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OAKLAND, Calif. — The kitchen counter in the home of the Hayes family is scattered with the inhalers, sprays and bottles of pills that have allowed Hannah, 13, and her sister, Abby, 10, to excel at dance and gymnastics despite a horrific pollen season that has set off asthma attacks, leaving the girls struggling to breathe.

Asthma — the most common chronic disease that affects Americans of all ages, about 40 million people — can usually be well controlled with drugs. But being able to afford prescription medications in the United States often requires top-notch insurance or plenty of disposable income, and time to hunt for deals and bargains.

The arsenal of medicines in the Hayeses’ kitchen helps explain why. Pulmicort, a steroid inhaler, generally retails for over $175 in the United States, while pharmacists in Britain buy the identical product for about $20 and dispense it free of charge to asthma patients. Albuterol, one of the oldest asthma medicines, typically costs $50 to $100 per inhaler in the United States, but it was less than $15 a decade ago, before it was repatented.

“The one that really blew my mind was the nasal spray,” said Robin Levi, Hannah and Abby’s mother, referring to her $80 co-payment for Rhinocort Aqua, a prescription drug that was selling for more than $250 a month in Oakland pharmacies last year but costs under $7 in Europe, where it is available over the counter.

The Centers for Disease Control and Prevention puts the annual cost of asthma in the United States at more than $56 billion, including millions of potentially avoidable hospital visits and more than 3,300 deaths, many involving patients who skimped on medicines or did without.

“The thing is that asthma is so fixable,” said Dr. Elaine Davenport, who works in Oakland’s Breathmobile, a mobile asthma clinic whose patients often cannot afford high prescription costs. “All people need is medicine and education.”

With its high prescription prices, the United States spends far more per capita on medicines than other developed countries. Drugs account for 10 percent of the country’s $2.7 trillion annual health bill, even though the average American takes fewer prescription medicines than people in France or Canada, said Gerard Anderson, who studies medical pricing at the Bloomberg School of Public Health at Johns Hopkins University.

Americans also use more generic medications than patients in any other developed country. The growth of generics has led to cheap pharmacy specials — under $7 a month — for some treatments for high cholesterol and high blood pressure, as well as the popular sleeping pill Ambien.

But many generics are still expensive, even if insurers are paying the bulk of the bill. Generic Augmentin, one of the most common antibiotics, retails for $80 to $120 for a 10-day prescription ($400 for the brand-name version). Generic Concerta, a mainstay of treating attention deficit disorder, retails for $75 to $150 per month, even with pharmacy discount coupons. For some conditions, including asthma, there are few generics available.

While the United States is famous for break-the-bank cancer drugs, the high price of many commonly used medications contributes heavily to health care costs and certainly causes more widespread anguish, since many insurance policies offer only partial coverage for medicines.

In 2012, generics increased in price an average of 5.3 percent, and brand-name medicines by more than 25 percent, according to a recent study by the Health Care Cost Institute, reflecting the sky-high prices of some newer drugs for cancer and immune diseases.

While prescription drug spending fell slightly last year, in part because of the recession, it is expected to rise sharply as the economy recovers and as millions of Americans become insured under the Affordable Care Act, said Murray Aitken, the executive director of IMS Health, a leading tracker of pharmaceutical trends.

Unlike other countries, where the government directly or indirectly sets an allowed national wholesale price for each drug, the United States leaves prices to market competition among pharmaceutical companies, including generic drug makers. But competition is often a mirage in today’s health care arena — a surprising number of lifesaving drugs are made by only one manufacturer — and businesses often successfully blunt market forces.

Asthma inhalers, for example, are protected by strings of patents — for pumps, delivery systems and production processes — that are hard to skirt to make generic alternatives, even when the medicines they contain are old, as they almost all are.

The repatenting of older drugs like some birth control pills, insulin and colchicine, the primary treatment for gout, has rendered medicines that once cost pennies many times more expensive.

“The increases are stunning, and it’s very injurious to patients,” said Dr. Robert Morrow, a family practitioner in the Bronx. “Colchicine is a drug you could find in Egyptian mummies.”

Pharmaceutical companies also buttress high prices by choosing to sell a medicine by prescription, rather than over the counter, so that insurers cover a price tag that would be unacceptable to consumers paying full freight. They even pay generic drug makers not to produce cut-rate competitors in a controversial scheme called pay for delay.

Thanks in part to the $250 million last year spent on lobbying for pharmaceutical and health products — more than even the defense industry — the government allows such practices. Lawmakers in Washington have forbidden Medicare, the largest government purchaser of health care, to negotiate drug prices. Unlike its counterparts in other countries, the United States Patient-Centered Outcomes Research Institute, which evaluates treatments for coverage by federal programs, is not allowed to consider cost comparisons or cost-effectiveness in its recommendations. And importation of prescription medicines from abroad is illegal, even personal purchases from mail-order pharmacies.

