COSTLY DRUGS – THE WONDERS WE CREATED AND THE POTHOLES WE DUG

Chapter 15 –understanding expensive drugs

“We shall find the answer when we examine the problem. The problem is never apart from the answer. The problem is the answer.” Bruce Lee.

SETTING THE PRICE

“The cost of a thing is the amount of what I will call life which is required to be exchanged for it, immediately or in the long run.”
― Henry David Thoreau, Walden

To appreciate how and when Pharma learned it can charge as much as it thinks it can get away with, it helps to scrutinize the price trajectory of Gleevec. The first of many drugs that attacked cancer in a new manner, its cost was high and kept rising. No one seemed to care and the other pharmaceutical manufacturers noticed.

Malignancies start when a newly born single celldoesn’t die when it’s supposed to. It reproduces relatively rapidly; its offspring learn how to escape detection by the body’s immune system; it spreads; and it takes root in distant parts of the body.¹⁵

When I entered medical school in 1958, aside from nitrogen mustard derivatives, cancer altering chemicals were virtually non-existent. In the subsequent decades a number of drugs that attacked rapidly growing cells, malignant or otherwise, were developed. In the 1960s doctors started using combinations of several of these medications to cure some lymphomas and leukemias. The chemicals also commonly eradicated a few uncommon malignancies—like some metastatic testicular cancers and choriocarcinoma.

Our medications were toxic and often caused major side effects, but when they were given to people with widespread cancers, tumors would shrink and some lives were extended.

They were later used to destroy “probable” metastases. We knew that malignant cells from some surgically removed cancers had already seeded parts of the body. The “seeds” were not visible, not detectable; but we could identify the cancers that were at risk, the tumors that would statistically benefit from chemotherapy.

Gleevec (Imatinib), a “small molecule”, was the first of many drugs that attacked cancer in different way. Conceived and fully developed over many years in the labs of big Pharma, it changed the way the industry valued the drugs we use to treat certain malignancies. At $26,000 a year (in 2001), the medication’s introductory cost was deemed “high but fair” by the Chairman and CEO of Novartis. Then the company started increasing the price in parallel with “the purchasing power of money.” After 2005 yearly boosts started exceeding inflation by 5 percent, and the government did not significantly object. By 2007 Gleevec was costing consumers “$3,757 a month ($45,000 a year).” Again there were no substantial objections. The cost of the drug took off in 2009. Its price point passed $60,000 in 2010, and it exceeded the $100,000 a year mark in 2013.¹

The approach helped lead to a new valuation model. Certain classes of medications fresh out of the gate had exorbitant “list prices” and their cost was “adjusted” annually—often in an upward direction.

The product of decades of research at the Ciba-Geigy labs in Basel Switzerland, Gleevec was discovered by a research team chasing a dream, a theory, a hypothesis. Alex Matter, a Swiss M.D. advocated looking for a small molecule that would get inside cancer cells and stop them from growing.

“Inspired by the likes of Louis Pasteur and Marie Curie”, Matter was 12 years old when he began dreaming that he would one day be involved in the discovery of important new medicines.” I don’t know if he ever practiced medicine, there’s not much written about his private life, but in 1983 he became a Ciba researcher in Basel, a centuries old city that straddles both shores of a bend in the Rhine River.

At the time he was apparently wondering what happens when the offspring of a normal cell turns out to be cancerous. Could it be that one of its numerous tyrosine kinase enzymes, proteins that “function as an “on” or “off” switches, gets stuck in the “on” position, and causes the cell to grow and grow”?

Each part of the body is made up of cells. Within each of these small units, traffic is directed down various metabolic pathways by enzymes called kinases.¹⁶ These enzymes control the functions of cells. At the appropriate time they cause them to “grow, shrink, and die.” Malignant tumors are sometimes created when one of the kinases gets stuck in the pro-growth position. The cells don’t die when they are supposed to, and the collection of abnormal cells gets bigger and spreads.

What if we could block a corrupting kinase without harming a cell’s other 90 or so tryosine kinases? Could we cure that cancer? That was the dream.

