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.

1. 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.  He was studying chronic myelocytic leukemia and was interested in the drug.²⁸ For technical and legal reasons—lawyers for the Swiss 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 sold 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 worked after school in the family restaurant.  In his free time he played the violin.  His father’s father had been a physician in the old country and had died young, and Roy’s father felt that to succeed in life his son would need a good education.  Vagelos studied hard and went to college on a scholarship.  He always remembered the Johns Hopkins interview.  It was going well but ended abruptly when the man conducting the interrogation learned the young man’s parents had not gone to college.  As a university student Vagelos 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 (originally named Oncogene Science) a small pharmaceutical company that was founded by Gary Takata, a “shaggy-haired, Manhattan-based venture capitalist.  In March 1983 he persuaded an entire laboratory of National Cancer Institute scientists to join his new company and start developing drugs.²⁹ Located in Long Island, New York, it had twenty employees when Colin Goddard became its CEO in 1989.  There was a biology group 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 block the action of 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,” a pill that was harmless and had no therapeutic effect.  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 medication.  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.

• DONATED & TAX DOLLARS

Your tax and donated dollars at work

This chapter takes issue with the Pharmaceutical manufacturer’s claim that they charge astronomically high prices for new drugs because research is costly and they need high profits if they are going to continue to play an important role in the development of the medical miracles of the future.

It tells the story of two recently marketed medications that improve the lives of people with metastatic prostate cancer.  Each drug was created with dollars (and pounds) supplied by taxpayers and charitable institutions.

The research labs of big Pharma were not part of the process– though Pharma did pay for most of the studies run on humans, and they did manufacture, distribute, and promote the medications, both of which have huge price tags.

I got interested in one of the medications after I spoke with a young man while our launch was speeding through the dark waters of the Grand Canal of Venice.  He explained he finally had enough money to bring his wife and child to Europe, thanks to a bonus he received.  He had recently acquired the rights to a new drug for the pharmaceutical company he worked for.  Called Enzalutamide it was a treatment for prostate cancer and it was going to be big.

Prostate cancer, one of the western world’s common lethal malignancies, was found in almost a quarter of a million American prostates last year, and it killed 33,000.  When advanced and widespread the disease is incurable, and if it grows in bones it can be quite painful.

Located between the bladder and the penis, a young man’s prostate is the size of a walnut.  It grows as men age and eventually becomes large enough to slow or obstruct the flow of urine.  Now and then a mutated cell reproduces more rapidly, lives longer, and its offspring form a cluster.  Over time there are additional mutations.  One of the abnormal cells can become cancerous, clone itself, and spread to other parts of the body.  Its growth and spread can be slowed or halted for a period of time by interfering with the hormone that fans the fire, by eliminating testosterone.

We’ve long known that male hormones encourage prostate cancer cells to grow faster, and that surgical castration is therapeutic.  The role of male hormones was firmly established in the 1940’s when a Canadian born physician, Charles Huggins, showed that metastatic prostate cancer could be controlled for a few years with surgical castration or female hormones.  During the subsequent decades orchiectomy– removing the testicles—commonly kept the cancer from growing for a period of time–after which the malignancy typically started expanding.

In recent years physicians have fought the malignancy with drugs that antagonize testosterone.  When the medications stop working and the disease becomes aggressive, the growth is usually stimulated by a protein inside the cancer cells, a molecule called the androgen receptor (AR).

And that’s what researchers at UCLA and Sloan Kettering tried to neutralize.  Funded by the government and people who donate money to prostate cancer research, the medical teams spent years developing a drug that could block the cancer cell’s androgen receptor (AR).  Starting with a protein that was known to have “a high affinity for the receptor, they spent years chemically altering it.” (Like– take a dress pattern and add one pocket or two pockets; a zipper or buttons.)  They added carbons, hydrogens, etc, came up with 200 candidate molecules.  They tested them in the lab, using “human prostate cancer cells that had been engineered to express increased levels of the receptor.”

Two of the 200 potential drugs seemed promising.  Well absorbed and not toxic, they were effective blockers.  UCLA patented the chemicals in 2006 and tested them on mice.  They worked, –stopped mouse prostate cancer from growing and spreading.

In 2005 Medivation, a San Francisco based “Biopharmaceutical Company” somehow learned about the drug.  Signing a license with UCLA they walked away with a majority of the patent rights.  In return they agreed to fund all costs associated with the development and commercialization of MCV3100 (Enzalutamide).

The next big study was probably not funded by Medivation.  It was performed in 2009 by the U.S. department of defense, and it showed that MCV3100 had “significant antitumor activity.”

In October of 2009 Medivation got a partner.  They made a deal with Astellas, a large Japanese pharmaceutical company.  Medivation received $655 million and Astellas got global rights” to the drug.  The two companies then financed a huge international assessment:  1200 men with metastatic disease got either the drug or a placebo.  The men who took Enzalutamide on average lived 5 months longer than those receiving placebo.  During the study treated patients had “a 37% reduction in the risk of death.”

FDA approved the use of Enzalutamide in men who had failed standard chemotherapy.  The initial planned price of Enzalutamide was $7450 a month— $59,000 for 8 cycles — $89,000 a year.

In 2014, based on a new study, the FDA approved the use of Enzalutamide as the first drug given to people with metastatic disease.  Patients didn’t have to first fail treatment with something else.  The new indication meant patients would live longer after they started therapy.  They would now ingest more pills and buy more medicine.  A year of therapy in the U.S. would cost $129,000.

Astellas had international rights and sold the medicine for a lot less in other countries.  A 40 mg pill, for example, was sold in the U.S. for $88.  Medicare paid $69.  And the price for the same product in Canada, France, and the U.K, was $20, $27, and $36.  In the two years between 2012 an 2014, Medicare’s Enzalutamide cost went from $35 million to over $440 million annually. 

The price Americans paid troubled some.  UCLA owned over 40 percent of the drug’s patent, and in 2016 sold their residual rights to Royalty Pharma for $1.14 billion—paid over many years.  They then settled for an up-front cash payment of $520 million.

In 2015 Astellas sold $2.2 billion of the drug.  The following year Pfizer bought Medivation for $14 billion, and in the first quarter of 2017 sold $131 million worth of the medication.

In the West it seems you almost have to get industry involved if you want to get a drug tested, approved, produced, distributed, and used.  Not that UCLA and Sloan Kettering didn’t know how to run a controlled trial.  They did.  But pharmaceutical companies have big bucks and are better equipped to coordinate the testing of over a thousand people in 15 countries.  They are experienced at moving drugs through the FDA and getting them approved promptly and efficiently.  And, of course, they know how to market.

Once corporations are involved, the price being charged has little to do with the cost of creating a drug.  In the case of Enzalutamide, before they could make a profit Pfizer had to sell enough high priced medication to recover their $14 billion investment.

In the Enzalutamide case many were happy.  UCLA got an infusion of cash.  The poor guy with prostate cancer got an extra 5 months of life, and according to Astellas, he didn’t have to go into bankruptcy to be treated.    ”80% of patients with Medicare or private insurance have a monthly co-payment of $25 or less. 2,000 men with poor or no insurance and household incomes of $100,000 or less received Xtandi free.”

The system we’ve created is not really “capitalism” and it’s not fair to call it “corporate welfare”.  It allowed the lead researchers to claim a”37.5% stake in the drug’s royalty interest.”  Private industry, investors, the Howard Hughes Foundation, and Medivation made money. 

Few seemed  troubled by the fact that a drug developed with public and donated money ended up enriching a few and selling for a pretty penny—a price that was usually paid by a needy taxpayer’s private or public insurance.

Bernie Sanders claims that in 2014 nearly one in five Americans between the ages of 19 and 64–35 million people – decided to NOT fill their prescriptions.  They decided the drugs cost too much. 

At the same time spokesmen for the pharmaceutical industry were repeating their mantra:  the high costs are needed to support medical research.   If we want to cure Alzheimer’s and cancer we need Innovation.

Enzalutamide’s chief competitor, Abiraterone (Zytiga), was created at Cancer Research UK, a charitable fund with its own research institute.  In 2012 an anonymous donor gave the organization ten million pounds, (13 million dollars) and asserted that “if you do what you’ve always done, you’ll get what you’ve always got.” Promoting scientists who “think differently,” the huge concern finances “the work of more than 4,000 researchers, doctors and nurses throughout the UK, and it supports over 200 clinical trials and cancer related studies.”  The drug its scientists created, Abiraterone (Zytiga), is a bit cheaper than the U.S creation, but for years it was pricey and not really affordable to a guy without good insurance.

Here again Pharma wasn’t brought in until the medication was created and was ready to be tested on humans.  And once more the enemy was testosterone. Researchers wondered if the cells had lost their dependence on male hormones—or if they were responding to testosterone made somewhere in the body.   What would happen, they asked, if a drug totally impeded a person’s ability to make male hormones–androgens?

The body makes male hormones and cortisone from cholesterol.  (Raisins and wine are made from grapes.)  Both use an enzyme, CPY17, for the conversion, and the reaction can be blocked by the antifungal agent, Ketoconazole.  All this was known.

Ketoconazole is toxic and in patients with prostate cancer it’s not a useful drug, so investigators decided to modify it.   Using three dimensional models an Institute of Cancer Research (IRC) team (working in a unit of Cancer Research UK) studied a number of compounds, and they eventually found one that worked.  It didn’t seem to be toxic and it “specifically and irreversibly” blocked CYP17.