“Our regulatory and approval system seems constructed to achieve high-priced outcomes,” said Dr. Peter Bach, the director of the Center for Health Policy and Outcomes at Memorial Sloan-Kettering Cancer Center. “We don’t give any reason for drug makers to charge less.”

And taxpayers and patients bear the consequences.

California’s Medicaid program spent $61 million on asthma medicines last year, paying more than $200 — not far from full retail price — for many inhalers. At the Breathmobile clinic in Oakland, the parents of Bella Buyanurt, 7, fretted about how they would buy her medications since the family lost Medicaid coverage. Barbara Wolf, 73, a retired Oakland school administrator covered by Medicare, said she used her inhaler sparingly, adding, “I minimize puffs to minimize cost.”

‘A Frustrating Saga’

Hannah and Abby Hayes were admitted to the hospital on separate occasions in 2005 with severe shortness of breath. Oakland, a city subject to pollution from its freeways and a busy seaport, has four times the hospital admission rate for asthma as elsewhere in California.

The asthma rate nationwide among African-Americans and people of mixed racial backgrounds is about 20 percent higher than the average.

Robin Levi, a Stanford-trained lawyer who works for Students Rising Above, a group that helps low-income students attend college, is black. Her husband, John Hayes, an economist, is white. Their daughters have allergic asthma that is set off by animals, grass and weeds, but they also get wheezy when they have a cold.

“That first year, I had to take a lot of time from my job to deal with the asthma drugs, the prices, arguing with insurers — it was a frustrating saga,” Ms. Levi said.

For decades, the backbone of treatment for asthma has centered on inhaled medicines. The first step is a bronchodilator, which relaxes the muscles surrounding small airways to open them. For people who use this type of rescue inhaler frequently, doctors add an inhaled steroid as a maintenance drug to prevent inflammation and ward off attacks. The two medicines are often mixed in a single combination inhaler for adults, and these products are especially pricey. In addition, many patients, particularly children, take pills as well as nasal sprays that calm allergies that set off the condition.

While on medication, neither Hayes girl has been in the hospital since her initial diagnosis. Their mother tweaks dosing, adding extra medicine if they have a cold or plan to ride horses.

For most patients, asthma medicines are life-changing. In economic terms, that means demand for the medicines is inelastic. Unlike a treatment for acne that a patient might drop if the price became too high, asthma patients will go to great lengths to obtain their drugs.

For pharmaceutical companies, that has made these respiratory medicines blockbusters: the two best-selling combination inhalers, Advair and Symbicort, had global sales of $8 billion and $3 billion last year. Each inhaler, typically lasting a month, retails for $250 to $350 in the United States.

Asked to explain the high price of inhalers, the two major manufacturers say the calculus is complicated.

“Our pricing is competitive with other asthma treatments currently on the market,” Michele Meixell, the United States spokeswoman for AstraZeneca, which makes Symbicort and other asthma drugs, said in an e-mail. She added that low-income patients without insurance could apply for free drugs from the company.

Juan Carlos Molina, the director of external communication for GlaxoSmithKline, which makes Advair, said in an e-mail that the price of medicines was “closely linked to this country’s model for delivery of care,” which assumes that health insurance will pick up a significant part of the cost. An average co-payment for Advair for commercially insured patients is $30 to $45 a month, he added.

Even with good insurance, the Hayeses expect to spend nearly $1,000 this year on their daughters’ asthma medicines; their insurer spent much more than that. The total would have been more than $4,000 if the insurer had paid retail prices in Oakland, but the final tally is not clear because the insurer contracts with Medco, a prescription benefits company that negotiates with drug makers for undisclosed discounts.

Patent Plays

Dr. Dana Goldman, the director of the Leonard D. Schaeffer Center for Health Policy and Economics at the University of Southern California, said: “Producing these drugs is cheap. And yet we are paying very high prices.” He added that because inhalers were so effective at keeping patients out of hospitals, most national health systems made sure they were free or inexpensive.

But in the United States, even people with insurance coverage struggle. Lisa Solod, 57, a freelance writer in Georgia, uses her inhaler once a day, instead of twice, as usually prescribed, since her insurance does not cover her asthma medicines. John Aravosis, 49, a political blogger in Washington, buys a few Advair inhalers at $45 each during vacations in Paris, since his insurance caps prescription coverage at $1,500 per year. Sharon Bondroff, 68, an antiques dealer in Maine on Medicare, scrounges samples of Advair from local doctors. Ms. Bondroff remembers a time, not so long ago, when inhalers “were really cheap.” The sticker shock for asthma patients began several years back when the federal government announced that it would require manufacturers of spray products to remove chlorofluorocarbon propellants because they harmed the environment. That meant new inhaler designs. And new patents. And skyrocketing prices.