Kinases have inlets on their outer surfaces. When these are filled by a small molecule that “fits,” the cell dies. Locating the bad kinase and plugging it with the appropriate small molecule is a little like finding a needle in a haystack. But that’s what the Swiss Geigy team lead by Alex Matter and Nick Lydon set out to do. They started with a small molecule that they knew would selectively inactivate one and only one of the 90 or so “tyrosine kinases” found in each cell. Making various small alterations to the protein, they created new molecules and tested them one by one. A few seemed promising. Gradually they made dozens of blockers, each of which inhibited the activity of one and only one kind of kinase. The project took years and must have been quite costly. Geigy funded the studies “reluctantly.” At the time Matter’s was told to keep investigating other approaches to cancer. The kinase program was supposed to be “very very small—hidden in plain sight. “

In the 1980s Lydon went to Boston in search of a cancer that might be susceptible to one of his kinase inhibitors. He met Bryan Drucker, a lanky, soft-spoken physician from St. Paul Minnesota who had spent 9 years at the Dana Farber Institute, was studying chronic myelocytic leukemia and was interested in the drug.²⁸ For technical and legal reasons—lawyers for the drug company and the Dana Farber institute “could not find agreeable terms”–it took a few years before Drucker, then in Oregon, was able to obtain and test the kinase inhibitors. When he did, he found a blocker that caused chronic myelocytic leukemia (CML) cells to die.

Most cases of Chronic Myelocytic Leukemia (CML) are caused by a genetic accident. The tips of two chromosomes have “broken off”, switched location, and fused. The resulting “hybrid” gene, called the Philadelphia chromosome, causes the abnormal cells to keep reproducing themselves. The defect had been elucidated and explained a decade earlier by a hematologist named Janet Rowley.

In the absence of a marrow transplant Chronic Myelocytic Leukemia (CML) was usually lethal. If a person had an HLA identical sibling, and if they underwent a stem cell transplant, they subsequently had a 60-80% chance of surviving and being disease free five years out. Without someone else’s’ bone marrow, half of the affected were dead in 3 years; less than one in 5 lasted 10.²

But now a dream was being realized. A small molecule could selectively inhibit an enzyme and control or cure cancer. Turning the protein into a drug a human could use required proving its safety in animals, then people. Several hundred million dollars needed to be spent before the company could market the medication. And it would only help a few thousand people.

Novartis (the company created by the Ciba-Geigy—Sandoz merger) decided to give the chemical a shot, to see what it did to the cancer in question. It proved to be amazingly effective. Chronic myelocytic Leukemia wasn’t cured but it became a chronic disease, and an entirely new era of research was launched.

The first clinical trial of Imatinib mesylate (Gleevec), took place in 1998. In 2001 the FDA approved the new medication and granted Novartis a 5 year monopoly.

When it first came out the company knew that when patients had CML—chronic myelocytic leukemia, and they took a Gleevec pill each day, they were alive and well three years out. But they worried because most cancers eventually become resistant to therapy. They were pleasantly surprised. Gleevec and a slightly altered later iteration “changed the natural course of the malignancy.

Each year an additional group of people developed CML, and they started taking a pill a day for the rest of their lives. A 2015 study of people who had taken the drug for 10 years, found that 82% of them were alive and progression-free³.” By 2018 “an estimated 8,430 people in the United States” were living with the diagnosis.

And they were living with the price– which “passed $60,000 a year in 2010, and exceeded the $100,000 a year mark in 2013⁴.” The increases “sparked a nationwide conversation on cancer drug prices and value.”

Then the first generic form of the drug entered the U.S. market and it wasn’t much cheaper⁵. (Though it was selling in Canada at a third the U.S. price.)

In 2015 Novartis sold $4.65 billion of the drug. Between 2001 to 2011, sales of Gleevec world wide totaled $27.8 billion. Its 2015 price in the U.K. was “$31,867, France paid $28,675 and Russia spent $8370⁶.”