The “team” filed a patent and licensed the drug to a German Pharma company, Boehringer Ingleman.  Phase one studies showed the drug blocked androgen and cortisone production in people, but the pharmaceutical company’s scientists believed that late stage prostate cancer no longer needed male hormones to grow.  Feeling they didn’t want to spend money on a lost cause, Boehringer returned the drug’s license and IRC started over.¹

Arguing that they wanted to get the drug into needy people’s hands as soon as possible, the IRC next assigned the rights for commercialization to publically traded BTG, a UK-based healthcare company.  BTG, in turn, licensed the product to Cougar Biotechnology.  And Cougar “began to develop a commercial product”.  Studies proved the drug worked, helped cancer patients.  In May 2009 Cougar was acquired by Johnson and Johnson for about $1 billion.  Two years later the FDA approved abiraterone’s use in combination with prednisone—a form of cortisone. (In addition to blocking the body’s production of androgens, Abiraterone blocks the body’s ability to produce cortisone, a hormone the body needs.)  Abiraterone was approved for use as a treatment for late-stage prostate cancer in men who have already received standard chemotherapy.  Called Zytiga, it initially sold for $5000 a month in the U.S., and it’s not a cure.  After a mean of 8 months the drug stops working or the average patient has died.  Thus the cost of treating a person was averaging about $40,000.

In the UK where it was developed by a charitably funded organization, the drug is marketed by Janssen.  Its original cost was 2930 pounds –$3820 a month, a price that British regulators (NICE) decided was not cost effective.  The National Health Service wouldn’t pay.  The company then negotiated.  The government was willing to walk away so negotiations worked.  The U.K. got a “deal.”  The NHS subsequently paid 2300 pounds ($3000) a month “for the first 10 months of therapy.  For people who remain on treatment for more than 10 months, Janssen agreed to rebate the drug cost of abiraterone from the 11th month until the end of treatment.”

By 2019 two additional very expensive drugs for prostate cancer:  apalutamide and darolutamide—had joined the fray, and the U.S. price of “full-dose abiraterone” had risen to $10,000 per month.  But a $2800 monthly generic form of the medication was now available; and a quarter of the initial dose of abiraterone was showing “similar benefits and similar pharmacokinetic and pharmacodynamic effects.²”

 “A decade ago cancer drugs cost around $5000 per month; that has now doubled to more than $10,000 per month.  I think (companies) charge what they think they can get away with, which goes up every year,” Peter Bach, MD, Sloan Kettering, New York. 

—-Is a pharmaceutical company really needed when we want to effectively manufacture and distribute an important drug?  The answer seems to be yes.

• SWISS MOVE IN

The Swiss take control 

Thirty percent of the money spent on pharmaceuticals is used to purchase a relatively small number of very expensive “designer” drugs.  The medications are often extremely pricey (in large part–I believe) because the company that produces and markets them needs to recoup the billions they paid to acquire the drug and/or the company that created it.

Novartis and Roche, two of the top 4 Pharma companies, with gross incomes in 2018 of $35 and $46 billion–are headquartered in Switzerland. I have no doubt they are two of the many “Pharma companies that seem to believe acquisitions are the only way to keep their revenues growing as fast as investors expect.  With today’s complex breakthrough medicines, it’s often cheaper for a company to acquire the next blockbuster drug than to develop it in-house.¹”

In 2006 Novartis paid $5.4 billion, took over Chiron, and planted its feet solidly on American soil.   The company they bought was 25 years old and had been created by Bill Rutter, a visionary biochemistry professor. 

The son of a Mormon elder from Liverpool England, Rutter was born and educated in Malad a small town in southern Idaho.  His grandfather had been a British Army officer in India and had told William about the poverty and exotic parasitic diseases he had witnessed.  As a youth William wanted to go to the school of tropical medicine in Calcutta. At age 15 he spent a year at Brigham Young University then lied about his age and joined the navy.  World War Two was raging.  When the conflict ended Rutter went to Harvard and was drawn to science.  After he graduated he was accepted to Harvard medical school, attended a few medical school classes with a cousin, and realized he wanted to be a scientist, not a doctor.  He earned a Ph.D. at the University of Illinois and spent a decade as a researcher and professor at the University of Illinois, Stanford, and the University of Washington.

In 1968, after refusing the job offer three times, he agreed to become the chief of the biochemistry department at the University of California in San Francisco.  The unit had been leaderless for six years and (he once quipped) “every good scientist in the United States had probably been asked to take that job and turned it down.” He claimed he accepted the post because twenty faculty positions were open, and that was a “bonanza for recruiting^1” Rutter gathered top notch researchers and got them to work collaboratively.   In academia investigators don’t always cooperate and share.  He knew “science was competitive.  “Everyone is trying to beat you and will use every trick in the book.  You try to cover your bets in many different ways.⁸”His associates shared their knowledge.

In 1981, deciding NIH would not allow him to use genetic engineering to develop a hepatitis B vaccine, he acquired venture funding, hired great researchers, and formed Chiron. “It was not an issue of damn the torpedoes, full speed ahead. The business of the company initially was research, pure and simple–understanding the potential of a set of technologies.  The major pharmaceutical companies didn’t want to become polluted by something that was “controversial” like genetic engineering, and they stayed on the sidelines.  He had great confidence he’d be able to do things that helped human beings.”¹⁴ 

.           The disease he wanted to put a stop to, Hepatitis B was caused by a virus.  It was present, though usually inactive, in the livers of over 200 million people, 1.2 million of whom were Americans.⁸  

Maurice Hilleman at the pharmaceutical company Merck had developed a vaccine that prevented the disease, by inactivating live viruses.  His creation was safe and effective but people were afraid to use it.  They recalled how, in 1955, the Cutter lab was making the Salk vaccine and failed to adequately kill the polio virus.  Two hundred children were partially paralyzed and 10 died. I remember British Liver Professor Sheila Sherlock giving a lecture to a group of doctors back then and asking how many had taken the B vaccine.   When but two hands went up she said: “Shame on you.  Shame.”

Rutter had worked with Herbert Boyer and others at the University of California.  He knew how to genetically engineer yeast and make it grow the shell of the virus.  Researchers could then use the viral surface protein to create the vaccine.  The idea of using implanted genes frightened some politicians, and the NIH might not fund the research.  “Some portion of scientists was genuinely concerned. Others enjoyed the debate and the public controversy.” 

There was a Senate hearing on the topic of genetic engineering and Bill Rutter attended.  Margaret Mead arrived wearing a huge long robe and carrying a shepherd’s staff.  “Adlai Stevenson, a Senator and a lawyer who would later run for the presidency of the U.S., ran the proceeding and introduced Margaret Mead as a world-renowned scientist who could give guidance on these issues.”  Mead was an anthropologist who became famous after she spent 9 months in Samoa and learned that “adolescence on the island was not a stressful time for girls because their cultural patterns were different than those in the U.S.”¹⁸

At the hearing stood and repeatedly said something like, “You’re going to hear today from these scientists that this (genetic engineering) is not dangerous. I’m here to tell you it is dangerous.” After each repetition of her statement she pounded the floor with her staff for emphasis. “Boom! Boom!¹⁶” To Rutter “A social anthropologist with her shepherd’s staff giving advice on molecular, microbiological, and physiological science’” seemed incongruous.  Observing the theatrics and attitudes Rutter realized that if he wanted to make the hepatitis B vaccine his way he would have to give up his job as chief of biochemistry and go private.

Growing the hepatitis B surface antigen in yeast, Rutter’s team “demonstrated how to do it in the laboratory.” Working with Merck, Chiron marketed a successful “B” vaccine.  Then, since the company had money and talent, their researchers solved a whodunit that had eluded investigators for years.  They identified the virus responsible for Hepatitis C, and we learned 200 million people worldwide and more than 2 million Americans were carrying the intruder in their liver.  Some of them would develop cirrhosis and liver cancer. 

Located in the right upper abdomen just under and below the ribs the liver is the body’s largest organ.  Blood carrying nutrients from the intestine, filters through it before it enters the circulation.  The organ metabolizes, detoxifies and produces needed proteins. It dumps unwanted wastes into the yellow bile that it secretes.  It’s also commonly infected by several viruses, two of which, Hepatitis B and Hepatitis C often set up shop and become lifelong inhabitants.

Over the next few years Chiron acquired a number of European and U.S vaccine businesses and became one of the world’s largest vaccine makers.  With a second company Chiron commercialized DNA and RNA tests that allowed blood banks to make transfused blood safer.  The process they developed could detect minute amounts of live hepatitis and HIV viruses in donated blood.  Chiron had a biopharmaceutical division, and to the displeasure of their Swiss partner Novartis, often participated in joint ventures with other pharmaceutical companies.  In 1984 their scientists worked on the first sequencing of the HIV genome, and in 1987discovered, sequenced, and cloned the Hepatitis C virus.⁸

In 2006, already owning 49 percent of Chiron, Novartis bought the other 51%, started wearing the mantle of a U.S. corporation, and began to act more like a commercial business.  In 2015 the company marketed and charged a little less than a competitor for the first U.S. biosimilar, Zarxio.  It’s a medication that stimulates the bone marrow to produce more neutrophilic white cells.  In 2018 Novartis paid $8.7 billion for the therapeutic gene that treated and hopefully prevented the worsening of spinal muscular atrophy, a lethal genetic disease. (As mentioned earlier they plan to sell the treatment to Americans for $2.1 million for a course of therapy.)

---

By 2009 the other Swiss giant, Roche, had a 15 year history pharmaceutical company acquisitions–like Syntex in 1994 and Chugai Pharmaceuticals in 2002.  Their CEO was an Austrian born economist.  Married with three children he skied, hiked, and made movies in his spare time.  Initially thought of as shy he led the company when it plunked down billions and entered the cancer drug fray.   Buying California based Genentech for $46.8 billion, Roche acquired a lot of debt and three antibodies that were used to fight cancer:  bevacizumab, herceptin, and rituximab.   They also had to deal with a “clash of cultures between a freewheeling Californian biotech company and a buttoned-up Swiss multinational.”  There was plenty that could go wrong. The California innovator “was full of smart people who were very upset and worried about the idea of another company coming in and making the decisions.⁶”

The cost of their acquisition virtually cemented Roche’s need to charge high prices and to sell a lot of these drugs.  If, at the time, some companies were uncomfortable charging a lot for anti cancer drugs, seems to me that they now no longer had much of a choice.  Their shareholders would (no doubt) expect little less than a $100,000 a year price tag for significant products.

The entity Roche purchased, Genentech had started as a company that used genetic engineering to produce hormones.  Hormones are molecules that are made in glands.  They travel to, turn on and off, and adjust the activities of target organs in various parts of the body.  

