GOUGING – THE WONDERS WE CREATED AND THE POTHOLES WE DUG

To be audacious with tact you must know when you’ve gone too far. Jean Cocteau

When I started learning about Martin Shkreli I expected to find a canary in a coal mine– the Edward Snowden of drug prices– an in your face rebel trying to force the country to stare hard at its absurd drug pricing system. But that wasn’t who he was. Shkreli, the son of immigrants, went to business school and worked on Wall Street. He allegedly (when young and new) exaggerated or lied to some of his hedge fund clients. He insists the people who stuck with him all made a profit, so no harm done. He later became the head of a pharmaceutical company and overpaid for a drug called Daraprim.

The medication was developed 75 years ago and was originally used to fight Malaria. It was one of many drugs developed by Nobel Prize winner Gertrude B. Elion, a woman who rose to the top in a discipline dominated by men. The daughter of a Lithuanian dentist who was bankrupted by the 1929 stock market crash, she graduated from tuition free Hunter College, and worked as a lab assistant to earn the money needed for her graduate studies. When she was finally able to study advanced chemistry she noticed she was the only female in the class.

The medication she created, Daraprim was owned by Glaxo Smith Kline. It had been around for decades and couldn’t have been very profitable. In 2010 the drug was sometimes used to treat Toxoplasmosis, a parasite transmitted by cats that can damage the eyes and brains of newborns.

In people with advanced AIDS, people whose immune system has lost its ability to protect them from the microscopic organisms that live harmlessly and unobtrusively in our bodies, the parasite can invade the central nervous system. After it gets a foothold it can cause focal cranial lesions and encephalitis, a potentially lethal inflammation of the brain. Daraprim, also known as pyrimethamine, plus sulfadiazine and anti viral therapy is the treatment of choice for the infection.

HIV destroys T cells, immune cells that protect us from invaders. Over years untreated people with HIV have fewer and fewer of these defenders. When their CD4 count, the number of circulating T cells, drops below 200, the person affected has the full blown disease– “AIDS”. Creatures that were barely surviving start to wreak havoc. When the CD4 count goes below 100, the parasite that causes Toxoplasmosis can become a problem.

A little over a million Americans are living with HIV. The majority are taking drugs every day. The virus is suppressed and is not destructive. 15% of those infected are unaware. A little over 6000 U.S. deaths annually are attributed to HIV. I don’t know how often Toxoplasmosis contributes to their demise.

Made in a few places in the world, Daraprim had long been available and cheap. Glaxo Smith Kline couldn’t or wouldn’t raise the drug’s price for practical, philosophic, and public perception reasons. So it was kind of a financial loser. One of several drugs that was sold or dumped by GSK, Daraprim was briefly owned by a drug company called Tower holdings. After a series of drug company acquisitions and mergers the drug became the property of Impax of Hayward California.

The company (allegedly) claimed they sold $9 million dollars worth each year and made little or no profit. In August 2015 they got rid of the product. They convinced Turing Pharmaceutical to buy it for $55 million. At the time Turing was a privately held start up with offices in Switzerland and New York. According to its LinkedIn page, the company once had 50 to 200 employees.

After the drug was acquired, Turing tried to start campaign to make mothers aware of the possibility of transmitting Toxoplasmosis to their fetus. I’m not sure why. Toxoplasmosis in newborns is uncommon. Of the 4 million children born in the U.S. each year, an estimated 400 have Toxoplasmosis. That’s .01 percent. When Daraprim (pyrimethamine) is fed to pregnant animals many of their offspring are born with abnormalities. So we avoid giving the medication to pregnant women.

Once Daraprim was part of Turing’s arsenal, the company’s CEO, Shkreli, raised its price from $13.50 to $750 per pill. A self professed Republican he chose to not explain the price hike. It was legal. Drug companies raise their prices all the time.