The company, no doubt, spent millions, maybe more than a billion dollars over the years bringing a great drug to market. But even if the initial price reflected their research and development costs, it clearly had little bearing on the subsequent annual increase in the price point.²⁵

In the U.S the consumer typically pays a percentage of the official list price for the very expensive medications. By 2014 the drug’s list price was close to a $100,000. Medicare is (by law) not allowed to negotiate. Insurers and pharmacy benefit managers can bargain. They sometimes obtain significant rebates and discounts, but they are usually not passed on to the consumer. Our current system creates a burden for many⁷.

In 1970 India allowed drug makers to patent their manufacturing processes but not the active chemical or the drug. As a result a number of cheap generic drugs were developed and marketed. In 1993 Novartis filed a patent application for Gleevec and in 1998 they filed a patent for a new form of the medication. A few years later India joined the World Trade Organization, and started allowing companies to patent the drugs themselves. That year Novartis filed a patent for the 1998 form of Gleevec, and their claim was challenged and rejected. The court felt the company didn’t prove the new iteration worked better than the form that was being sold in India. They accused the company of “evergreening, extending the life of a medication by altering it just enough to warrant patent extensions without changing the underlying mechanism of the drug.” Indian law seems to be more in tune with the needs of their nation’s people than they are with the tricks used by the powerful pharmaceutical industry to further enrich itself.⁸

Novartis researchers, looking for a molecule that was as effective as or better than Gleevec,” modified the protein and tested some of their creations. One of the new molecules, Nilotinib (Tasigna), did a better job at targeting the kinase in question. It rescued some people whose disease no longer responded to Gleevec. In new patients it more rapidly and effectively reversed the biochemical markers of chronic myelocytic leukemia. But it was not better than Gleevec at halting disease progression–and it wasn’t worse. In 2007 the FDA released Tasigna and Novartis started selling it. A few years later a Canadian study showed that 5-6% of people treated with the new medication developed an arterial disease and had a heart attack, stroke, or some other “atherosclerosis-related ailment.” The FDA allowed the company to keep marketing the medication, but Novartis had to put a black box warning on the drug insert⁹.

The year Nilotinib was approved it was costing people $6900 a month. (Median monthly payment). 7 years later, a month of medicine was costing $8806. According to the watchdog web site FiercePharma, generic Gleevec was selling for as little as $40 to $50 a month in 2018. That year Nilotinib was expecting revenues in excess of $2.5 billion. Some doctors and people seem to believe that newer is better.

Researchers for Bristol Myers Squibb created another drug that successfully controlled CML: Sprycel (dasatinib). Like Nilotinib it “produced a faster, deeper response,” but didn’t make people live any longer. It also did not significantly price compete. When approved by the FDA it sold for $5477 a month. In 2014 its monthly list price was $9300.

On August 1, 2019 the New England Journal of Medicine published a study that showed that Ibrutinib, a small molecule– kinase inhibitor that interferes with signals within lymphocytes– improves the survival of people with Chronic Lymphocytic Leukemia. Its side effects: hypertension and heart rhythm problems, were discussed in great detail, but its cost was treated as little more than an afterthought. “Indefinite use of Ibrutinib therapy has been associated with substantial expense.” To the authors and editors of the journal, a price that made a medication unobtainable for some was not a significant side effect. “The typical cost of ibrutinib in the United States will be about $148,000 a year”. People insured by Medicare D typically have co-pays that are 1/3 of the list price.

A second inhibitor of the tyrosine kinase that lymphocytes need to survive, Acalabrutinib, was approved for sale in the U.S. in 2017. It was created by a Dutch-run startup and was developed in the biotech center of the world, California.

In 2018, the cost of 30 days’ treatment with the Dutch drug, Acalabrutinib was $14,064. Thirty days of Ibrutinib was costing $12,180. Competition didn’t seem to significantly affect price.²⁷

Our “free enterprise capitalist economy” encourages innovation by protecting the price of a new medication with patents and a multiyear FDA granted exclusivity. When their monopoly ends, theoretically at least, the amount manufacturers charge should be modified by competition.

When Roy Vagelos was head of Merck, the company “vowed to only increase prices in line with the Consumer Price Index, plus or minus one percent. About half the industry followed suit.” When some companies used loopholes in the drug laws to extend the patents of their successful drugs, Vagelos refused to join in.