The existence of these important proteins was unknown before the 20^th century.  Prior to the 1970s they had been extracted from the glands of dead animals and human cadavers.  They were then purified and manufactured.  Contaminants were always a concern.

The seed that grew into Genentech was planted during a meeting that took place in 1973.  A scientist from UCSF and one from Stanford discussed the small collections of DNA in the cell’s cytoplasm.  They met at a conference in Hawaii and at the end of a long day “took in the balmy evening air as they strolled and talked.”¹²

One of them, Herbert Boyer, “blue jean clad, with a cherubic face; outwardly relaxed and unassuming”, grew up in a small railroad town near Pittsburg.  As a college student he had at times hitchhiked to classes at a nearby college.  Majoring in biology and chemistry he was “really taken with the Watson-Crick structure of DNA”, and he earned his PhD in bacteriology.  At age 37 he was a researcher at the University of California in San Francisco when one of his graduate students isolated an important enzyme.  It sliced DNA at a specific position.  The raw exposed nucleotide ends were sticky.  Lengths of DNA could be attached.

The other man who walked leisurely in the warm air that evening was Stan Cohen, a 36 year old “trim, bald, bearded” Stanford hematologist.  When he was young he wrote a pop song that made the hit parade.  He was studying circles of DNA in the cytoplasm of bacteria that were spreading antibiotic resistance from one germ to another—plasmids.

The two investigators wondered if it was possible to use Boyer’s enzyme to hook a DNA fragment, a gene, onto the sticky ends of a plasmid’s DNA.  Would the gene then tell the bacteria what to do and make? Would the transformed plasmid survive and clone itself?

It took a few months to do the research, but the following March they tested their idea and it worked.  In November 1974 both medical schools filed a patent application, and the academic world debated the potential hazards of genetic engineering.

Over the next few years, surviving on money gathered by a venture capitalist named Bob Swanson,  Boyer formed a company and called it Genentech.  In its early years the company made somatostatin.  A peptide that reduces secretory diarrhea and that blocks the action of some hormones like insulin and growth hormone.  The product was not a big money maker.

Genentech then produced genetically engineered human insulin.  At the time people were using purified animal insulin.  It’s chemically a bit different from human insulin, but it works well.  Genentech also produced genetically engineered human growth hormone. It too was not a big money maker.

In 1978 the start-up leased a 10,000 square foot section of an airfreight warehouse near the San Francisco Airport.

In 1980 the company’s technology was up and running and Genentech had a public stock offering.  It was wildly successful and Swanson, one of the founders, called gene cloning “the cornerstone of a future billion dollar business.”

During the next decade Genentech developed TPA, Tissue Plasminogen Activator, protein that dissolves clots.  It was used to treat “massive pulmonary embolisms” –blood clots that traveled from a person’s legs to their lungs.”

They also developed several cancer fighting medications.  One of them, the antibody Avastin, inhibited the growth of the blood vessels that nourished tumors.  In 2010 it generated $7.4 billion in revenue for its new Swiss owner, Roche. 

The concept that tumors produce a gene that stimulates the growth of the blood vessels that nourish it–wasn’t originally Genentech’s.  It was conceived of by Judah Folkman, a surgeon who would later quip that science goes where you imagine it.  As a boy, Judah accompanied his rabbi father when he visited people in the hospital. “His father would pray through oxygen tents and Judah would sit in a chair and be very quiet.  About age seven to eight he noticed doctors could open the tents and do things, and he told his father he wanted to become a doctor not a rabbi.  He thought his father would be upset, but has dad wasn’t.  He said you can be a rabbi-like doctor, and Folkman knew he thought it was fine”.²¹

 He served in the navy for two years, went to med school, and became a surgeon.  In the 1950s “he developed the first implantable pacemaker that targeted the atrioventricular region of the heart, and he “pioneered the first implantable polymers that allowed drugs to be released slowly.  And at age 34 Folkman was “the youngest ever Harvard Professor of surgery.¹⁷” He had a research lab and studied the blood supply of tumors.  By 1971 he had learned about the way cancers develop their blood supply and he shared his findings in an article in the New England journal of Medicine.

“The growth of solid neoplasms is always accompanied by vigorous new capillaries that come from the host.”  Time-lapse movies of an animal experiment demonstrated vessels advancing towards and penetrating a tumor implant and establishing blood flow.  If new vessels don’t develop, most solid tumors stop growing when they are 2 to 3 mm in size.  They don’t die but the growths become inactive.  Folkman’s lab isolated a factor that stimulated rapid formation of new capillaries in animals, and his people tried to develop an antibody to the factor.  They were not successful.¹¹”

Folkman kept promoting the concept of cancer enlargement being slowed by blocking a factor that stimulated blood vessel growth.  In the years that followed Folkman’s paper he noticed that when he rose to speak at medical meetings a number of doctors in the audience filed out.  Some physicians thought his idea was farfetched and were apparently tired of hearing his pitch.  Believing there’s a fine line between persistence and obstinacy Folkman kept at it.⁹

In 1989, a Genentech investigator isolated and cloned 3 isoforms of“vascular endothelial growth factor” (VEGF), a gene that caused blood vessels to grow.  Then they developed an antibody to VEGF.   Subsequently a slew of additional vascular stimulating factors have been discovered.

The researcher in charge of developing the antibody, Napoleone Ferrara, was born in Catania, a Sicilian town near the Mediterranean Sea and not far from the highest volcano in Europe.  His interest in science was ignited by his grandfather, a high school science teacher who had a 5000 book library.  The Sicilian went to medical school.  Then he heard the fascinating lectures of a charismatic Professor of Pharmacology named Umberto Scapagnini, and he decided to become a researcher.   Joining Genentech in 1988, Ferrara and his group spent years characterizing the protein and developing the humanized antibody that became Avastin.   The years of research were costly.  They were funded by Genentech, and the company was ultimately richly rewarded.  Ferrara was lecturing in Sienna the day he learned that a pivotal study had shown that his antibody successfully helped treat colon cancer.  He recalled he celebrated by drinking a whole bottle of Chianti.

Avastin remains pricey and is not always covered by insurers.  Using it can create an additional burden for people who are living on a tight budget and have widespread disease.⁷

In 2008 Roy Vagelos, the chief executive of Merck commented on the price trend.  His remarks were reported in the New York Times.  He said he was troubled by an unnamed drug (thought to be Avastin) that “costs $50,000 a year and adds four months of life.  He called it a shocking disparity between value and price.²”

Vagelos was 79 at the time.  His attitude and remarks were influenced by what he did when he was the CEO of Merck in the 1960s.  In his New York Times quoted speech he said the high prices charged for Avastin were, “not sustainable.”  He was wrong.

Keeping the price of Avastin high has been a struggle.  That year (2015) the British National Health Service and some insurance companies were disturbed by the thought of spending tens of thousands of dollars for the extra months of life the drug could provide.  Headquartered in Switzerland, Hoffman La Roche–According to “The Street’—had to resist an effort by many European countries to lower the price of their expensive, cancer fighting drugs.  “A bid to push down drug prices by the Swiss health ministry “infuriated drugmakers”.. and the company warned that such a move would hurt employment and would have a “negative impact on their future contribution to the Swiss economy.”  In the years subsequent to its release Avastin’s annual revenue always topped $5 billion.³

The second drug Roche acquired, herceptin, was also an antibody.  Most cancer causing genes “are sequestered deep in the cell.”  By contrast, the gene in question, neu, is connected to the cell membrane and “a large fragment hangs outside.”

It was discovered in the 1970s after a researcher (working with Robert Weinberg at MIT) injected the “DNA from neurological tumors in rats, into normal mouse cells.  The injected cells turned cancerous.”  After the gene was discovered it was “more or less forgotten,⁴” and largely ignored before one Genentech’s scientists, Axel Ulrich made an antibody that targeted it.

After Ulrich’s antibody attached to neu it created an abnormal complex.  A macrophage, a white cell that “engulfs and rids the body of cellular debris” would float by.  It would sense the antigen-antibody combination, know it didn’t belong, and clean up the “mess,” obliterate the antibody and the cell that it’s attached to.

Once created, the antibody to neu might have intrigued some people but it was not really useful. Ulrich talked about it when he gave a seminar at UCLA in 1986.  One of the attendees, Dr. Dennis Salmon, was interested.

A university hematologist, Salmon grew up in a coal mining town and, as a boy, had been impressed by the doctors who came to the house to tend to his father.  His dad survived two mine cave-ins, then lost a leg in an auto accident.  The doctors making house calls “made people feel better.”  Salmon “saw the respect my parents gave them. So (he) always thought it would make a pretty cool profession.”  In high school he “developed a keen interest in biology.” and in college he spent summers working in a steel mill.  The job was tolerable for a few months, but the experience showed him what his life as a factory worker could be like and it “cemented his resolve. This wasn’t what I wanted to do with my life.” After med school Salmon had offers, but took a job at UCLA because “It wasn’t ossified, and if you had some resources and a good idea, you could pursue it.¹⁵”

According to Mukherjee, Salmon thought he and Ulrich should collaborate.  Ulrich gave UCLA a DNA probe that identified neu, and Salmon checked his array of cancer samples to see if any of them were, perhaps, driven by the gene.  Until that time it had only been found in mouse brain tumors.  There didn’t seem to be much chance that it would turn up in a human tumor.

But it did.  The oncogene, now called Her-2/neu, was found in some breast cancers, and it turned out to be an important reason for their rapid growth.  Some breast cancers made and used it in large quantities.  Scientists implanted Her-2 containing cancers in a mouse and watched them grow wildly.  Traztuzumab, the antibody that inactivated Her-2 caused the cancer cells to die.

The scientific findings were intriguing, but it took a while before Genentech was fully committed to the idea of making a cancer drug.  It would be a first for them.  A drug that interfered with cancer was still a reach.