“You can get away with high drug prices if you do it right,” Barrie Werth once said. “If he had raised the price 30 times instead of 5,000 times, he could have gotten away with it.¹“

Because of its high cost, pharmacies and hospitals were reluctant to stock the medication, and it was hard to obtain on short notice. Then a person with AIDS was hospitalized with a Toxoplasmosis brain infection. His doctor found it difficult to get the drug and Dr. Judith Aberg, the head of infectious disease at a New York medical center got involved. Outraged by the price she told the person’s story to the New York Times and Shkreli was vilified.¹²

And he wasn’t contrite. When he later appeared before a congressional committee he refused to answer questions. He took the fifth. The amount charged for the drug was legal, and Shkreli was not apologetic. He was interviewed repeatedly by Journalists and became infamous.

His company, Turing was sued by Impax. They no longer owned the drug but, reportedly, still owed the government $30 million for Daraprim related Medicaid requirements. Impax wanted Turing to pay, but a judge found it wasn’t part of the contract. Then the department of justice indicted Shkreli for alleged misconduct as a hedge fund manager. He was found guilty on 5 of 8 charges, he lost his job, and the company laid-off a lot of people.

As Shkreli said on an internet talk show (edited) “in life you can play the game or you can give up the fakeness and be yourself. It has drawbacks. We saw a major insider trading case that was settled by the SEC. Big banks take millions in fines. No one gets arrested. There was a security charge that I manipulated stock price and another that I defrauded investors. They all made money.”

“People with insurance or under Medicaid don’t pay for their drugs. They pay co-payments”…. (which can be quite significant.) Much of the cost of Daraprim, like most expensive drugs, is borne by the tax payer or it becomes part of the rising cost of health insurance. And that wasn’t Shkreli’s problem. He wasn’t a rebel. He had no cause.

I don’t know what Daraprim costs today. Shkreli, who was out on bail was rearrested for a stupid internet prank, and the judge had him imprisoned. I have no idea what makes him tick, but I know his antics have little to do with the high cost of many drugs in this country.

Numerous Americans are bothered by the cost of the medications they take, but they don’t usually focus their ire on the big pharmaceutical companies. Instead they talk about “the gougers”—the notorious few who dramatically jacked up the price of the drug that helped a few people who were dying of AIDS or Epipen. Their antics grabbed the headlines. Congress held publically televised hearings, and in the eyes of many Martin Shkreli, and Heather Bresch, became public enemy number one and two.

When Heather Bresch appeared before Jason Chaffetz’s congressional committee in September 2016, the congressmen and women probably assumed she would quietly accept their outrage and verbal reprimand then continue “getting filthy rich at the expense of their constituents…and have no remorse.” As a leader at Mylan Pharmaceuticals she was in charge of a product, EpiPen. Her company had purchased the contrivance from Merck in 2007. There was a marketing campaign. The awareness of the device’s importance as an emergency treatment for severe allergic reactions had grown. The company “had pushed through legislation that made EpiPen a main stay in schools.” And the sale and price of EpiPen grew dramatically.

After her congressional appearance, in at least one subsequent TV interview Bresch, a mother of 4, and the daughter of West Virginia Senator Joe Manchin, appeared thoughtful and concerned. She answered questions like a well schooled politician–with her talking points: The system incentivizes higher prices for brand named products. Too many schools did not stock Epipens. They were underserved. The company spent a billion dollars improving access and awareness about severe allergic reactions and how to treat them.

The Autoinjector, the device that automatically squeezes the drug into a person’s body, was invented in the mid 1970’s The FDA approved its use in 1987. It is presumably no longer patented.

The drug, epinephrine, was one of the world’s first hormones. Isolated from the adrenal glands of animals in the late 1800s, it was purified and patented in 1902 by Jokichi Takamine, a Japanese chemist liing in the U.S., and has long been the antidote for a severe allergic reaction. (13). When a susceptible individual senses his or her body reacting to an allergen, when they develop hives, wheezing, or become faint because their blood presure is dropping–if they are severely allergic to bees, have just been stung, and are starting to react, they take out their device, remove the top, put the needle end against their thigh, and press a button. A sharp painless needle bursts out of the syringe, pops through their clothes and skin, and enters their thigh muscle. Then the “plunger” automatically pushes the drug into the person’s body.

