GOUGING

Most Americans haven’t see drug costs as “their problem.”  They have good insurance, or they don’t have a costly illness, or they’re too proud to complain.  Then a few individuals got control of an old, little used drug and jacked up the price.  Newspaper headlines and T.V. commentators were on it.  And the average guy and gal was so incensed that Congress had to hold publically televised hearings..

Public enemy number one was Martin Shkreli.  When I started learning about him 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 what I found.  Martin 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.  One of many drugs developed by research genius and Nobel Prize winner, Gertrude B. Elion, it was owned by Glaxo Smith Kline and couldn’t have been very profitable.

In 2010 Daraprim 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, the parasite can cause serious brain disease—encephalitis and focal brain lesions.

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 drops below 200 the person affected has the full blown disease– “AIDS”.  Creatures that were harmlessly living in the person’s body multiply, and start wreaking havoc.  When the CD4 count goes below 100 the parasite causing Toxoplasmosis becomes a problem.

A little over a million Americans are living with HIV.  Most are taking drugs every day and their virus is suppressed, harmless.  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.

Daraprim, also known as pyrimethamine, is the treatment of choice for the brain diseases caused by Toxoplasmosis. Made in a few places in the world, it 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 acquisition/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—convinced Turing Pharmaceutical to buy it for $55 million.  At the time Turing was a privately held company with offices in Switzerland and New York.  According to its linked in 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.

Turing’s CEO, Shkreli raised the price of Daraprim 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 the price 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.”

Because of its high price pharmacies and hospitals were reluctant to stock the medication, and it was hard to obtain on short notice.  The press started publishing stories of sick people who had difficulties getting the drug and who were outraged by its price.  Shkreli was vilified.  And he wasn’t contrite.  He appeared before a congressional committee and refused to answer questions.  He took the fifth.  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.  The price rise was legal and Shkreli was not apologetic.  Then the department of justice decided to indict Shkreli for alleged misconduct as a hedge fund manager.  He was found guilty on 5 of 8 charges and he lost his job.  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.  (In other words, 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 his 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 drugs in this country.

A DRUG THAT STARTED A GOLD RUSH

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.

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 first synthesized in 1904, and has long been the antidote for a severe allergic reaction.  When a susceptible individual senses his or her body reacting to an allergen—when they develop hives, wheezing, or become faint because their blood pressure 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 their syringe, pops through their clothes and skin, and enters their thigh muscle. Then the “plunger” automatically pushes the drug into the person’s body.

At the time of the congressional hearings two prefilled syringes sold for over $600. (Between 2007 and 2016 the list price of a two-pack went from $94 to $609, an increase of 500%.) http://www.businessinsider.com/epipen-price-increases-2016-8.  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.  EpiPen 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.

Bresch was repeatedly asked how much of the money was profit, and she kept changing the subject.  The FDA representative sitting next to Breach 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 a fourth epinephrie 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 their syringes.

THE PRODUCT NO ONE WANTED

In October 2010 GSK (Galaxo 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.   And they 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—an awful chronic disease.  GSK proudly proclaims 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.  Invented by Robert J. Gyurik and Vassilios J. Theodorides and assigned to SmithKline Corporation, It was introduced in 1977 as an antihelminthic for sheep in Australia.  Humans used it after 1982.  (Helminths live in the intestines of 1.5 billion people. Usually acquired in childhood, the parasites are ingested with tainted food and water, by children who play in the contaminated soil, then eat, and by kids who go barefoot in certain parts of the world.)

Amedra is a subsidiary of Impax, a publically held pharmaceutical company that buys drugs.  In 2016 they purchased “a portfolio of 15 generic drugs from Teva and Allergan for about $586 million. Their website says they are “engaged in the development of propriety pharmaceuticals.”

People who live in places that have poor sanitation commonly carry worms in their intestine, creatures most modern day westerners never heard of—tapeworms like Cysticercosis and echinococcus—Nematodes like pinworms, ascariasis, and hookworms.

The parasites are so common in the guts of U.S. bound refugees that the center for disease control recommends we treat these newcomers presumptively with Albendazole and other drugs.  In India the medication commonly sells for $18 and, according to Wiki, in some countries it costs a penny to 6 cents a dose.

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 increased spending is the result of increased demand.

The year after Amedra bought Albendazole, Teva the generic drug company that later sold 15 drugs to Amedra, stopped manufacturing the drug’s only U.S. competitor,  Mebendazole (brand name-Vermox), for “business reasons”  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.”

Amedra does have a program that supplies the medication to the impoverished, “but these programs often have complicated enrollment processes”  High-Cost Generic Drugs: Alpern et al, N Engl J Med 2014 Nov 13, 2014

The FDA has approved Albendazole as a treatment for—sorry if I bore you–: Neurocysticercosis (pork tapeworm; Taenia solium) and Hydatid disease (dog tapeworm; Echinococcus granulosis)*

It’s also used in most of  the world for a number of other parasites:  Ancylostoma caninum (eosinophilic enterocolitis); Ascariasis; Chinese liver fluke (Clonorchis sinensis); Cutaneous larva migrans (dog, cat hookworm); Enterobius vermicularis (pinworm); Filariasis (Mansonella perstans); Gnathostomiasis; Hookworm (Ancylostoma duodenale, Necator americanus); Microsporidiosis; and Visceral larva migrans (toxocariasis).  And it is also used by vetenarians.

Amedra as a corporation is a legal entity.  It has a duty to be profitable and enhance stockholder value.  Customers who take Albendazole are usually poor and powerless.  So if the leaders of Amedra don’t get too “ambitious”, don’t raise their prices too much, their price increase will probably be ignored.

A few years back a Philadelphia drug manufacturer got exclusive FDA rights (a 5 or 7 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. (Aust N Z J Med 1987; 17:301-304.)  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.   (Outside the U.S. colchicine still costs 9 cents a pill.)

On May 6th 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 a pituitary hormone.  The pituitary is a small gland located at the bottom of the brain.  Some of the hormones it makes stimulate the thyroid or adrenal gland.  (Acthar induces the adrenal gland to make cortisol.)  ACTH—the hormone– is extracted from slaughtered pigs; it was used in the early 1950s as a means of giving patients cortisone. In 1955 prednisone became available and over many decades 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 aid 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.      https://www.nytimes.com/2012/12/30/business/questcor-finds-profit-for-acthar-drug-at-28000-a-vial.html?module=ArrowsNav&contentCollection=Business%20Day&action

https://dealbook.nytimes.com/2014/04/07/mallinckrodt-to-buy-californias-questcor-for-5-6-billion/