Salmon kept working the project.  They couldn’t use the standard mouse monoclonal antibody.  It could trigger an immune response.  They found a Genentech scientist who knew how to create a mouse that produced monoclonal antibodies that a body would think came from a human.  In the summer of 1990 they successfully created Herceptin.  Women with breast cancer became experimental subjects.  15 were studied in 1992.  900 were given the drug in 1996.  It kept making a difference.  When, in 1998, the drug application was submitted to the FDA it was quickly approved.  Its initial monthly price was $3,208.  It rose to $4,573–$54,000 a year in 2013.

The research and development costs were part of the overall lab costs of Genentech, and before the company found a useful antibody their scientists probably produced a lot of duds.  The overall cost of creating a new drug was significant.  Testing, development, and getting FDA approval cost a lot.   I suspect hundreds of millions of dollars were spent in the process.

But the reward, $6 billion plus a year, dwarfs the expenses.  The high price tag has little to do with research and development and much more to do with the way the market works.  The pharmaceutical manufacturer has a five year monopoly.  During that time they have no competition and can charge whatever they think they can get away with.  People with insurance often have a co-pay, and it can be substantial.  But no company would price compete.  They wouldn’t want to charge less for a new cancer medication.  Others might follow suit, and that might upset the apple cart.  To enhance stockholder value prices need to stay high.  And of course once they owned the drug the Swiss company Roche “needed” to recoup the $46.8 billion they paid when they bought Genentech in 2009.

When Roche announced their revenues in 2016, the third antibody they had acquired from Genentech, Rituximab topped the list.  With $7.3 billion in annual sales worldwide and $3.9 billion in the U.S., the drug was on fire.

When pharmaceutical spokes people justify the high price of drugs they commonly invoke the cost of research, but are unable to supply details.   Rituximab provides a window into how much it really costs to create an innovative medication when researchers have a strong sense of where they are going and how they are planning to get there.

Approved by the FDA in 2012 the injectable antibody has revolutionized the treatment of some lymphomas.   It targets a unique protein called CD20 that is found on the surface of only one kind of human cell: the B cell.  Part mouse and part human (chimeric) in origin, the antibody was first tested for dose and toxicity in 1994.  After rituximab is infused it circulates and “tends to stick to the side of B cells that’s rich in CD20.  Natural killer cells then destroy up to 80%of a body’s B cells.”

The drug was developed by a San Diego start up called Idec.  Its founders included several Stanford university researchers and Ivor Royston, a San Diego immunologist. 

The son of a Polish sheet metal worker who entered Great Britain via the beaches of Dunkirk, Royston always remembered the summer when he and his mother lived in the castle his father was re-roofing that was once the home of Henry VIII and Anne Boleyn.  In 1954 the family moved to America.  In the U.S. Ivor, a good student, went to medical school, and married.  His first wife’s father was a successful business man who liked to “challenge the young man with business problems.” If the son-in-law couldn’t solve the problem, his father-in-law would tell Ivor how stupid he was.”  Years later when he was running Idec, Royston “wasn’t afraid to get involved with business people because “if I could deal with my father-in-law, I could deal with anybody.”  

After medical school Royston carried out research at the NIH, became board certified in oncology and tried “to understand how the body recognizes cancer cells, and how can we get the body to make an immune reaction to cancer cells.”  When he was a low level research doc at Stanford, Royston was stirred when he learned how to make monoclonal antibodies. “You could produce antibodies by fusing lymphocytes with myeloma cells and create a cell that don’t die and keeps making antibodies.”  A colleague went to England, contacted the physicians who made the discovery, brought back cells from the “the myeloma line, the immortalizing cell line” and gave a few of the precious “hybridomas” to Royston.  Ivor spent the next 22 years trying “to figure out how to make antibodies against cancer cells.¹³”

From the outset (1985) Idec researchers were looking for a monoclonal antibody that could be used to treat B-cell lymphomas.  There are about 240,000 cases of the disease in the U.S. each year.  The antibody they were trying to develop could also be used to improve some autoimmune and inflammatory diseases.  Their efforts consumed millions of dollars.

In 1991 they needed more money and had an initial public stock offering.  The proceeds netted enough money to get through FDA phase one testing–(toxicity and dose) and phase 2: treating patients without a control group to see if the drug seemed to work.  The company had allegedly spent $80 million to this point.  But they did not have the money necessary to perform the phase 3, the double blind, control versus treatment group, studies that the FDA requires before they approve a drug.  The startup couldn’t get the medication to market.

In 1995 their CEO, a former Genentech guy, signed a collaboration agreement with his former employer, Genentech.  The giant chipped in $60 million and acquired “a majority of the sales and profits that Rituxan would generate if it earned FDA approval.”

It was initially approved in 1997.  Out of the gate Genentech charged $3475 for a month’s worth of the infusion.  In 2002 $1.47 billion of the drug was sold.  Genentech got most of the money.  Idec got $370 million.  By 2013 the average 30 day cost of infusions had gone up to $5031.

Vis-a-vis the price having something to do with the cost of development, Idec spent $80 million and walked away with $370 million.  Genentech spent $60 million and hit the jackpot.  The cost of research, development and getting the drug to market was $140 million.  In 2017 it brought in over $7000 million—$7 billion.

In 2017 the antibodies Roche acquired with Genentech accounted for more than half of the company’s revenue.  That year they sold $7 billion worth of Avastin; $7.4 billion worth of Herceptin; and $9.2 billion worth of Rituxan.⁵

• DOMINATING THE MARKET

 There are many reasons to question the widely held notion that high drug prices and innovative research are inextricably linked.⁹ EZEKIEL J. EMANUEL

For decades companies have been buying one another, combining, and attempting to control segments of the market.  Large pharmaceutical companies purchase small startups or large competitors to gain control of a drug and/or the technology that led to its creation.  Many acquisitions cost billions.  To survive the purchasing company has to sell a lot of product, so they market aggressively and charge as much as they dare.  And we all pick up the bill.

In 2011 Gilead bought Pharmasset for $11 billion and gained control of the company’s potent Hepatitis C medication, sofosbuvir.  When combined with a second, though less potent anti – viral, Pharmasset’s medication cured most people quickly with minimal side effects. Gilead researchers had developed a drug ledipasvir.  It suppressed hepatitis C, but when used alone it wasn’t curative. 

The drug combination was great news for the 2.7 to 3.9 million Americans and the 71 million worldwide who carry the bug.  Some of the people who are chronically infected with Hepatitis C develop cirrhosis or liver cancer; the virus is responsible for the deaths of 400,000 people each year.

Hepatitis C was identified in the 70’s by researchers in at the Emeryville startup called Chiron.  It’s one of several viruses that inflames the liver, turns a person’s skin and eyeballs yellow, and drains their energy.  It becomes chronic in 70-85% of those who acquire the disease when they are adults.   A third of the infected people develop cirrhosis, and they die within 20 years.  A third never have significant problems. And in a third the virus isn’t harmful for many years, but at some point, for some reason, their liver slowly and progressively becomes inflamed.

By contrast, hepatitis A doesn’t become chronic.  Hepatitis E can become a persistent problem in people who are immune-suppressed.  Hepatitis B usually causes a self limited illness in newly affected adults, but becomes a lifelong problem for infants who acquire the disease from their infected mother.

For decades “C” was treated and often cured with interferon.  A year long ordeal, the treatment consisted of weekly injections that cause fever and exhaustion.  The bad effects usually lasted a few days and subsided before it was time to get the next shot.   As I once explained to a young man who developed a fever and had no energy for the first two days after he received interferon:  “If you get an injection on a Friday you will be sick on Saturday and Sunday, but will probably be well enough to go to work Monday.  Would you like to be treated that way?” 

 “And ruin my weekend?” he shook his head.  “I don’t think so.”   He requested and I wrote for him a year- long excuse from work.

My colleagues and I treated hundreds of people using this regimen.  The process was emotionally trying, but the people who desperately wanted to be cured, endured the weekly draining days.  In a significant minority the treatment didn’t eradicate their disease.  For many that was heartbreaking.  

The doctors who developed the curative drug were scientists at Emory University.   One of them, Raymond Schinazi, was a Jew who was born in Alexandria Egypt.  In 1956 Israel and Egypt fought a war and Egyptian Jews became personae non grata.  His family moved to Italy, and he later studied at Bath in the UK.  “As a student he lived on 100 English pounds a month, worked as a parking attendant to help pay his way, and didn’t have real money in his pocket until he won 3000 pounds in the Spanish lottery.”  After receiving his British degree he did his post doc work in Yale and spent three years making “chemicals similar to Nucleosides.” A bear-sized man who speaks bluntly, negotiates fiercely, and favors splashy, multicolored shirts, Dr Schinazi enjoyed the science but not the weather at Yale.”  “We had two really cold winters in a row in New Haven, with tons and tons of snow.⁵” So he moved south.

When the world learned HIV was caused by a virus, Schinazi was a professor of Pediatrics at the VA hospital in Atlanta.  As he explained (in interviews) he “couldn’t just sit around and do nothing.  We had the tools, the brains and the information” (He had done research on the Herpes Virus.)  He wanted to attack the virus with nucleoside analogues.  The VA resisted then assented, and Schinazi helped develop two of the more significant anti HIV drugs.  Profits from the sale of the medication went to his university.

Encouraged by his success Schinazi wanted to try to develop an anti Hepatitis C drug.  The NIH, allegedly, turned down his application for the project.  He and a partner got venture funding and founded Pharmasset.  One of their company chemists, Michael Sofia, developed Sofosbuvir, a drug that, with a little help, cured hepatitis C. “

“Pharmasset planned to sell the drug at a total cost for the treatment of around $30,000.⁴  

In 2011 Gilead bought Pharmasset for $11 bn.   Schinazi received $440 million and went on to do further research. Gilead now had to sell and charge a lot for the medication.  The original list U.S. price for the company’s two drug combination, Harvoni, was $94,000.

During an interview with journalist Jon Cohn, Schinazi was asked about “Sofosbuvir’s price tag of $1000 per pill.”Shinazi pointed out that Gilead decides how much they will charge and he called the price “obscene” but not unreasonable. “Is it fair to pay $3 for a bottle of water when you’re thirsty? This is something that cures you from a disease.”