Between 2007 and 2016 the list price of a two-pack went from $94 to $609, an increase of 500%.²EpiPen generated $184 million in net sales revenue in 2008, and Mylan thought they would take in $1.1 billion in 2016. That was a fivefold increase in gross income. At the time of the Congressional hearings two prefilled syringes were selling for over $600. A Congress person derided company’s “simple corrupt business model.” Find an older cheap drug that has virtually no competition and raise the price over and over, taking advantage of the monopoly.

Bresch was repeatedly asked how much of the money was profit, and she kept changing the subject. The FDA representative sitting next to Bresch said the agency would review new applications for epinephrine injectors within 10 months.

The rapid rise in price had created a stir. Representatives and reporters needed to express their indignation. And they did. The publicized outrage also alerted a few entrepreneurs who were watching or reading about the hearing. Some saw a way to earn a quick buck. If EpiPen could bring Mylan hundreds of millions in profits each year, and if there was nothing keeping other companies from making and selling an identical product, why not get a piece of the action.

A few companies joined the fray and by the summer of 2017 EpiPen must have been feeling the heat. In Canada and the U.S. the price of EpiPen and a recently approved self injecting epinephrine Allerject sold for $130 a syringe.

CVS Health had a deal with epinephrine syringe provider Impax Labs, and was selling their authorized generic product, Adrenaclick, for $109.99 for a 2-pack.

And by 2011 a fourth epinephrine auto injector Symjepi, produced by San Diego’s Adamis company had been approved but had not yet been priced.

Bresch may have been unashamed, but the massive price hike opened a few eyes; and they saw gold in them there syringes.

THE PRODUCT NO ONE WANTED

In October 2010 GSK (Glaxo Smith Kline) dumped/sold a loser–the U.S. marketing rights for albendazole. Amedra, a small American drug company picked them up. The details of the deal were not disclosed (or at least I couldn’t find them on the web.)

As part of the agreement GSK agreed to continue manufacturing the drug for Amedra in the short run. They also renewed their pledge to the world health organization. They would continue to give the organization 600 million tablets per year as their contribution to the struggle to free the world from Lymphatic Filiariasis. A condition caused by microscopic thread worms that block the flow of lymphatic fluid the “neglected tropical disease” can cause an arm, leg, or testicle to swell and disfigure. As explained by the CDC the mosquito-borne condition affects 120 million people in 80 countries.” The Global Alliance is trying to rid the planet of the parasite by annually giving albendazole and ivermectin to all of the occupants of communities that are at risk.³

GSK proudly proclaimed their company “is committed to improving the quality of human life by enabling people to do more, feel better and live longer.” (I suspect GSK didn’t seriously consider raising the U.S. price, in part because they didn’t want to deal with the publicity such a move would engender.)

Albendazole was patented in 1975. It was invented by Robert J. Gyurik and Vassilios J.Theodorides, after Vassilios, a biochemist working for GlaxoSmithKline, read an article and had an insight. Raised in a small Greek village near the Macedonian border, the drug’s inventor never forgot the morning when German soldiers surrounded his town and marched its occupants to the village center. He was 10 years old. The soldiers told everyone to bring out their guns. Then they searched the houses. Finding shotguns in two homes they publically shot the men who had not obeyed. After the war Vassilos was briefly a shepherd. One day when he was 14 he left his flock of 200 lambs grazing in the public pasture and walked 11 kilometers to take a high school entrance exam. He was in another village studying the day in 1947 that Communist soldiers burned his village and killed 48 people. Some of them were relatives. Schooling was easy—natural. After he finished high school, planning to become a mathematician he visited the university office and asked where the mathematics school was. The clerk asked: what’s wrong with the Veterinary school? And he checked it out. As a veterinary student he developed an interest in research. Deciding he needed a PhD and knowing his future wife’s family had emigrated to Boston, he came to the U.S. and earned a PhD. As a young struggling postgraduate he worked for Pfizer in Terra Haute Indiana for two years. The town had a total of two Greek families. The mayor was Greek, and Vassilos wife was unhappy. So they moved to Pennsylvania for a research job at Smith Kline and French laboratories. One day, years later he read an article, and he had an “aha” moment. Unexplainably he somehow “knew” how to design the chemical that became Albendazole. (He quotes Pasteur: “God helps the minds that are prepared.”) Introduced in 1977, the medication was initially given to animals in Australia and New Zealand, but it was not approved for people in the U.S. because someone at the FDA decided it was carcinogenic. Vassilios met with people at the agency and showed them that their “mathematical approach in evaluating its potential carcinogenicity was incorrect.” They agreed, and humans started using the medication in 1982.

