it, and it barely passed. Had PhRMA waited to see how well it progressed, it might have been able step in at a later stage and tip the scales against passage. But hindsight is 20/20.
“A lot of people in the pharmaceutical industry right now are unhappy with the fact that a deal was cut and the federal government still has the long knives out pushed against their throats,” Pitts said.
In a slap to drugmakers, after the healthcare law passed, Obama pushed for slashing the exclusivity period on drugs produced using biotechnology to seven years from the 12 years that was assumed in Obamacare.
This, Pitts argues, shows why it was naive for PhRMA to believe it could make a deal with the administration. “But in fairness to Billy Tauzin,” he acknowledged, “as the saying goes, if you’re not at the table, you’re on the menu.”
The drug industry now finds itself under fire once again. Though there have been more expensive drugs than Sovaldi, they have so far been treatments for relatively rare conditions. In contrast, an estimated 3.2 million people in the United States are afflicted with hepatitis C, a blood-borne illness most commonly transmitted through injection drug use. Many people aren’t symptomatic and do not get tested, so the actual number of people infected could be several million higher.
The release of Sovaldi "was an unprecedented event in the following way,” explained Miller of Express Scripts. “We’ve had higher-priced drugs. We’ve never had a drug priced this high for this many people.”
He added, “It’s a threat to healthcare economics that we’ve never seen before.”
Miller argued that the pricing of Sovaldi isn’t reasonable, especially because Gilead “didn’t invent this drug, they bought it. And so they didn’t have R&D costs sunk into it.”
Gilead’s Alton disputes this view and notes that although the company did acquire Sovaldi when purchasing Pharmasset for $11 billion in 2011, at that point the drug was still in the early part of Phase III trials (the largest and most expensive stage of drug testing). Thus, the drug required further development. “We did the vast majority of R&D on Solvaldi,” he insisted.
He also emphasized that Gilead isn’t claiming to have priced the drug based on research and development costs. “What we did was price it based on the standard of care that was used prior to Sovaldi,” he said.
Prior treatments for hepatitis C, he argued, took longer, and the overall treatment regimen cost the same. But those treatments weren’t nearly as effective and in many cases, couldn’t be tolerated by patients.
He also says it’s unfair to look at upfront costs without considering savings over time.
The California Technology Assessment Forum study concluded that if 50 percent of those estimated to have hepatitis C in the state were to take Sovaldi, after 20 years, the offsetting savings would recoup three quarters of the initial drug expenditures. But the study also found that if the drug were given only to those with advanced liver problems, the 20-year savings would exceed the costs by $1 billion. This is why several state Medicaid programs have restricted prescriptions of the drug to populations with more advanced liver disease.
Another factor weighing in congressional thinking is that, according to a survey cited by Sens. Wyden and Grassley, nearly a third of all people with hepatitis C are in prison, and treating prison populations with Sovaldi could pressure federal budgets.
Defenders of Sovaldi’s price note that the oft-cited $84,000 tag isn’t what people actually end up paying once the price has been negotiated down. Nor is everyone with hepatitis C going to get treated. Gilead estimates that Sovaldi will treat roughly 150,000 patients this year in the U.S.
But to Miller, this is all the more reason for a lower price. It would, he says, allow a national campaign to screen people for hepatitis C, and then get them cured. “If the cost were lower, wouldn’t you like to eradicate hepatitis C from the population?” he asked.
Gilead can make a substantial profit even with a lower price, he claims, because manufacturing costs are negligible. The company, he said, “should be able to make a great profit. But the profit shouldn’t be anything the market will bear.”
In other countries, Sovaldi is cheaper. In the United Kingdom, the 12-week course costs $57,000. On Sept. 15, Gilead announced a deal with generic drugmakers in India to produce a lower-priced version of the drug for poorer countries. This is an example of how Americans often subsidize global drug spending.