For most of those infected treatment wasn’t urgent, but Gilead had to move a lot of their product before competitors developed a drug combination that worked as well as Solvadi.  The company spent $60 to $80 million on TV ads in which people said they were “ready” to be cured.

Approved late in 2013, Gilead’s drug combination, Harvoni (ledipasvir/sofosbuvir) created revenues of more than $10 billion in 2014.  Then Gilead marketed two additional anti viral combinations. Each was made up of sofosbuvir plus one or two other drugs that suppressed Hepatitis C.  Each cured most people who had the disease.  Gilead’s revenue from the sale of the anti-virals neared $20 billion in 2015.

In August of 2017 the FDA approved a second combination of anti Hepatitis C drugs.  Called Mavyret, “It was initially priced at $13,200 per month, or $26,400 per treatment course, before discounts.” At the time a curative course of Gilead’s three Sofosbuvir combinations:  Epclusa, Solvadi, and Harvoni were priced at $74,760, $84,000, and $94,500 respectively.  Gilead sold $13 billion worth of anti virals in 2015.  In 2018 the company projected “$3.5 billion to $4 billion in U.S. sales.”

When companies spend billions to control the sale of a drug, we all pick up the bill.¹

Gilead, the company that made the $11.9 billion gamble was founded in 1987 by Michel Riordan, a 29 year old M.D. and business major.  Enthusiastic and committed, Riordan convinced heavy hitters George Schultz and Donald Rumsfeld to join the company’s board of directors.  During its first 15 years the company created a few drugs, “took in 2 billion dollars from investors and lost ¾ billion dollars.” 

In 1990, the head of Gilead embarked on a new approach.  He convinced John Martin, the Bristol Myer Squibb head of antiviral chemistry, to jump ship and come to his failing company.  Then Squibb decided “they no longer wanted to develop” the promising antiviral that had been created in Prague by the intuitive Czech researcher, Antonin Holy.  Squibb’s rejection “hit like a ton of bricks”.  It came 2 years after Gorbachev allowed Czechoslovakia to free itself from Russia’s grip.  Years earlier as an employee of Bristol Myers, John Martin had flown to Prague and spent a day with Holy walking through the streets of the city on the Vltava River.  When he heard about Squibb’s decision, knowing the potential of Holy’s creation, Martin phoned his old acquaintance.  He convinced Holy to sign a licensing agreement with Gilead….which they did a few months later—on a napkin–in a restaurant near the Eiffel Tower.¹² (I tell this story in the chapter on HIV)  Gilead tweeked the nucleotide and it became the basis of several potent Gilead medications that are currently used to prevent and treat HIV and active hepatitis B.  They helped Gilead become solvent, and they, no doubt, added to the confidence and fire power it took for Gilead to purchase Pharmasset and later Kite, the company that is developing CAR-T therapy for lymphoma.⁸   In 1996 Martin became Gilead’s chief executive, replacing Riordan, who retired and went on to other ventures.¹⁰

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In 1999, as part of a hostile takeover Pfizer paid $90 billion and swallowed Warner Lambert, the corporation that owned/controlled Lipitor.  Pfizer went on to sell a lot of the medication. It became the world’s best selling drug.  In a 12 year span (1997-2009) Pfizer sold more than $80 billion of the pharmaceutical for $5-$6 per 20mg pill.

To understand the drug’s appeal we have to remember that 800,000 people a year–one in three deaths in this country are the result of a heart attack or stroke.  92 million adults are living with heart disease or the after effects of a stroke.  Vascular disease isn’t preventable, but it’s more likely to occur in people with a family history, high blood pressure, diabetes, or to those who smoke or have a high serum cholesterol.

Since the 1950s doctors have believed that if they could lower the level of cholesterol in the blood they could prevent some heart attacks.  A low fat diet helps, but major dietary restrictions sometimes fail.  Our bodies require cholesterol.  It’s a component of cell membranes, hormones and much more.  We mainly produce it in the liver.  When we make too much our blood levels rise and we are at risk for heart disease.  Over a few decades researchers have unsuccessfully sought a molecule that would block the synthesis of cholesterol.  The chemicals they came up with were toxic or not very effective.

In 1973 a researcher in Japan, Akira Endo, extracted a statin from a blue-green mold.  When taken by a human it caused the blood cholesterol level to drop.  Born in a rural northern Japan, Endo “grew fascinated with mushrooms and other molds when he was young.”  As a college student he read and was inspired by a biography of Alexander Fleming, the man who discovered penicillin, the protective juice that was produced by a blue-green mold.  What other amazing juices do these growths fabricate? After a few years as a researcher he spent 2 years in the U.S and “was surprised by the rather rich dietary habits of Americans compared to those of the Japanese.” While living in the Bronx he recalled seeing ambulances that took people who had suffered a heart attack to the hospital. When he returned to Japan he became an investigator for a Japanese pharmaceutical company.  At one point he wondered if “fungi like molds and mushrooms could produce antibiotics that affected the synthesis of cholesterol.”  His company allowed him to choose his field of research, and over a number of years he studied the “juice”–the metabolites and toxins produced by over 6,000 types of fungi.  In the early 1970s he cultured the fluid created by a blue green mold that was growing on a rice sample in a grain shop in Kyoto.¹³   It blocked the cholesterol synthesis pathway and became the first statin.  Endo’s discovery was huge.⁶The recipe it provided was, over time, modified and tweeked by researchers who developed increasingly better cholesterol lowering medications.  

After confirming Endo’s findings, Merck scientists, used an aspergillus (and Endos methods) to create the cholesterol lowering drug Lovastatin.¹¹   A 1994 Scandinavian study showed that statins “led to a sharp drop in fatal heart attacks for patients with heart disease.”  The following year Merck sold more than 4 billion dollars worth of Simvastatin and Lovasatin.

Many tried to make a superior statin.  Bruce Roth, a researcher at Warner Lambert in Ann Arbor synthesized Lipitor and showed it was very potent –the strongest available.  The drugs inventor had grown up outside Philadelphia, loved the night sky, and initially wanted to be an astronomer.  One day when he was in high school reality struck.  He “realized there were only like three jobs in the whole world for astronomers,” and he decided to become a chemist.  While learning the craft he came to believe that “there really are true artists in organic chemistry.” He got his Ph.D. and played intramural softball at Iowa State University.  At age 30 he moved to Ann Arbor, Michigan and “used his skills” to create the statin molecule called Atorvasttin.¹⁴

After it was tested and FDA approved, Warner Lambert joined forces with Pfizer, and the drug was “aggressively” priced and promoted.

Then (apparently) something went wrong and Warner sought to be acquired by someone other than Pfizer, and Pfizer wasn’t having it.  In 1999, as part of a hostile takeover, Pfizer paid $90 billion, swallowed Warner Lambert, and went on to sell lot of Lipitor.  When Pfizer’s monopoly ended their profits dropped and the company attempted to avoid U.S. taxes by moving their headquarters to Ireland.³

Staying alive

“To sustain a $20 billion-a-year business (a firm like Pfizer”) needs to add one new blockbuster medication to its portfolio each year.” Large companies in general need four “$1 billion-per-year drugs to maintain their revenue base.”  (That’s the conclusion of Bernard Munos, a leading thinker.)  He says the pharmaceutical industry of the 1980s was a “haven” for creative scientists whose work was based on “cutting edge discoveries coming mostly from academia.” Proceeding at their own pace and pursuing clues as they went, these researchers would steer their own course and pace.  Industry assumed some would eventually create a commercial product.  The approach was “risky”– but it led to a lot of innovative medications.⁷

In the 1990s business savvy CEOs became the leaders of most of the large corporations.  They tended to be scientifically untrained or illiterate, and they were troubled by the apparent disarray in their R and D divisions.  Scientists kept changing course.  There were no deliverables.   “To them (what they saw) epitomized mismanagement.”  So the CEOs changed the culture.  Researchers were now expected to be “responsive to the marketplace”.  A “process” driven–goal driven culture was created, and true innovation was largely “destroyed.”  

Munos believes leading edge innovators aren’t focused on the existing customers and markets.  They want to make something that “transforms—obliterates” the status quo.²

• 2019 SENATE HEARINGS

On Feb 26, 2019 the heads of 7 pharmaceutical manufacturers appeared before a congressional committee.  The CEO’s of Roche and Novartis—the Swiss—were notably absent.   Senators were trying to learn why the cost of medicine was much higher in America than it was in any other advanced country.   At the end of her 5 minute interrogation Debbie Stabenow of Michigan seemed frustrated by the evasive non-answers she was evoking, and she concluded that companies raise prices because they can. 

She was right and wrong.  I believe CEO’s believe they have no choice.  They are accountable to stock holders. If the company is not profitable their jobs are in jeopardy.  The marketplace they face is not one where their “competitors” are trying to grow market share by cutting their prices.  Quite the contrary.  Industry leaders are charging more each year.  As long as price increases stay below 10% and are some odd number, they don’t seem arbitrary.  Most importantly, when pharmaceutical prices rise no one who matters seems to care.

Not that the spokespeople that defend Pharma are wrong.  Some of the drugs that company researchers spend years developing fail.  When tested, they aren’t effective or are they are toxic, or they don’t have a market niche that makes them profitable. When company money makers lose their exclusivity, generics move in.   

Most advanced nations keep prices down by using a system called “reference pricing”.  They cluster medications that “have identical or similar therapeutic effects”.  Then some insuring nations (like Italy) pay the cost of the cheapest drug in each grouping, and in other countries (like Germany) shell out the price of the average medicine in the collection.  In America the government hasn’t instituted a pharmaceutical price control system. Insurers, phamaceutical benefit managers and the VA negotiate drug prices; Medicare, by law, can’t. ¹ 

 Many of the CEOs that were in Washington that day seemed less than proud of their contribution to the price problem.  Some seemed anxious to lower prices and/or tie increases to inflation.  In return they wanted to stop giving discounts and rebates to middle men and women–pharmaceutical managers– or give rebates directly to the person that needs them. And if they were going to lower prices they wanted the other companies to follow suit.