The bugs Albendazole kills exist in the intestines of 1.5 billion people. Most of the people who carry the parasites live in places that have poor sanitation. The bugs enter our bodies in childhood, with food that’s not thoroughly cooked or when we drink tainted water. Some penetrate the skin of a child or adult who walks “barefoot on contaminated soil.”

They come in a variety of sizes and shapes: tapeworms, long, flat, segmented ribbons that enter when we don’t cook the animals we eat. Pinworms, half an inch long nematodes that cause anal itching; ascaris, tiny snake like creatures. hookworms that suck our blood, and many more.

One day when my grandson, who had never lived in a third world country, was 3 or 4, he passed a worm. My daughter checked the internet, identified the creature and put it in a jar. When she showed it to her doctor he was taken aback, amazed. His nurse who had grown up in a village in the Phillipines merely shrugged. We still have no clue as to where or how the worm got in the kid’s body.

In India Albendazole commonly sells for $18. According to Wiki, in some countries it costs a penny to 6 cents a dose. In 2016 Amedra purchased the medication as part of “a portfolio of 15 generic drugs from Teva and Allergan for about $586 million.” A subsidiary of Impax, the publically held pharmaceutical company’s website says they are “engaged in the development of propriety pharmaceuticals.

”With the U.S. rights in their pocket Amedra raised the price pretty dramatically. In late 2010, the average wholesale price for the medication was “$5.92 per typical daily dose”. By 2013 it had jumped to $119.58. Medicaid spent less than $100,000 per year on Albendazole in 2008, and more than $7.5 million in 2013. Doctors in this country are prescribing it more often because the CDC thinks we should presume that refugees that come here from poor countries have parasites in their intestines, and we should treat them. Part of the stepped up spending is the result of increased demand.

The year after Amedra bought Albendazole, Teva, stopped manufacturing the drug’s only U.S. competitor, Mebendazole (brand name-Vermox). That made Amedra the only U.S. player in the intestinal parasite business.

“U.S. antitrust laws protect consumers only from anticompetitive strategies such as price fixing among competitors.
Manufacturers of generic drugs that legally obtain a market monopoly are free to unilaterally raise the prices of their products.
The Federal Trade Commission will not intervene without evidence of a conspiracy among competitors
or other anticompetitive actions that sustain the increased price.¹⁰”

Amedra does have a program that supplies the medication to the impoverished, “but these programs often have complicated enrollment processes.⁴”

A few years back a Philadelphia drug manufacturer got exclusive FDA rights (a many year U.S. monopoly) to a drug I had been using for 40 years. The medication, Colchicine, is a plant extract that was used to treat gout before Jesus was born. It is one of a handful of ancient cures that withstood the test of time. The flower that produces the alkaloid was introduced to the new world by none other than Ben Franklin, an innovative guy who used the ancient remedy to treat his painful joints. I learned about the medication in medical school, and have advised many to take it. It has its share of side effects, and over the years has helped many of my patients, while making a few sick. The books back then told doctors to give repeated doses to people with acute painful joints. We didn’t stop till the pain subsided or the patient became nauseated or developed loose bowels. That turned out to be too aggressive for a few of my patients, and I quickly adjusted my approach.

For centuries physicians have successfully used it, but no one did a double blind controlled study. Most docs would have thought withholding the drug from the control group would neither be necessary nor ethical. Then, 23 years ago, doctors in New Zealand did the study. Their 1987 paper was titled: Does colchicine work? The results of the first controlled study in acute gout.⁹ Half the people with an acutely inflamed joint took the real drug; the other half a placebo (an inert look alike pill.) People taking colchicine improved more rapidly and more completely.

In the company’s defense, clinical experience is sometimes misleading. On occasion useful drugs fail or people get well in spite of us. But colchicine has been used a lot over the centuries, and if the test of time means anything, the medication has always passed with flying colors.