“That decision bumped out the generics,” said Dr. Peter Norman, a pharmaceutical consultant based in Britain who specializes in respiratory drugs. “Suddenly sales of the branded products went right back up, and since then it has not been a very competitive market.”

The chlorofluorocarbon ban even eliminated Primatene Mist inhalers, a cheap over-the-counter spray of epinephrine that had many unpleasant side effects but was at least an effective remedy for those who could not afford prescription treatments.

As drugs age and lose patent protection, the costs of treatment can fall significantly because of generic competition — particularly if a pill has only one active ingredient and is simple to replicate. When Singulair, a pill the Hayes girls take daily to block allergic reactions in the lungs, lost its patent protection last year, generics rapidly entered the market. The price of the drug has already dropped from $180 per month to as low as $15 to $20 with pharmacy coupons.

But sprays, creams, patches, gels and combination medicines are more difficult to copy exactly to make a generic that meets Food and Drug Administration standards. Each time a molecule is put in a new inhaler or combined with another medicine, the amount delivered into the lungs or through the skin may change, even though that often has an imperceptible effect on patients.

“Drug companies can switch devices and use different combinations, and it becomes quite difficult to demonstrate equivalence,” Dr. Norman said, adding that inhaler makers have exploited such barriers to increase sales of medicines long after the scientific novelty has passed.

Obstacles for Generics

A result is that there are no generic asthma inhalers available in the United States. But they are available in Europe, where health regulators have been more flexible about mixing drugs and devices and where courts have been quicker to overturn drug patent protection.

“The high prices in the U.S. are because the F.D.A. has set the bar so high that there is no clear pathway for generics,” said Lisa Urquhart of EvaluatePharma, a consulting firm based in London that provides drug and biotech analysis. “I’m sure the brands are thrilled.”

The F.D.A. acknowledges that the lack of inhaled generic medicines, as well as topical creams, has been costly for patients, but it attributes that to “difficult, longstanding scientific challenges,” since measuring drug activity deep into the lung is complicated, said Sandy Walsh, a spokeswoman for the agency. Dr. Robert Lionberger, the agency’s acting deputy director in the office of generic drugs, said that research into the development of generic inhaled medicines was the agency’s highest priority but that the effort had been stalled because of budget cuts imposed by Congress.

Even so, experts say, a significant problem is that none of the agencies that determine whether medicines come to market in the United States are required to consider patient access, affordability or need.

The Food and Drug Administration has handed out patents to reward drug makers for conducting formal safety and efficacy studies on old drugs that had not been so scrutinized. That transformed cheap mainstays of treatment like colchicine for gout and intravenous hydroxyprogesterone for preterm labor into high-priced branded products, costing $5 a pill and $1,500 per dose.

For its part, the United States patent office grants new protections for tweaks to drugs without weighing the financial impact on patients.

For example, with the patent for the older oral contraceptive Loestrin 24Fe about to expire, the company Warner Chilcott stopped making the pill this year and introduced a chewable version — with a new patent and an expensive promotional campaign urging patients and doctors to switch. While many insurance plans covered the popular older drug with little or no co-payment, they often exclude the new pills, leaving patients covering the full monthly cost of about $100. Patients complained that the new pills tasted awful and were confused about whether they could just be swallowed.

“Drug patents are easy to get, and the patent office is deluged,” said Dr. Aaron Kesselheim, a pharmaceutical policy expert at Harvard Medical School. “The F.D.A. approves based on safety and efficacy. It doesn’t see its role as policing this process.”

For asthma patients in the United States, the best the market has yielded are a few faux generics that are often only marginally cheaper than the brand-name versions. AstraZeneca, for example, has an agreement with Teva Pharmaceuticals, a generic manufacturer, to make an approved generic version of its Pulmicort Respules, an asthma medicine for home inhalation treatments. Teva paid AstraZeneca more than $250 million last year in royalties to make a generic, which sells for about $200 for a typical monthly dose, compared with close to $300 for the branded product.

Research vs. Marketing

There are good reasons drug companies are feeling threatened. In the last several years, some best-selling medicines, like Lipitor for high cholesterol and Plavix for blood thinning, have been largely replaced by cheap generics in a very competitive market. In 2012, that led to $29 billion in savings for patients, said Mr. Aitken of IMS, or $29 billion in lost revenues for drug makers. Eighty-four percent of prescriptions dispensed last year were for generic medications.

While drug companies generally remain highly profitable, recent trends have meant tough times for some companies, including Merck, whose profits crashed 50 percent this year primarily because the patent expired on its best-selling asthma pill, Singulair.