Kenneth Frazier, the son of a janitor, and grandson of a South Carolina share cropper was the CEO of Merck. A graduate of Harvard, he was the first black man to head a fortune 500 corporation.  Initially a member of the defense team when Merck was sued because its arthritis medication, Vioxx, increased the risk of heart attacks and strokes, he had also practiced criminal law. He was part of a legal team that won a new trial and eventual acquittal for an Alabama man who had been convicted of murder.⁵ 

He told the senators that he felt his company had a duty to be responsible in pricing practices and to contribute to solutions that address patient affordability.  He said that the previous year Merck had decided to not annually increase the net price of their portfolio by more than inflation.  And he pointed out that his company had deployed 70k doses of experimental Ebola vaccine in the Congo. 

The French company Sanofi’s head, Olivier Brandicourt, had, as young doctor “spent two years in the Republic of the Congo, and he had then studied malaria during his eight years at the institute of infectious and tropical diseases in Paris.”  He said that two years earlier his company had pledged to keep price increases at or below the U.S. national health expenditure projected growth rate.  He talked about the gap between net and list prices.  Lantus, the company’s long acting insulin had seen a 30% decrease in net at a time when U.S. patients out of pocket costs had increased 60%.  He felt dealing with list price alone would not solve the problem of patient out of pocket costs.⁶ 

Pascal Soriot head of Astra-Zeneca agreed:  “The government has to step up and change the rules.”  Born in France, Soriot currently calls Australia his home. An avid bicyclist he keeps a road bike in the Alps, another in the US, and a third one in Cambridge England.⁷ He grew up in the north of Paris and when young was a member of a “team”. His story suggests it might have been a bit like a gang. There were “many fist fights.” He was trained in veterinary medicine before he started working for Pharma.   

The new CEO of Pfizer apparently believed the group was not brought to Washington to provide certain senators with an opportunity to publically chastise big shots and show their voters they cared.  He thought the senators wanted suggestions.  Named Albert Bourla, he was a Greek veterinarian who was a former director of Pfizer’s animal health group.  When his turn came he stated he was “particularly humble to take part in such an important policy discussion within the U.S. Senate.  When he immigrated 18 years earlier he could never have imagined such an honor.”  And he told the senators–at the end of the session–that he had made it clear to investors: Pricing will not be a growth driver for the company now or in years to come.  (I wonder how long he will last.)

 Unlike the other CEOs he didn’t point out how many billions of dollars his company was spending on research, how they desperately wanted to discover and develop a new super drug for mankind—not for their bottom line.  And he didn’t talk about his company’s risks and failures.  The suggestions he made provided a decent summary of what everyone (aside from AbbVie) was saying.

Medical breakthroughs, he said, “won’t do anyone any good if patients can’t afford them, and unfortunately the horribly misaligned incentives within our health care system often makes medicines unaffordable for American patients.  We need to fix this.”  

In part restating the thoughts of the other CEOs, Bourla presented four ideas:

All rebates should go to patients. He believes too much money is being swallowed up in the supply chain. His company paid $12 billion this year in rebates.  He didn’t think any of the money found its way to patients.  If discounts were provided to the people who take medications, seniors could save hundreds of dollars a year.  

Bourla suggested capping the amount seniors pay out-of-pocket.  Americans are paying a greater percentage of the cost of their medicines (14%) than they do for their time in the hospital (3%).  If someone doesn’t take a needed medication and as a result lands in the hospital, it’s more costly to the health care system.  (Lids on drug costs will also get some of the noisy voters off the backs of the companies and the legislators).

Finally Bourla touched on the problem that congress created and that only congress could fix.  Our laws are keeping Biosimilars off the American market.

Biosimilars are generic monoclonal antibodies.  They bind to the same antigen as an approved monoclonal antibody and work as well, but they are not identical.  Humira is a monoclonal antibody and to date four pharmaceutical manufacturers have developed and tested effective Humira biosimilars.

The Biosimilars Act of March 23, 2010, gave biosimilars 12 years of marketplace exclusivity.  Standard medications were getting a 5 year monopoly.  At the end of those years (in the absence of legal gamesmanship) the first standard generic (biosimilar) would theoretically be allowed to compete —unless a valid patent stood in the way. And that’s the rub. All new pharmaceuticals are “protected” by significant and insignificant patents. Pharmaceutical companies have long used insignificant patents –that their lawyers could allege were important–to keep generics off the market for a few years. They have long used a provision in the 1984 Hatch-Waxman act to delay the entry of competitors. Then in 2010, in the guise of speeding biosimilars to the market, industry lobbyists did it again. They shaped a new rule as an amendment to the Public Health Service act.  They titled it an innovation, and they slipped it into the Affordable Care Act—Obama care.  And Ron Wyden, the senator who was most troubled when AbbVie used the loophole, voted for the bill.

AbbVie used loopholes in the law to keep four Humira biosimilars, off the American market for 5 years. Presumably they would have driven down the price of Humira. The company’s lawyers probably had one or several patents that were allegedly being infringed. Abbvie owns 126 Humira patents.  Most (I assume) have little nothing to do with the core drug. Under the new law when there was a patent dispute–in the place of litigation “negotiation was encouraged”.  The bargaining rules (called a dance) are complex, Byzantine.³

In Humira’s case the manufacturers reached an agreement. 4 companies were allowed to market their biosimilars in all countries of the world outside the U.S.  AbbVie kept exclusive control of the American market.  That’s over $9 billion a year for 5 years.  Thanks to our legislators, the U.S. will have to wait for biosimilars until September 2023.⁴ Bourla explained our law created “reverse incentives that favor higher cost biologics and are keeping biosimilars from reaching patients.  In many cases insurance companies decline to include lower price biosimilars in their formularies because they would risk losing rebates from higher cost medicines.”

Parenthetically Bourla suggested that the administration should obtain trade agreements that prevent foreigners from freely using American innovations.  He didn’t think Americans should pay less for drugs. He thought people in the other western countries should pay more.  “The price control mechanisms of many nations are giving others a free ride on American innovations.”

Richard Gonzalez, the CEO of AbbVie was the target of Senator Wyden’s wrath; One of Pharma’s few CEO’s without a college degree, Gonzalez worked for Abbott for 30 years and retired when he developed throat cancer.  Declared cured, he returned in 2009 as head of a spinoff called Abbvie.⁸ Gonzalez stated there’s no one solution; and he did his best to avoid discussing the biosimilar elephant in the room.  He pointed out that since its inception in 2013 his company had spent 50 billion dollars in research and had a hepatitis C drug that financially failed. He felt price was only a part of the problem.  Stating a willlingness to work with the committee, he pointed out that his company is charitable. 81,000 patients got free drugs (for an unspecified period of time.)

AbbVie, he explained, has 30,000 employees (and they need to eat). Senator Wyden, in turn, pointed out that Gonzalez’s salary was $22.6 million.  And he got a bonus of $4.3 million dollars.  Was, Wyden asked, the bonus tied to the financial performance of Humira.

In September 2018 congress passed John Sarbanes’ Biosimilars Competition Act.  It is supposed to “shine a light” on backroom, “so-called “pay-for-delay” deals – often made in secret.  They must now be reported to the federal trade commission who, with the justice department, will review agreements, look for anti- trust and anti-competitive behavior and “punish bad actors.”  In other words if a company has a drug with an annual revenue of $10 billion and they keep other drugs off the market for 5 more years (and make an additional $50 billion in U.S. sales) they may be sued, and their lawyers may be forced to settle with the government, admit no wrong, and pay a fine of a few million dollars.  Great law.   

“By 2014” (according to a Harvard Public Health school intellectual-property consultant) “biologics were expected to account for half of all pharmaceutical sales.”  Their prices are often quite high. If congress doesn’t modify the rules we can expect high priced biologics for a long time.

ARE GENERIC DRUGS SAFE AND EFFECTIVE?

Reality is a crutch for people who can’t cope with drugs.     Lily Tomlin

A New York Times article tells of employees at the large Wockhardt facility in India who were “knowingly throwing away vials of insulin that contained metal fragments” and were caught.  They were seen by Peter Baker, a man who spent six years inspecting generic factories in India.  He discovered some if the company’s employees were fabricating, backdating and falsifying.  Some of the data in 29 of the 38 plants he inspected was allegedly fraudulent or deceptive.² 

Wockhardt is India’s 5th largest pharmaceutical manufacture and has 8600 employees worldwide, and it’s not the only company where short cuts and violations were detected.  In 2014 the FDA sent cautionary letters … to companies operating plants in Australia, Austria, Canada, China, Germany, Japan, Ireland, and Spain.” They discussed manufacturing and packaging violations, testing, quality checks,..data collection, and contaminated products.^”

I’m not saying that brand name medications are safer than generics. According to Consumer reports “Many brand-name drugs are produced overseas, often in the same plants as the generic equivalents.”³

In her excellent book, Bottle of Lies, Katherine Eban tells the story of how one of the large producers of drugs in India entered the American market.  Then they cheated, deceived, and ultimately went under.⁴

The company in question, Ranbaxy, was incorporated in 1961 by Bhai Singh, a member of a wealthy Sikh family.  It initially distributed cheap Japanese pharmaceuticals and had one factory that “reformulated bulk drugs into tablets and capsules.”  In 1968 the company created and marketed a generic version of Valium.  The drug became a best seller and Ranbaxy had value.  The sons of the founder were studying in the U.S. and they came home.  Over the next twenty years they were welcomed into the family businesses, and they eventually started fighting over who was in charge.  In 1995 Ranbaxy entered the U.S. market and seemed to be playing by rules set down by the food and drug administration, the FDA. 

The U.S food and drug administration inspects and checks manufacturers, but they also expect companies to police themselves, keep records, and submit them to the FDA.  The rules for good manufacturing practices were created in the early 1960s.  Each critical step has to be performed and documented competently. Each batch of drugs needs a record.  The policy calls for “preventative and corrective action,” and Ranbaxy seemed to be compliant.  Not that the company had the same ethos as their competitor Cipla. A Gandhi inspired pharmaceutical company, Cipla was clean, well run, and was devoted to supplying medicines to the underserved.   Ranbaxy was in business to make a profit.  But they were competent and efficient; and the company grew in size and importance.  Then they hired an expert to computerize their data, he took his job seriously and the company started to unravel.

