Congress Probes Pricing On Two Repurposed Drugs
11 CommentsBy Ed Silverman // May 25th, 2011 // 7:03 am
Earlier this year, a scandal erupted after KV Pharmaceuticals won approval for its Makena drug to prevent premature births and charged $1,500 for treatment, an eye-popping increase for a med that was previously available from compounding pharmacies for $10 to $20 for decades. The move was possible because the FDA approval came with marketing exclusivity under the Orphan Drug Act (see here).
The episode prompted accusations of price gouging and forced the FDA to decline to pursue compounders (read this and this). Moreover, the red-hot controversy focused renewed attention on older drugs that are repurposed, win FDA approval and gain a lock on the market that allows prices to be increased dramatically.
And so Herb Kohl, who chairs the Senate Special Committee on Aging, and three members of the House are investigating two other drugmakers that recently won similar advantages. One is URL Pharma, which sells a version of colchicine called Colcrys to treat gout and benefited after the FDA forced other manufacturers to halt marketing on the grounds their own pills were never approved (look here). Like KV, URL won approval under the Orphan Drug Act and received seven years of marketing exclusivity. Meanwhile, the older pills had sold for pennies, while URL began charging approximately $5 for each of its own.
The other company being targeted is Avanir Pharmaceuticals, which sells Nuedexta, a medication used to treat involuntary emotional outbursts known as pseudobulbar affect. The drug combines two older generics - quinidine, which prevents heart arrhythmia, and dextromethorphan, a cough suppressant. However, Avanir obtained three years of marketing exclusivity after winning FDA approval last fall and began charging about $600 for a drug that cost about $20 for decades.
“Although we recognize that we all benefit when FDA approves a new, safe and effective formulation, it is not clear that the significantly higher prices charged for this drug are justified given that it is merely a combination of long-used and inexpensive generic medications,” the Democratic legislators wrote Avanir. And their letter to URL chastises the drugmaker: “Charging prices for newly-patented drugs fifty times higher than for the price of the same drugs that have been used for decades greatly increases costs for our nation’s health care system” (read here).
Along with New Jersey’s Frank Pallone, California’s Henry Waxman and Colorado’s Diana DeGette, Kohl wants both URL and Avanir to provide all sorts of information, including the total cost of the clinical trials that led to the approvals; marketing costs and plans; documentation that led to their pricing strategies; anticipated revenue and profits, including projected sales from government health plans, and information about customers who have participated in a patient assistance program.
An Avanir spokesman declined to comment when contacted. No one URL could be reached, but we will update you accordingly.
pills and money thx to carbonnyc on flickr
Robert
Congress never asks about the cost of approval or compliance. Not to totally justify pricing but there is a lot more to investment recoupment than marketing. And of course FDA must have more money to carry out their mandate. Give me a break!
Pharmfresheggs
It’s interesting that some recent reports have shown that a large number of patients with substantial co-pays on high priced cancer oral meds just simply stop filling their prescriptions. Why should insurors and the government pay such high prices for these drugs when those who are supposed to benefit judge the benefit to not be worth the much smaller cost they’re being asked to pay? Until the government’s hands are untied with respect to making judgements about cost-benefit, we will continue to see this jaw-dropping pricing of drugs. Companies need to make a profit, yes, but a killing? Please excuse the pun. For once, Congress is doing its job here.
Robert
I think one of the bigger issues is the FDA’s requirements; costly and not always on par. FDA approval was once a gold standard and unfortunately now it’s simply a regulatory means to an end. A company should be expected to price product that will provide a reasonable return to investors or investors will simply disappear. Watch the FDA video at http://www.fda.gov/Drugs/ResourcesForYou/HealthProfessionals/ucm211975.htm . They concur that FDA has no mandate regarding control of pricing.
ReasonedPerson
Pharm -
“Companies need to make a profit, yes, but a killing?”
Who is to judge the difference between making a profit and making a killing?
If you believe that is the role of Congress, then you have just given Congress a lot more power than the constitution gives them. Should Congress hold trials to determine whether all companies charge “fair” prices? Imagine the corruption that would come from that.
The only objective measurement of a fair price is the market. For years millions of PBA patients have lived without 1) a diagnosis of their ailment and 2) a treatment for it. Avanir has the moral right to charge whatever price they want, and patients have the right to buy the drug or not buy the drug. If the price outweighs the value they won’t buy the drug, which will cause the cost to go down. It’s basic economics.
Yes, the fact that government subsidizes and regulars so much of the drug industry complicates matters, but an overreaching government is to blame for that. It is not a drug company’s fault that central planners screwed up our free market.
Salient point
ReasonedPerson-Agree in principle. This particular situation merits Congressional involvement, however. Essentially, these companies are exploiting a loophole in the Orphan Drug Act to garner exclusive rights to old, established drugs & increase the price by several multiples. The legislature does have the right to determine the appropriateness of this practice & amend the legislation to prevent it from happening in the future if so desired.
harpy
what market? perhaps you missed the part where the company gets an exclusive right to sell? I swear, you so-called “free market” people would pee your pants if you ever saw a truly free market.
please note:
“free” market price for colchicine - pennies. URL price - $5/pill
“free” market price for Makena drug - $10-20/treatment. KV price - $1,500/treatment
do go on…
tedw
These 2 are a bit apples and oranges. URL simply took advantage of the Orphan Drug act offer for exclusivity of pre-FDA treatments for taking on the burden of doing the trials and filing for formal FDA approval. Avanir took 2 generic compounds that have never been used together and tested them for a disorder never treated by either or the combination of these generics. This is a realistic innovation and represents significant risk and investment. And if someone doesn’t want to pay for the drug, the generics are available at generic prices. Getting the exact dose of each is a bit of a challenge, but I suspect it can be done.
All that said, what gives Congress the right to demand all these documents with the clear intent of making a value judgement? And the cost of branded colchicine “greatly increases costs for our nation’s health care system”? Seriously? It’s an eye dropper of water into a large bucket at best.
Pharmfresheggs
Let’s not forget that choosing to pay or not pay for a drug or procedure is a very different situation from choosing to pay or not pay for an ipad. We should stop pretending that the economics of these two situations are the same.
Salient point
tedw-The legislature does have the right to ask for the documents, as it has. It doesn’t have the right to compel that they be handed over, of course. But it also has the right to revisit the ODA & close the loophole, which wouldn’t affect these products but would prevent companies from doing this in the future.
Or the companies could play ball, share whatever info seems appropriate & perhaps reach a conclusion that isn’t quite so draconian. Their call, really.
mml
I think nationalizing the pharmaceutical Industry would solve many of our current financial medical woes.
industry insider
Great idea mml, and would further suggest that we nominate that man form all seasons and reasons, Dr. Joseph Biden to be Chief Medical Officer.