So AstraZeneca has recently spent millions of dollars in court pursuing several small drug companies for patent infringement after they announced a plan to make a true cheap generic version of Pulmicort Respules. Though a New Jersey judge sided with the generic manufacturers this spring, legal appeals by AstraZeneca will keep the generics off the market for the near future.

As insurance policies require patients to contribute more out of pocket for medicines, public pressure to curb prices has grown. This year, more than 100 top cancer specialists protested the rising prices of cancer treatments.

Drug companies have long argued that pharmaceutical pricing reflects the cost of developing and testing innovative new drugs, many of which do not pan out or make it to market.

“When there’s a really innovative product, you might be able to justify the price,” Dr. Kesselheim said. “But this is not generally the case.”

Critics counter that drug companies spend far more on marketing and sales than the 15 percent and 20 percent of their revenues that they devote to research and development.

In the United States, one of the few Western countries that allows advertising of prescription drugs to consumers, GlaxoSmithKline spent $99 million in advertising for Advair in 2012. Despite its financial woes, Merck spent $46.3 million to advertise its steroid spray, Nasonex, according to fiercepharma.com, a Web site that tracks the industry’s advertising.

Also, the focus of much pharmaceutical research in recent years has shifted from simple drugs for common diseases that would have widespread use to complicated molecules that would most likely benefit fewer patients but carry far higher price tags, in the realm of tens of thousands of dollars.

The newest offering for asthma is Novartis’s Xolair, which is given by injection in a doctor’s office every two weeks at a cost of up to $1,500, depending on the dose. Because the drug is so expensive and was deemed to have little or no benefit over inhalers for a vast majority of patients, the British government last year announced that it would not make it available through the National Health Service. It relented this year, agreeing to stock it for limited use, after the manufacturer offered a confidential discount.

In all other developed countries, governments similarly use a variety of tools to make sure that drug manufacturers sell their products at affordable prices. In Germany, regulators set drug wholesale and retail prices. Across Europe, national health authorities refuse to pay more than their neighbors for any drug. In Japan, the price of a drug must go down every two years.

Drug prices in the United States are instead set in hundreds of negotiations by hospitals, insurers and pharmacies with drug manufacturers, with deals often brokered by powerful middlemen called group purchasing organizations and pharmacy benefit managers, who leverage their huge size to demand discounts. The process can get nasty; if mediators offer too little for a given product, manufacturers may decide not to produce it or permanently drop out of the market, reducing competition.

With such jockeying determining supply, products can simply disappear and prices for vital medicines can fluctuate far more than they do for a carton of milk. After the price of Abby Hayes’s Rhinocort Aqua nasal spray rose abruptly, it was unavailable for many months. That sent her family scrambling to find other prescription sprays, each with a price tag over $150.

This year the price of Advair dropped 10 percent in France, but in pharmacies in the Bronx, it has doubled in the last two years.

In Georgia, Ms. Solod, the freelance writer, found the same thing. “Every time I get Advair, the price is different,” she said. “And the price always goes up. It never comes down.”

Twenty years ago, drugs that could safely be sold directly to patients typically moved off the prescription model as their patent life ended. That brought valuable medicines like nondrowsy antihistamines and acid reducers to drugstore shelves. But with profitable prescription products now selling for $100 per tiny bottle, there is little incentive to make the switch, since over-the-counter drugs rarely succeed if they cost more than $20.

As a result, a number of products that are sold directly to patients in other countries remain available only by prescription in the United States. That includes a version of the popular but expensive steroid nasal spray used by Abby Hayes, which is available over the counter in London for under $15 at the Boots pharmacy chain.

“Not only is the cost cheaper, but it doesn’t require a doctor’s visit to get it,” said Dr. Jan Lotvall, a professor of allergy and immunology at the University of Gothenburg in Sweden, where steroid nasal sprays are also available over the counter.

During this high pollen season, Abby had to cut short a gymnastics practice, and her sister, Hannah, missed one day of school because of breathing problems, the first time in many years. But with parents who can afford to get the medicine they require, both are now doing fine.

That is not true of two other sisters from Oakland whom their mother mentors. With treatment hard to access and drug prices high, Kemonni and Donzahnya Pitre, 19 and 17, simply suffer and struggle to breathe.

As Donzahnya, a high school senior, looked through the Fiske Guide to Colleges at the Hayeses’ kitchen table one day, she had an unusual selection criterion: “I worry about going to a college that’s surrounded by a lot of grass.”

The Soaring Cost of a Simple Breath,
NYT, 12.10.2013,
https://www.nytimes.com/2013/10/13/
us/the-soaring-cost-of-a-simple-breath.html

Drugs and Profits

May 24, 2011

The New York Times

By FREDERICK C. TUCKER Jr.

Fredericksburg, Va.