Vagelos, a physician and academic lipid researcher, became the company’s CEO in 1966. The son of immigrant Greeks, as a young man Roy spent his after school time working in the family restaurant and playing the violin. His father’s father had been a physician in the old country and had died young. Roy’s father felt that to succeed in life Roy would need a good education, and Vagelos studied hard and went to college on a scholarship. While there, he developed a love for chemistry. During his first year in medical school he “had a very tough time because he had a terrible memory. Anatomy almost wiped him out.” Fortunately, there was also biochemistry and he “survived” and became a talented researcher.

Under Vagelos’ leadership Merck developed Lovastatin and Simvastatin, the first drugs that limited the body’s production of cholesterol. The company then sponsored studies that proved that the drugs lowered the risk of heart attacks and death.

Merck started in Germany in the 1800s and opened its U.S. branch in 1891. In its early days it made medicinal morphine and codeine, and it had been the birthplace of one of the first medical books for the masses, the Merck Manual. While Vagelos was in charge, one of the company’s labs developed a drug that killed a number of the worms that attacked cattle, sheep and horses. Called Ivermectin it was marketed as a means of preventing heartworm in dogs, but it didn’t do much for the hookworm like parasites that lived in the intestines of man. Its commercial value seemed limited. Further research on the chemical was suspended, and it was shelved until the day that Mohammed Aziz, a staff researcher, met with Vagelos and got permission to perform additional studies. Aziz had been in Africa and had seen people infected with the filariae that caused river blindness. 100 million Africans were at risk for the condition and the parasite had blinded 18 million of them. The invading worm existed in two forms: adults, which can be 6 to 15 inches long and exist as lumps under an infected person’s skin; and the filariae, a small organism that infiltrated the skin and caused intense itching. The black fly that lived in the river spread the parasites from one person to the next.

People who had the problem were constantly scratching themselves. When kids scraped their skin, then touched their lids, the microfilaria got into their eyes. The subsequent eye inflammation, lead to scarring and blindness. In some villages 25% of the inhabitants couldn’t see. In an attempt to escape, many moved away from the river to less fertile ground and suffered from malnutrition.

Ivermectin, a Merck drug that had been one of the large pharmaceutical company’s financial failures, destroyed the filariae that attacked horses. Aziz suggested it might have an effect on the creatures that blinded so many Africans. Merck produced a quantity of pills, and Aziz went to Senegal to study their effect. Pinch biopsies of the skin of infected people showed huge numbers of the filariae. Half of the people who were infected got a pill and the other half didn’t. A month later a second biopsy showed the filariae had been eradicated from the people who had been treated.

Based on the positive results Merck spent years performing tests that proved Ivermectin was safe and effective. Then they went to the African leaders and tried to sell it for a dollar a pill. The government had no money. The discussion went something like: OK, 50 cents a pill, a dime. The governments really didn’t have enough money. The World Health Organization was spraying rivers with insecticides (though the black flies were already becoming resistant to the spray). The WHO wasn’t interested. Officials in the U.S. State department and at the White House were excited but “the government was broke.” (Ronald Reagan was president.) The French were about to approve the drug. (There were cases in Paris that had originated in colonial Africa), but in the U.S. the FDA wasn’t interested.

Merck was in business to make money and to enrich its officers and stockholders. But the drug was ready. These were the 1980s, and Roy Vagelos was a doctor as well as a business man. The leadership at Merck decided they would provide the medication free of cost to anyone who would use it. They had spent millions to develop the medication. Providing it gratis would cost the company (and its shareholders) tens of millions of dollars, but Vagelos made the announcement and waited to see how the stockholders would react. He claims he received a lot of positive feedback but he didn’t get one negative letter. For years, thereafter, the best of the best researchers in the country wanted to come to and work for Merck. And Vagelos stayed on as head of Merck for an additional 6 years.