In November 1984 Congress unanimously passed the law that turned the drug market on its head.  It allowed generic drugs to enter the market without undergoing redundant testing. It had its flaws and created new dilemmas. (See Hatch Waxman in the FDA chapter.).  Some contend that the recent creation of a number of high priced medications is in part a reaction to the revenue big Pharma lost to generic competitors.¹³ 

Before the 1984 law most U.S. medications whose patents had expired—drugs that were in the public domain –were still made and sold by one and only one pharmaceutical company.  They distributed the medication and determined its price. Other companies could not market an exact replica of a drug U.S. unless or until their product survived a double blind control study. Half the subjects had to be given a real drug and half a placebo—a dud.   These kinds of investigations were expensive, time consuming, and, since half the people were being deprived of a known medication, the studies were potentially unethical.  Only 13 percent of U.S. prescriptions were written for generic medications. 

The new law changed everything, and by 1994 copy cats accounted for half the drugs that were prescribed.  During the early months and years that followed the changes, the FDA was flooded with fraudulent drug applications, and the agency got tough and created and enforced a number of new policies.

Each drug producing establishment was supposed to be checked every 2 years. That wasn’t possible, so the FDA employed a model that relied in part on the risk.  The company’s inspection history helped tell them which facilities to scrutinize. Foreign offices did some of the inspections.  Between the years 2000 and 2008 the FDA conducted over a 1000 domestic inspections a year and fewer than 400 check ups in foreign countries. ¹⁴    

By 2012, 84 percent of the pharmaceuticals used by Americans moved along the assembly lines of generic manufacturers. 

It’s not easy to create a drug that is truly generic.  Not because manufacturers have a problem acquiring the needed chemicals. They don’t.   A medication’s active ingredient, the substance that lowers a person’s blood pressure, slows clotting, or sinks the level of sugar in the blood can usually be purchased. It’s often produced in large quantities in factories (commonly in China.).  Once the patent for the original medication has expired sophisticated chemists seem to know what to do.

Most medications are part API’s—active pharmaceutical ingredients.  And part “excipients”–inactive substances. Drugs become truly generic when their active and inactive substances are absorbed like the brand named drug, when they circulate, reach the right blood level at the right time, and when they work as long as the original drug.  Nowadays the original fabricator usually patents the various manufacturing steps, so generic manufacturers have to use a different path to produce the product.    

 “The U.S.’s top 5 sources of pharmaceutical imports by “value”–not quantity– (in 2015) were Ireland, Germany, the U.K., Switzerland and India.” Indian companies produce large volumes of cheap generics that are no longer patent protected. The medications “account for 22 percent of U.S. spending,” China doesn’t sell many “finished drugs” but they produce 40% of the global chemical components used for our medications.¹ 

Companies that produce a drug and sell a medication in the U.S. need to tell the FDA the name and business address of the manufacturer. In 2009 over a thousand generic plants applied to the FDA for permission to sell their drugs here.  43% of the plants were in China; 39% in India.

One of the problems that doomed Ranbaxy, the company that motivated Eban to question generic drugs, was the way the company handled their version of the acne medicine Accutane.  Their product was called Storet.  Ranbaxy was ready to market their drug when further testing showed the generic formulation wasn’t absorbed appropriately.  Small quantities of the drug had worked in the lab, but when the company started producing it in quantity it “was failing”.  Ranbaxy should have delayed its launch, kept it off the market until they figured out how to correct the problem.  But they decided to sell the defective medication to the public while the company’s scientists tried to figure out what they were doing wrong.  They “concealed the problem from regulators”, and they memorialized their findings and decisions in a dossier that was labeled “DON’T SHOW TO THE FDA.”  That decision would come back to haunt them.     

As Eban explained in her book, drug companies were expected to emphasize quality over cost.  “Manufacturing processes had to be transparent, repeatable, and investigate-able.” There’s, apparently, always some variation between batches of medicine, so companies are expected to test each group and keep real time records of each drug making step.

At one point Ranbaxy was getting big, and it was hard to keep track of what was happening in their factories.  So they hired a data expert who was born in India and learned his trade while working for the American drug manufacturer Bristol Myers Squibb.  His name was Dinesh Thakur and he took his job seriously.  Before he could computerize figures from the company’s many factories he had to collect the information. He sent his assistants to the facilities, and one by one they came back empty handed. Ranbaxy, it turned out, had been faking the data that “showed” each batch was tested.  They were telling the FDA they were regularly checking the drugs that came off their assembly lines, and they were claiming they had proved that each batch was “properly formulated, stable, and effective.”  But half the information submitted to American and European regulators was bogus.  Drugs sold to people in India were not tested for stability and bioequivalence.  Adverse events were not reported to the FDA.   The drugs may or may not have performed appropriately.  The data that said they were up to snuff looked impressive, but it was phony.  Drugs made for third world countries were formulated using relatively impure, cheaper ingredients.  Sometimes, instead of testing products they made, people at their factories would crush and test brand named drugs.  Documents were back dated. 

In 2004 after his team gathered proof, Thakur reported to his boss, Raj Kumar.  It took a little convincing but eventually Raj was persuaded.  The company was systematically faking data.  The board of directors had to be notified.  Raj created a power point explanation of what was happening.  He believed the drugs that had been misrepresented had to be pulled from the market and the company had to reapply to the FDA. 

He made his presentation to the people in charge.  It was called a self assessment report (SAR). When Raj finished, his statement to the board was met with silence.  The company leaders didn’t seem surprised, and they weren’t willing to admit they were wrong. They would not reapply to the FDA.  Kumar was told to destroy his slides and presentation—the SAR.  As a result of the leadership’s refusal Kumar resigned.  That was in October 2004. 

Thakur stayed but was troubled by many of the company’s products.  He worried about the HIV fighting drugs that were being shipped to Africa.  “He knew they were bad, degraded easily, and would be useless in the heat of Sub Saharan Africa.”  Two years after he joined the company Thakur resigned.  But he remained troubled.  Four months later Thakur assumed a pseudonym and started writing, initially to the World Health Organization, then to several FDA officials, and ultimately an FDA commissioner. He told them Ranbaxy was faking data.  –that they were fabricating information to support stability.”  At the time whistle blowers in India had sometimes been killed, and Thakur felt he had to hide his identity.  But he also felt compelled to act because he believed “executives at India’s biggest pharmaceutical company had committed intentional global fraud.”       The people at the FDA who received the emails Thakur sent didn’t know what to do.  Ranbaxy was a huge company with multiple factories and paper work that seemed impeccable. 

In India companies were always notified when the FDA was sending an inspector.  Visits were scheduled and manufacturers had days to make their facility spotless.  And that was a potential problem.  Sometime during the subsequent year the company was checked out by an FDA examiner who, apparently, didn’t know about the allegations.  He believed the company was honest and honorable.  He spent his days identifying and pointing out deficiencies, and he gave the factory a passing grade.  The people at Ranbaxy thanked him and promised to fix the problems.  By February 2006, having received multiple surreptitious emails from Thakur, a few people in the FDA had grown suspicious.  The Ranbaxy factory was re-inspected.  This time two hardnosed investigators surveyed the plant.  They found deficiencies, and the FDA stalled one of the company’s new drug applications. 

Eventually, on Feb 14, 2007 officers carrying guns and wearing bullet proof vests raided Ranbaxy’s New Jersey facility.  They carried away hard drives and a copy of the company’s internal report on their Accutane drug.  It was labeled DO NOT GIVE TO FDA, and it proved someone in the company had lied.  But it didn’t provide evidence of systemic fraud.  FDA investigators tried to contact Raj Kumar, the man who gave the power point presentation, and he evaded them. A company lawyer warned Raj to “be careful about what he tells the FDA because he had exposure.”  Some leaders at the FDA found it hard to believe that a company with manufacturing plants in eleven countries and sales in 125 nations was systematically providing fraudulent data. 

About that time Tsutomo Une, a leader of a Japanese pharmaceutical house Daiichi Sankyo, contacted the head of Ranbaxy and spoke of a joint venture.  His company wanted to grow.  Japanese drug manufactures were at the time (and still are) known to be leaders in the field of quality control.  The leaders of the two firms met a number of times. Within 4 months a merger of sorts seemed likely, but Une was hesitant.  It was public knowledge that the Indian company had been raided and had received warning letters from the FDA.  Malvinder, head of Ranbaxy told Une that the raid was really incited by Pfizer.  They were trying to get back at Ranbaxy because the Indian company had “prevailed in the Lipitor patent litigation.”  And Une believed him. 

But Malvinder was worried.  His lawyers learned that when the FDA raided the New Jersey Ranbaxy headquarters, among the data they had hauled away was the 2004 SAR.  It was a smoking gun and showed that Ranbaxy had been faking the data they presented to the FDA.   Malvinder fretted but didn’t tell his Japanese counterpart.

In 2008 Daiichi Sankyo became Ranbaxy’s principle share holder.  In September 2008 the FDA barred the import of 30 drugs from two Ranbaxy plants, and in early 2009 the FDA formally issued an “AIP.” The letter notified the company that the agency believed it had evidence that the company’s applications had been “fraudulent or unreliable.”  Malvinder was forced to resign as head of Ranbaxy. He paid a large fine to the FDA but avoided criminal prosecution.  At a later time he was sued by the Japanese and was forced to pay them $550 million for overstating the value of his company.  Ranbaxy agreed to plead guilty to three felony counts of violating the federal drug safety law and four counts of making false statements to the F.D.A. The company also admitted that they failed to complete the proper safety and quality control tests on several of the drugs that were manufactured in the Indian factories.  We probably would not have learned that Ranbaxy was faking their data had it not been for a troubled whistle blower.

In subsequent years the FDA’s presence in India has gradually expanded.  They claim to have more than a dozen full-time staff.  Inspections are (officially) frequent and increasingly unannounced. If the agency finds problems, it issues a Form 483, a notice outlining the violations, which if not resolved can lead to a warning letter and in worst case, a ban. Violations range from hygiene, such as rat traps and dirty laboratories, to inadequate controls on systems that store data, leaving it open to tampering.⁵.