LAST year the Food and Drug Administration rescinded approval of the drug Avastin for treating breast cancer patients, prompting a firestorm of criticism. The decision was denounced by some politicians as health care rationing, and by breast cancer patients who feared that they would be deprived of a drug that they felt had helped them immensely.

But these criticisms ignore the facts: Avastin was rejected simply because it didn’t work as it was supposed to, and the F.D.A. should resist the aggressive campaign by Genentech, the drug’s maker, to get that ruling reconsidered at a hearing in late June.

Avastin has been on the market for seven years, and combined with other drugs it is effective in treating, but not curing, some colon, lung, kidney and brain cancers. It inhibits the development of new blood vessels and in so doing can starve a growing tumor.

Treating a breast cancer patient with Avastin costs about $90,000 a year, and Genentech could lose $500 million to $1 billion a year in revenue if the F.D.A. upholds the ban.

A clinical trial published in 2007 demonstrated that Avastin, when paired with the chemotherapy drug Taxol, halts the growth of metastatic breast cancer for about six months longer than chemotherapy alone. Genentech then asked the F.D.A. for approval of Avastin, combined with Taxol, for use against metastatic breast cancer.

This halt in tumor growth is known as progression-free survival. But delaying the worsening of cancer does not necessarily prolong life, and Avastin was not shown to lengthen patients’ overall survival time. So Genentech argued that the drug led not to longer life, but to improved quality of life.

In 2007, an F.D.A. advisory committee rejected the application, deciding that the toxic side effects of Avastin outweighed its ability to slow tumor growth. The F.D.A., however, overrode the committee and granted what is called accelerated approval, allowing Avastin to be used pending further study. The criteria for full approval was that Avastin not worsen overall survival and that the drug provide clinically meaningful progression-free survival.

To support its case Genentech submitted data from two additional clinical trials in which Avastin was paired with chemotherapy drugs other than Taxol. Like the first trial, neither showed a survival benefit. Both showed an improvement in progression-free survival, though this outcome was much less impressive than in the original study. In addition to seeking full approval for the Avastin-Taxol combination, Genentech also asked the F.D.A. to approve the use of Avastin with the drugs used in these follow-up studies.

Genentech presented progression-free survival as a surrogate for better quality of life, but the quality-of-life data were incomplete, sketchy and, in some cases, non-existent. The best that one Genentech spokesman could say was that “health-related quality of life was not worsened when Avastin was added.” Patients didn’t live longer, and they didn’t live better.

It was this lack of demonstrated clinical benefit, combined with the potentially severe side effects of the drug, that led the F.D.A. last year to reject the use of Avastin with Taxol or with the other chemotherapies for breast cancer.

In its appeal Genentech is changing its interpretation of its own data to pursue the case. Last year Genentech argued that the decrease in progression-free survival in its supplementary studies was not due to the pairing of Avastin with drugs other than Taxol. This year, however, in its brief supporting the appeal, Genentech argues that the degree of benefit may indeed vary with “the particular chemotherapy used with Avastin.” In other words, different chemotherapies suddenly do yield different results, with Taxol being superior. The same data now generate the opposite conclusion.

Perhaps more troubling is the resort to anecdote in the brief to the F.D.A. and in the news media. Oncologists recounted their successes, and patients who were doing well on Avastin argued for its continued approval. But anecdote is not science. Such testimonials may represent the human voices behind the statistics, but the sad fact is that there are too many patients who have been treated with Avastin but are not here to tell their stories.

Avastin will not disappear because of the F.D.A. decision. It remains available for treating other cancers, and research to find its appropriate role in breast cancer treatment continues. In the meantime, the F.D.A., which is expected to make its decision in September, needs to resist Genentech’s attempt to have it ignore scientific evidence.

Serious progress in the treatment of cancer will not be the result of polemics, lobbying or marketing. Genentech’s money and efforts would be better spent on research for more meaningful treatments for breast cancer.

Frederick C. Tucker Jr. is an oncologist.

Drugs and Profits,
NYT, 24.6.2011,
http://www.nytimes.com/2011/05/25/opinion/25tucker.html

Rising Prices of Drugs

Lead to Call for Inquiry

November 19, 2009
The New York Times
By DUFF WILSON

Democrats in Congress asked for two separate investigations of drug industry pricing Wednesday as they continue working on legislation to overhaul the nation’s health care system.

Responding to news reports of unusually high wholesale price increases in brand-name prescription drugs, four House leaders and one senator asked for government reviews of the pricing practices.

Although drug makers challenge the theory, some experts say the run-up in wholesale prices may be partly related to the industry’s concerns about future cost containment under any health care legislation.