The drug was available, cheap, on the pharmacy shelf. No one had to go to the FDA to bring it to market. Then some whiz kid figured out how his company could get exclusive rights to the old herbal remedy. They ran a trial where neither the investigator nor the patient knew what substance was being used. (Though, frankly, it’s hard to not know when the pill you are testing causes nausea and diarrhea at high doses.) Colchicine, of course, worked. The results were presented to the FDA and the whiz kid’s company got exclusive rights to sell the herb extract in this country. “After the FDA approved Colcrys, the manufacturer brought a lawsuit seeking to remove any other versions of colchicine from the market; and it raised the price by a factor of more than 50, from $0.09 per pill to $4.85 per pill.” Since this is a widely used medication they apparently stand to take in an additional 50 million dollars a year during the next 7 years. (The manufacturer received 3 years of exclusivity for gout and 7 years for Familial Mediterranean Fever, although no new FMF studies were conducted). (Outside the U.S. colchicine still costs 9 cents a pill.)

On May 6^th 2018 the TV show 60 minutes explored Mallinckrodt Pharmaceutical’s decision to sell Acthar Gel for $40,000 a vial. (7 years earlier the same vial was priced at $40.)

The product is one of many hormones made in the pituitary, a small gland located at the bottom of the brain. Acthar, the brand name for a hormone called ACTH, is extracted from slaughtered pigs, and it tells the adrenal gland to make cortisol. In the early 1950s it was a means of giving some patients cortisone. In 1955 prednisone became available and doctors largely stopped using Acthar. The product was left with but two “accepted” indications: It uniquely helped a rare seizure disorder– infantile spasm; and it was used to help diagnose the cause of adrenal insufficiency. By 2001 doctors were only prescribing Acthar now and then, and it was a money loser. But some kids needed it, and its manufacturer, Aventis, apparently felt someone should keep producing it. That year the French pharmaceutical company managed to sell the drug to Questcor, a California “pharmaceutical company” that was losing money. Questcor paid $100,000 for the medication, raised the price, promoted the hormone for a few additional “indications”, and turned a profit. In 2013 Forbes named Questcor the best small company of 2013; and in 2014 Mallinckrodt paid 5.6 billion for Questcor and its money maker, Acthar.

In 2018 the FDC charged Mallinckrodt with price fixing. To keep the price high the company paid Novartis $135 million dollars and acquired the rights to Synacthen, a drug that is biologically similar to Acthar and was Acthar’s only competition. “Then they put the drug on the shelf.” At the time Synacthen was selling for 33 dollars in Canada.¹¹ Mallinckrodt was charged with antitrust and, admitting no wrong, settled the case for a hundred million dollars. The company makes more than a billion dollars a year on Acthar alone. With only 2000 cases a year of infantile spasm, the company then started marketing their hormone stimulator for a few additional diseases, like rheumatoid arthritis. And they were successful. According to 60 minutes, in 2015 “Medicare was spending half a billion a year on Acthar⁶.”

In April 2017 Maryland passed a price gouging law. It empowered the attorney general to indict companies if they “shocked the conscience” by dramatically raising the price of an off patent drug. The following year the Court of Appeals ruled the law was unconstitutional, and the Supreme Court did not weigh in. Absent a new amendment to the Constitution, Americans who “shock the conscience” have the inalienable Right to Gouge.⁷

9. Aust N Z J Med 1987; 17:301-304.
10. Excessive Pricing in Pharmaceutical Markets. Organization for economic co-operation and development https://www.ftc.gov/system/files/attachments/us-submissions-oecd-2010-present-other-international-competition-fora/excessive_prices_in_pharmaceuticals_united_states.pdf
11. Rockford Illinois lawyer Dan Havilland https://www.businessinsider.nl/rockford-mallinckrodt-express-scripts- drug-pricing-lawsuit-2018-5/
12. https://www.nytimes.com/2015/09/21/business/a-huge-overnight-increase-in-a-drugs-price-raises-protests.html By Andrew Pollack Sept. 20, 2015
13. epinephrine https://digital.sciencehistory.org/works/5x21tf430