When he reached the mandatory retirement age in 1994, Merck “was number one in sales, size, and marketing force”. As a successor Vagelos recommended a number of Pharma savvy colleagues, but the world was changing. The board chose a real business man—a non-scientist, Harvard MBA, and former CEO of a medical device company named Ray Gilmartin.¹³

In 2017 Roy Vagelos, former CEO of Merck took part the great debate on the ethics of drug pricing. He wasn’t pleased with the way Pharma had changed. He maintained that “The industry has a lousy image and it should, until it reforms itself.” “He attributed Pharma’s failings to “a lack of understanding of what people respect, and a lack of respect for human beings.¹¹”

Some think the astronomical increase in drug prices was the result of greed. Others blame the trust that pharmaceutical companies built during the early post world war 2 decades. The healthy didn’t seem to detect the dramatic rise in medication fees, and the ill were too demoralized to speak up. Too few of the people in power seemed to be paying attention. Unlike the frog that, if placed in boiling water would have jumped out, the populace of the U.S. was plunked into cold water and we didn’t realize the liquid was slowly being brought to a boil.

I don’t believe the leaders of industry are to blame. They just did what comes naturally. Congress passed laws, and lobbyists for the industry fashioned loopholes that could be exploited. Companies became corporations with stockholders. CEOs reported to boards of directors. Pharmaceutical companies acted more and more like real businesses. In house investigators with quirky innovate ideas and notions were reigned in. Researchers were increasingly tasked to focus, to develop marketable products.

After a specified number of years best selling drugs would lose their exclusivity and generic competitive products would enter the market. If the company didn’t have an emerging replacement, revenues and the price of the company’s stock would fall. To maintain the bottom line industry leaders started raising prices.

The initial price increases must have pleased stockholders and boards of directors. If industry leaders wanted to keep their jobs or get bonuses they had to raise prices the subsequent year, and the year after that. If a CEO wasn’t willing to charge substantially more each year he or she could easily be replaced.

Companies also exploited loopholes in the laws, rules that gave them a few more years of exclusivity. For a blockbuster drug that meant at least an additional billion dollars of revenue per year. Legal teams that took advantage of the cracks in the system proved they were worth the big bucks. (If a football team is losing by a touchdown and its coach doesn’t try an onside kick or a Hail Mary pass during the last seconds of the game –he or she is not trying to win, and will be fired.) Corporations were in the business of making money. Failure of a corporate lawyer to exploit the available legal gimmicks was akin to misconduct.

The increases started at companies with targeted treatments for cancer. They “set the bar” that led to prices that “were many times more than most people’s yearly salaries, prices that were not necessarily related to value.”

The true costs of getting a drug to market are a black hole and are largely irrelevant.

The success of Imatinib-Gleevec showed researchers that it’s possible to develop small molecules that are highly specific to one of the hundreds of tyrosine kinase inhibitors…medications that can inactivate a specific critical enzyme in chosen targeted cell. There were a few known targets.¹⁷—so called low hanging fruit– and researchers in startups and in the labs of big Pharma started making thousands of molecules and testing them with their biologic assays. Not that it was easy. Developing a molecule that targeted a specific genetic alteration took time, luck, optimism, and money.¹⁷.

Most of the targeted cancer drugs are made in the labs of big companies and we don’t know much about the true cost of their research and development.¹⁷ The Tarceva story provides a window. An EGFR (epidermal growth factor receptor) blocker, in a minority of cancers it blocks the activity of a kinase that causes malignant cells to grow and divide. It was developed by OSI, a small pharmaceutical company that was originally called Oncogene Science. It was founded by Gary Takata, a “shaggy-haired, Manhattan-based venture capitalist who, in March 1983 persuaded an entire laboratory of National Cancer Institute scientists to join his new company and start developing drugs.²⁹Located in Long Island, New York, it employed 20 people when Colin Goddard became its CEO in 1989, and it had a biology and a small molecule discovery group. A Brit, its leader Goddard had a biochemistry degree. He had been a runner and soccer player at his university and had considered a career in sports. Then a friend developed a brain tumor, a Glioma, and Goddard decided “maybe there are other things in life to do besides play sports.” The startup was looking for a chemical that would modify EGFR. They had a relationship with researchers at a nearby mega company, Pfizer, and people at OSI persuaded investigators at the big company to screen a number of their small molecules. At the time Pfizer was evaluating molecules for a different cancer target: Her-2 Neu, and they needed a “control.” When they checked the compounds for OSI, Pfizer scientists identified Tarceva. OSI subsequently kept the “lead rights” to the chemical and Pfizer had some ownership.