“Recent studies have indicated that the industry may be artificially raising prices for certain pharmaceutical products in expectation of new reforms,” the House Democrats wrote in a letter to the Government Accountability Office, a nonpartisan investigative arm of Congress. “Any price gouging is unacceptable, but anticipatory price gouging is especially offensive,” the letter added, asking the G.A.O. to conduct an expedited review of the price increases.

The House letter was signed by four representatives who have been active in the health care legislation: Charles B. Rangel of New York, chairman of the Ways and Means Committee; Henry A. Waxman of California, chairman of the Energy and Commerce Committee; and Pete Stark of California, and John Lewis of Georgia, chairmen of two Ways and Means subcommittees.

Separately, Senator Bill Nelson of Florida, a Democrat who has led efforts in the Senate to seek more concessions from drug makers, wrote to the inspector general of the Department of Health and Human Services asking for “an immediate and thorough investigation into drug industry pricing and recent increases, and the extent to which these increases may affect the Medicare and Medicaid programs.”

Both letters cited a New York Times article on Monday reporting that wholesale prices of brand-name drugs rose about 9 percent in the 12 months that ended Sept. 30, the highest increase in years — even as the Consumer Price Index was declining during the same 12-month period.

The Times article cited a Wall Street analyst’s calculations; a study sponsored by the AARP, the advocacy group for older Americans; and a report by IMS Health, a consulting firm to the drug industry.

The price increases could add more than $10 billion to the nation’s drug bill, which is on track to exceed $300 billion this year.

At that rate, the increases would more than offset at least the first year of savings that the drug industry has agreed to make under a provision of the health care bill that was approved by the Senate Finance Committee and has been incorporated into the full Senate bill introduced on Wednesday. That measure calls for the industry to come up with discounts and rebates that would save Medicare recipients and the government $8 billion a year for 10 years.

“I want to know if there’s a back-door move under way by the drug makers to recover some of the concessions they’ve promised for health care reform,” Senator Nelson said in a statement Wednesday.

Drug companies do not deny having raised wholesale prices at the highest rate in years. But they say it has nothing to do with the impending health care legislation. They say the price increases are necessary to maintain profits for research and employment in the face of a difficult business environment, which includes a slowdown in sales of many brand-name products, expiring patents and increasing competition from generic drugs.

The wholesale prices of brand-name drugs most commonly used by Medicare recipients rose in the latest 12-month period at the fastest rate since at least 1992, according to Stephen W. Schondelmeyer, a pricing expert working with AARP.

Separately, a study by the investment bank Credit Suisse found that prices for all drugs from the eight largest United States pharmaceutical companies had risen, on average, at the highest rate in at least five years.

And IMS Health said there were higher-than-expected price increases this year.

Mr. Schondelmeyer, professor of pharmaceutical economics at the University of Minnesota, and Catherine J. Arnold, a senior drug industry analyst for Credit Suisse, have said they believe that part of the reason for the price increases was to get ahead of possible cost containment measures in health care reform.

Professor Schondelmeyer and Joseph P. Newhouse, a Harvard health economist, said there were precedents for drug price increases before government actions affecting the industry.

The House Democrats also said the G.A.O. had previously found unusual price increases in some prescription drugs in the year before Congress added drug benefits to Medicare.

The House letter on Wednesday said that the G.A.O. could build on that work.

The House members are also asking the G.A.O. to submit a proposal to continuously monitor prescription drug prices. The House health care bill already includes a provision authorizing Medicare to negotiate directly with manufacturers — a proposal hotly opposed by the industry.

Ken Johnson, an official with the drug industry’s trade association, said in a statement that calls for an investigation were “based on misleading use of statistics and sensationalized media reports.”

Mr. Johnson, senior vice president for the Pharmaceutical Manufacturers and Research Association, did not deny any of the specific findings of AARP, Credit Suisse and IMS Health reports, which were based on data supplied by manufacturers and wholesalers. But he said other measurements of drug price increases show they have risen substantially less than 9 percent.

Mr. Johnson accused AARP of “trying to muddy the waters for its own political gain as we enter the homestretch of the health care reform debate.”

An AARP executive vice president, John Rother, said in a statement: “This isn’t about politics. It’s about affordable health care.”

Rising Prices of Drugs Lead to Call for Inquiry, NYT, 19.11.2009,
http://www.nytimes.com/2009/11/19/health/policy/19drugs.html

The Work-Up

Costly Drugs Known as Biologics

Prompt Exclusivity Debate

July 22, 2009
The New York Times
By ANDREW POLLACK

A bitter Congressional fight over the cost of superexpensive biotechnology drugs has come down to a single, hotly debated number: How many years should makers of those drugs be exempt from generic competition?

But what few people in Washington seem to recognize — or publicly acknowledge, anyway — is that this magic number may ultimately not matter as much as the most vitriolic debaters insist.