Sovaldi is expected to get more competition within the United States in the coming months, and its patent expires in March 2029.
Looking ahead, Miller said that other drugs, such as new cholesterol treatments called PCSK9 inhibitors, present an even more daunting payment challenge. He said the new treatments could theoretically be beneficial to 10 million Americans with high cholesterol who cannot tolerate current treatments and are expected to cost $10,000 per year. But unlike Sovaldi, these treatments would have to be repeated, meaning it could boost prescription drug spending by $100 billion annually.
In 2013, cumulative prescription drug spending in the United States was $272 billion, according to a report released in September by actuaries for the Centers for Medicaid and Medicare Services. As defenders of the industry point out, for all the criticism of drug pricing, it represents slightly more than 9 percent of all health spending, the same share that actuaries expect prescription drugs to take in 2023.
Critics of drug pricing from other health sector industries insist that they do not support government intervention, but rather, intend to pressure drugmakers to lower prices. In their comments, there’s an unstated warning to pharmaceutical companies to make their products more affordable or risk government meddling.
AHIP’s Ignagni said the insurance industry’s goal is “to find a private sector solution before anything arises on the public sector side.”
She argued that “hospitals that have pricing that is unsustainable and unaffordable have been challenged to reduce that pricing.”
She went on to explain that, with “everybody in the healthcare arena ... the conversation begins, ‘How can we work to reduce costs?’ ” But, she said, drugmakers represented “the only sector where that conversation is not occurring.”
Miller also pleaded with drugmakers to adjust their pricing voluntarily, before it’s too late.
“We think the market should fix itself,” he said. “But what we’re afraid of, remember, is the government becoming a bigger and bigger player in healthcare every year.”
In 2008, government at all levels accounted for 41 percent of total U.S. healthcare spending. That is projected to reach 48 percent by 2023, according to CMS.
“And so as the government becomes a bigger payer, what will happen is, if these prices keep going up, they’re going to go back to the playbook they understand, which is price control,” Miller warned. “And price controls would be a disaster for pharmaceutical innovation in this country.”
Gilead’s Alton agues that the long-term value created by Sovaldi is so apparent that it would “fare very well in a rational system that evaluates [drugs] on long-term value.”
Reilly of PhRMA said the concept of government interference is “always a concern” for the industry. She used Alzheimer’s as an example of a disease whose victims would benefit from a system that places a high value on innovation.
“If the signal that gets sent is, if you are the company that happens to solve that conundrum, or make significant progress against it, [you are] going to face government price controls, I’m not sure that there is the type of incentive or desire for companies to take that risk,” she said.
Obamacare didn’t pass in a vacuum. It passed after critics of private insurance spent decades pummeling insurers for imposing caps on coverage, denying coverage to individuals with pre-existing conditions, and dropping seriously ill patients. Now, insurance companies find themselves at the mercy of federal regulators who dictate the benefit packages they must offer and limit the amount of profit they may make after paying out medical claims, effectively treating them as public utilities.
Federal lawmakers have levers at their disposal that could pressure drugmakers. Congress could shorten patents, for instance, or allow the government to negotiate drug prices in public programs, or simply pass laws to control drug prices.
Politicians often cite the cost to public health programs when it comes to imposing nanny-state policies such as banning trans fats or smoking in public places. It’s easy to see how, with healthcare costs consuming a growing share of government budgets, there could be a powerful campaign against drugmakers who charge high prices for popular drugs. Drugmakers wouldn’t have much recourse against those in power who see medical innovations as public goods.
“You don’t know what you don’t have yet,” Reilly said. “And the promise of future innovation sometimes gets lost on people.”
For decades, drug companies have lobbied to have it both ways, to reap the benefits of a bigger government while enjoying the profits of the market. But the philosophy underlying big government is incompatible with a free enterprise system that allows innovators to price products based on their market value. And if the pharmaceutical industry hasn’t learned this lesson yet, it probably soon will.