Pfizer agreed to give the drug to a few people with advanced cancer and see what happened. They bailed when they learned the drug caused a rash.

About this time Pfizer was buying the company that owned Lipitor. It was an expensive hostile takeover, and Pfizer gave their Tarceva ownership back to OSI—free. (They later went on to acquire the company that owned Lipitor.)

OSI raised $440 million, ran clinical trials, and found out their drug, in fact, made some people with cancer live longer.

A few years back an athletic, non smoking friend had a nagging back ache that kept getting worse. An MRI showed bony defects caused by metastatic lung cancer. His brain was involved, and it was radiated. The X-ray treatment caused terrible side effects–a month of no appetite or thirst. When he recovered he knew he was not interested in conventional, toxic chemotherapy. But he spoke of a dream– of sitting on a boat in the bay and fishing. Would that be possible? His tumor was positive for EGFR and he was given Tarceva. His back pain improved, he got stronger, and he was able fish and enjoy life for about a year. Then the tumors in his brain started growing.

Genentech and Roche bought $35 million worth of OSI stock and commercialized Tarceva.

The internet says Tarceva costs Americans $2600 a month. That’s more than the British National Health Service was willing to pay. In 2007 the Swiss drug maker Roche negotiated and agreed to cut the U.K. price from $2766 a month to $2133 a month. The online Canadian pharmacy, Northwest, claims they get drugs from reputable factories in many parts of the world, then ship it directly to patients who mailed valid prescriptions. Their price for brand name Tarceva 150 mg per month is $3174. Their generic version goes for $1384 a month. Approved by the FDA in 2004, it became a $94,000-a-year drug. Genentech sold $564.2 million of Tarceva in 2011 and over a million dollars worth in 2016. (An article in the LA times questioned its effectiveness.¹⁴)

In India, in 2012, the Cipla pharmaceutical company produced a generic version of Tarceva, and lowered the price of the medicine from $459 dollars a month to $182 dollars a month. The Delhi court ruled that the Swiss patent was valid, but that the generic product didn’t infringe.¹²

Some argue that pharmaceutical companies make the majority of their profit in the U.S. Our high prices are subsidizing the rest of the world, and people in other countries aren’t paying enough.

Others contend that Pharma makes so much profit in America that they don’t have to bargain in good faith with other nations. When a company has a new important drug and there’s no competition they can hang tough. Negotiators can pay the asking price (with a small discount); or they can leave it./“

1.4. Price of Gleevec https://www.forbes.com/sites/joshuacohen/2018/09/12/the-curious-case-of-gleevec-pricing/#30e1487654a3

2. 3. Treatment of chronic myelocytic leukemia UPTODATE.

5. Gleevec generics https://www.ascopost.com/issues/may-25-2016/the-arrival-of-generic-imatinib-into-the-us-market-an-educational-event/

6. Gleevec in other countries. https://www.statista.com/statistics/312011/prices-of-gleevec-by-country/

7. Out of pocket cost burden for certain drugs https://www.kff.org/medicare/issue-brief/the-out-of-pocket-cost-burden-for-specialty-drugs-in-medicare-part-d-in-2019/

8. Novartis loses Gleevec battle in India https://www.wsj.com/articles/SB10001424127887323296504578395672582230106

9. Tasigna black box https://www.consumersafetyguide.com/drugs/tasigna/

11. The ethics of drug prices https://www8.gsb.columbia.edu/leadership/ethicsofpricingt

12. Tarceva patent India https://www.lexology.com/library/detail.aspx?g=bc7dd620-6e3a-4888-a18a-21ada73cd544

13. Gilmartin heads Merck https://www.nytimes.com/1994/06/10/business/merck-gets-outsider-as-new-chief.html

14. Effectiveness of Tarceva https://www.latimes.com/archives/la-xpm-2005-dec-04-fi-letters4.2-story.html

15. How cancer starts. https://www.cancerresearchuk.org/about-cancer/what-is-cancer/how-cancer-starts