At issue are such drugs as Biogen Idec’s Avonex, for multiple sclerosis, which can cost more than $20,000 a year; Genentech’s Avastin for cancer, which can cost more than $50,000; and several Genzyme drugs for rare diseases that can cost $200,000 a year or more. Typically, such drugs are given by injection or intravenous infusions.

These drugs, known as biologics, are complex proteins made in vats of living cells. Because they are hard to copy exactly, they have not been subject to the generic competition that eventually knocks down the price of drugs like Lipitor and Prozac. Pills like Lipitor, known in the industry as small-molecule drugs, are made from simple chemicals whose recipes are easy to reproduce.

But now Congress, as a cost-cutting piece of the overall health care effort, is preparing legislation to enable the Food and Drug Administration to approve copycat versions of biologic drugs. That could save consumers, insurers and the government billions of dollars in the coming years.

The trick is to allow competition without undermining the financial incentives the pharmaceutical industry needs to undertake the risky job of developing the next drugs for cancer and other diseases. That is where the magic year number comes in. Trade groups for the big pharmaceutical and biotechnology companies say that to recoup their investments, they need an exclusivity period free of generic competition that would last 12 to 14 years from the time the F.D.A. approves a drug for sale.

But consumer groups, insurers, employers and generic drug companies say anything more than five years — the exclusivity period now given to small-molecule drugs like Lipitor — would eviscerate any potential savings from the new competition.

So far, the biotechnology industry appears to be winning. The Senate’s health committee, for example, has agreed to 12 years of exclusivity. In the House, a bill that provides at least 12 years of exclusivity has many more co-sponsors than one that would provide five years. The Obama administration has said that seven years would be a “generous compromise.”

But in reality, neither the threats to innovation nor the potential savings from generic competition are as great as claimed.

For starters, whatever the exclusivity period, biologic drugs would also continue to be protected from copycats by patents. And in many cases, the patent protection would last longer than the exclusivity period, making the Congressionally mandated exclusivity a moot point.

Genentech’s Avastin, for instance, has patent protection until 2019 — 15 years after the drug’s 2004 approval by the F.D.A. The company’s breast cancer drug, Herceptin, has patents that extend 21 years from its 1998 approval.

Where the exclusivity period might matter most would be in the cases of drugs whose patents were nearing expiration by the time the developer succeeded in winning F.D.A. approval. But that seldom happens.

“I can’t think of a biotech drug that’s been on the market that doesn’t have more than 7 to 14 years of patent protection,” said Eric Schmidt, biotechnology analyst at Cowen & Company.

Still, it is probably not true, as the other side claims, that the legislation would be virtually worthless if it granted a long exclusivity period. There are plenty of blockbuster biologics, like Epogen and Neupogen from Amgen, that have been on the market more than 12 or 14 years and thus would get no extra protection from even an exclusivity period at the long end of the ranges now being discussed.

As for cost savings, the Congressional Budget Office has estimated that generic biologics might save the government only about $10 billion in the next 10 years. That is a relative drop in the bucket when it comes to paying for health care reform, which is expected to cost about $1 trillion over 10 years.

One reason for limited savings in the first decade is that it would probably take a few years for copycat biologics to reach the market after the law was enacted. Another factor is that biologics accounted for only 16 percent — about $46 billion — of total prescription drug spending last year, according to the market researchers IMS Health. And pharmaceuticals represent only about 10 percent of the nation’s overall health care spending.

The real savings might come more than 10 years out, as new biologic drugs appeared and as biologics represented an increasingly greater part of overall spending on drugs. That ramp-up is already evident: Express Scripts, a pharmacy benefits manager, says its spending on biologics grew 10 percent last year, compared with 2.5 percent for other drugs.

But anyone expecting the price wars that ensue when generic pills come on the market — when prices often drop by more than 60 percent — might be disappointed by the way competition plays out in biologic drugs.

Because it is harder and costlier to make biologic drugs than it is to copy pills, fewer generic competitors are likely to enter the fray. Many experts, including the Federal Trade Commission, expect price declines of more like 10 to 40 percent in biologics.

Even that would be a substantial savings for the overall health care system. But for many individuals, a $35,000 copycat version of a $50,000 cancer drug would still be unaffordable.

Another factor is that generic biologics are likely to undergo greater regulatory scrutiny than generic pills require.

It is difficult or impossible to verify that a copy of a biologic is exactly the same as the original — which is why the drugs are often called “biosimilars” rather than generic biologics. Because even small changes might affect the drug’s safety or activity, it is likely that makers of biosimilars will have to conduct at least some clinical trials to win F.D.A. approval of their drugs, which makers of generic small-molecule pills are not required to do. Such trials can cost a lot of money.

Since biosimilars will not be exact replicas, generic makers will probably need sales forces to persuade doctors to prescribe their drugs and pharmacists to dispense them. All of that costs money, too.

In Europe, which has approved biosimilar versions of three biologic drugs, companies generally price their biosimilar drugs about 20 to 30 percent lower than the originals. The impact in Europe has been limited so far, but in Germany the biosimilars have captured about 30 percent of the market for anemia drugs and forced the brand-name manufacturers to lower their prices.

The likelihood that biosimilar competition might be somewhat muted means that sales and profits of the originals may not necessarily dry up.

Kevin W. Sharer, Amgen’s chief executive, told investors in May that he hoped biotechnology companies would retain 30 to 50 percent of the cash flow from their drugs even after biosimilars reached the market. That, he said, “is a dramatically different outcome than we see in the small-molecule companies.” That is also one reason the Federal Trade Commission, in a report last month, said that no exclusivity period at all was needed. At the very least, because biologic drugs do not require appreciably more time or money to bring to market than small-molecule drugs, it is reasonable to ask why they should deserve longer protection from competition than the five years that small-molecule drugs now receive.

The reason, biotechnology executives say, is that patents may offer less protection for biologics than for small-molecule drugs. Because a biosimilar is not an exact knock-off of the original, a competitor might persuasively claim that it is not infringing the patents on the original drug.

So far biologic patents have held up well in court cases. Amgen, for example, has won legal victories preventing competitors from introducing anemia drugs that are slightly different from its own Epogen.

But generic makers and their supporters, sensing that many of the biologic patents may not withstand court challenges, are lobbying for the shortest possible exclusivity period.

“If your patents are strong, let your patents stand for themselves,” said Katie Huffard, executive director of the Coalition for a Competitive Pharmaceutical Market, a group of employers, insurers, pharmacies and generic makers lobbying for easier access to biosimilars. “That’s what every other industry has to do.”

Costly Drugs Known as Biologics Prompt Exclusivity Debate,
NYT, 22.7.2009,
http://www.nytimes.com/2009/07/22/business/22biogenerics.html

Editorial

When Drug Costs Soar Beyond Reach

April 15, 2008
The New York Times

It doesn’t take a health policy expert to recognize that something has gone terribly wrong when patients have to pay thousands of dollars a month for drugs that they need to maintain their health — and possibly save their lives. Congress needs to determine why this is happening and what can be done about it.

The plight of patients who have recently been hit with a huge increase in their insurance co-payments for high-priced prescription drugs was laid out in The Times on Monday by Gina Kolata. Instead of paying a modest $10 to $30 co-payment, as is usually the case for cheaper drugs, patients who need especially costly medicines are being forced to pay 20 percent to 33 percent of the bill (up to an annual maximum) for drugs that can cost tens of thousands of dollars, or even hundreds of thousands of dollars, a year.

These drugs — what insurers call Tier 4 medicines — are used to treat such serious illnesses as multiple sclerosis, hemophilia, certain cancers and rheumatoid arthritis. And since there are usually no cheaper alternatives, patients must either pay or do without, unless they can get their medicines through some charitable plan.

There is little doubt that the so-called tiered formularies, in which co-payments rise along with the cost of the drugs, are a sensible approach for encouraging consumers to use the cheapest drug suitable for their condition. But the system seems to break down when it moves to Tier 4 drugs where co-payments can be huge and suitable alternatives don’t exist.

The insurers say that forcing patients to pay more for unusually high-priced drugs allows them to keep down the premiums charged to everyone else. That turns the ordinary notion of insurance on its head. Instead of spreading the risks and costs across a wide pool of people to protect a smaller number of very sick patients from financial ruin, insurers are gouging the sickest patients to keep premiums down for healthier people.

The health insurance system is so complex that it is hard to parse the blame for this injustice. The drug companies, especially the biotechnology companies, are at the root of the problem; they often charge exorbitant prices for monopoly drugs that were developed with heavy government assistance. Washington needs to rein them in by encouraging generic competition for biological drugs and allowing government programs to negotiate lower prices.

Employers, including the federal government, also bear responsibility. They have been pressing to reduce their prescription drug expenditures, and all health care expenditures, by shifting more of the burden to patients. One patient who had been paying only $20 for a month’s supply of a multiple sclerosis drug was shocked when the charge rose to $325 per month. (It has since been suspended.) Another patient found that his co-payment for a newly prescribed leukemia drug would exceed $4,000 for a 90-day supply, so he has deferred buying it.

If patients do without medicines or put off taking them, the likely result will be sicker patients, and higher costs, down the road.

What is not clear is whether insurers are primarily reacting to pressure from employers or are exploiting the situation to increase their profits. Congress needs to probe hard to find out how many patients are facing enormous drug bills and how best to protect them from medical and financial disaster.