Eban’s book goes on to tell of a few other companies that cheated.   . 

In the early 1990s an FDA inspector observed Sherman Pharmaceuticals of Louisiana burning medication that was returned due to contamination.  Penalized in 1995, the company went out of business. 

In 2007, the anticoagulant heparin was manufactured by the American company, Baxter, and it made kids who were receiving kidney dialysis sick.  The substance that caused the harm turned out to be a contaminant in the Chinese chemicals that were used to make the heparin. And there were others.

In 2012, Congress passed the FDA Safety and Innovation Act.  It directed the FDA to inspect foreign facilities as frequently as domestic plants.

In 2013 “the Indian government approved the addition of seven new FDA drug investigators, and brought the total number of Americans checking their facilities to 19. 

That year the number of inspectors in China went from 8 to 27.”

By 2014 the FDA was complying with the law. They conducted over 800 inspections in the U.S. that year and they checked an equal number of facilities abroad.

By July 2016, 965 foreign production facilities had never been inspected.  And before 2020 the agency had, at least once, assessed 495 or 51% of them.¹⁴

Based on the Ranbaxy story and numerous interviews Eban asks a very important question:  Should brand name and/or generic pharmaceuticals be trusted?  It’s an especially important question because more than 40 percent of finished drugs used in the U.S., and 80 percent of active pharmaceutical ingredients are produced overseas.  Pharmaceutical factories are scattered around the globe. There’s a lot of money involved, and people sometimes cheat. 

• Deception by major players, sadly, is not confined to the generic pharmaceutical industry. 
• In 2015 the environmental protection agency discovered that 11 million diesel autos made by Volkswagen contained a special device that allowed the company to intentionally lie about their emissions.  The company admitted guilt and paid a $25 billion fine. 
• In 2008 the former head of Nasdaq, Bernie Madoff, admitted he had, over many decades, “conned his investors out of $65 billion.”  He went to jail. 
• More recently airplane manufacturer Boeing, fitted some of its newer planes with large engines and special software but failed to train some of the pilots.  Their actions led to the crash of two air craft and the loss of hundreds of lives. 
• Early in this century huge trusted banks sold collections of mortgages whose quality was falsely inflated.  When housing prices started dropping in 2007, the values of these mortgages plummeted and the banks didn’t have enough cash to avoid a run.  The economy was saved by a $16.8 trillion dollar government bailout. . 

In the EU, national competent authorities are responsible for inspecting manufacturing sites located within their own territories. Sites outside the EU are inspected by the State where the EU importer is located or by the manufacturing country’s examiners.

If products are imported directly into more than one member state from a manufacturing site outside the EU, there may be more than one responsible authority. Routine inspections are performed using a risk-based approach and when there is suspicion of non-compliance.⁷

Facilities in Europe apparently are rarely inspected by our FDA.  Thanks to the 2012 Food and Drug Administration Safety and Innovation Act, the FDA turned over the inspection of meds made in Europe to the inspectors of each country.⁸  

• Pharmaceutical manufacturing is a large global industry.
• In 2003, worldwide pharmaceutical industry sales totaled $491.8 billion. 
• The U.S. accounted for 44 percent of global industry sales for a total of $216.4 billion. 
• The ten largest pharmaceutical corporations made almost 60 percent of total U.S. sales in 2004. 
• There are a few pharmaceutical companies that participate in both the branded and generic parts of the industry. 

All manufacturers use electronic bar-coding technology on drug packaging. Hospitals claim bar coding each pill makes it less likely a sick in-patient will be given the wrong medication. In Europe (starting in 2019), all marketed medicines need a 2D Barcode.  Central verification systems are supposed to be able to trace each and every medication.

Hospitals in Holland have shown that when all Single Unit of Use Packages contain the correct barcode – record, doctors and nurses make fewer mistakes.¹⁰ . 

The side of the refill bottle of a prescription medicine I take has a bar code.  It is 8 numbers long and I don’t know how to access the information it encodes.  If the pill doesn’t work or causes a reaction I currently am unable type the numbers into a web site and get that information. What if everyone could post medication problems with details about where the drug was manufactured on a web site that others or the FDA could check? 

Pharmacy benefit managers choose which drugs we take on the basis of price, kickbacks, quality, and reliability.  How do financial incentives affect quality of our drugs?

ARE GENERIC DRUGS SAFE AND EFFECIVE? The world has bad actors and cheaters, but most companies and inspectors take pride in their work.  They don’t want to let their friends and neighbors down, and they strive to avoid creating or choosing an inferior, worthless or harmful product.

Chapter 14-NEGOTIATING

 

When we talk about the cost of a unique new life saving medication (see gene therapy) the process is a little like hostage negotiation.  The government gives the pharmaceutical manufacturer a 5 year monopoly and allows the company to set the price.  The insurer has meetings with itself and decides how it’s going to deal with the situation, and to the patient and family it becomes a “your money or your life” situation. 

When legislators decry Medicare’s inability to negotiate with a pharmaceutical company they are revisiting a politically influenced law that Congress passed in the wee hours of the morning December 8, 2003.  (see FDA chapter)  Some believe Medicare D could save a lot of money if they were allowed to negotiate with the companies that sell costly medications.  Currently by law they can’t. 

The law didn’t become a big political issue because of a later law that protects most of the people on Medicare.  If the yearly outlay for a drug exceeds $6350, the situation is officially a “catastrophe,” and the Medicare recipient is only responsible for a small copayment.

The legislation that authorizes the government to pay the other 80 percent of the annual cost of the expensive drugs started as a bill that limited “total out-of-pocket charges for people on Medicare.” It was championed by Otis Bowen.  A country doctor from a town of 5000 in northern Indiana, Otis was his state’s governor before he was appointed secretary of Health and Human Services by Ronald Reagan.  Known as “Doc” Bowen, he “kept a prescription pad handy, and recommended remedies to cure the common cold and sore throat for both colleagues and members of the press.”   When his bill to help people on Medicare was introduced Reagan wasn’t keen on the idea.  But his administration was caught red handed giving weapons to Iran and money to the Central American counter revolutionary fighters known as “contras.”  His party was in the midst of a huge scandal and the Republicans lost control of Congress. 

In 1988 a few liberal senators promoted the Medicare Catastrophic Coverage Act.  It included a tax that was controversial, and it had a drug benefit that, at the time, didn’t amount to much. 

Senator Lloyd Bentsen made sure the legislation didn’t cover most medicines.  It was just for catastrophes and at the time, there weren’t many.  Bentsen, the senator who brokered the compromise, was a fearsome poker player.  You never knew what cards he held.  He was a B-24 bomber pilot during the Second World War and was shot down on twice.  Looking and dressing like Hollywood’s version of a successful politician, the senator was tall and thin, had a deep, voice, and wore elegant clothes.  When he went to a party and his wife wouldn’t leave he, famously, would playfully toss her over his shoulder like a sack of potatoes and carry her out.¹⁹” In 1988 when Michael Dukakis was the Democratic presidential candidate, Bentsen was his running mate and they lost.  

In most of Europe, when a new drug becomes available countries go through a process. Germany makes sure the medication is safe and effective.  Then the country allows the manufacturer to set a price and sell it. During its first year the new drug is compared to existing therapies and its relative “value” is determined. Then the company and government authorities bargain and usually arrive at an acceptable price.  If they disagree they arbitrate.  The panel of five that hears both sides includes a representative of the government and a person who speaks for the insurer, and their decision is binding—if the manufacturer doesn’t strongly disagree and doesn’t choose to stop selling the drug in the country. In seven years Germany has assessed “More than 300 drugs and fewer than 30 were withdrawn.¹⁸”

In the U.S. doctors often don’t know (and many don’t want to know) how much people pay for their medications. Health insurance policies often have formularies that cover part of the cost, so some people pay more out-of-pocket than others for the same drug.  

Most of the medications people take are generics.  When there are more than two manufacturers price competition can be intense.

Pharmaceutical Manufacturers handle the negotiations for unions, hospitals, benefit managers, the military, and the Veterans Administration. Formulary management works for the Veterans Administration.  They, for example, only carry one or two beta blockers.  Companies bid for the contract.  All the VA business goes to the brand that provides the best price.

Medicaid doesn’t have to parley.  The law says the program automatically gets the best price available.

In the world where everyone negotiates, health insurance plans include a prescription drug benefit.  Their programs are managed by PBM’s, prescription drug management companies.  Some of them are owned by a large health insurance company.  Three independent management corporations control 75% of the market.  They bargain, receive a service fee from their clients, share their financial gains with health plans,” and commonly determine the drugs that insurers cover, and their “tier” position.³

Cheap generics have low co-pays.  Preferred brand name drugs are up a step.  The newer, very expensive medications are typically in the top row.  The person who takes the pricy drug and is not on Medicare commonly has to pay a percent of the list price.

For illustration, the formulary of the University of Maryland Health Advantage has 5 drug levels, and five escalating sums of money.  The following is taken from their web site.  It is the 30 day co-pay for each filled subscription.¹³

• Tier one: $4 co-pay for preferred generic drugs.
• Tier two: $15 co-pay for generic drugs that didn’t make the preferred list.
• Tier three: $47 co-pay for preferred brand name medications.
• Tier 4:  $100 co-pay for brand named products that didn’t make the preferred list.
• Tier 5:  33% of the manufacturer’s list price.

The medications on the top row are “specialty drugs” and typically cost $50,000 to $100,000 a year.  The amount Medicare Part D spent on specialty drugs nearly quadrupled in the five years between 2010 and 2015.  Their cost rose from $8.7 billion to $32.8 billion a year.  By 2015 they accounted for 31 percent of the programs net spending.⁴   Drugs in the most expensive group usually include:

• combinations of anti retroviral (HIV) drugs,
• multiple sclerosis modifying agents,
• Orphan drugs—medications that are not in high demand for people over 65.
• A number of the very expensive, cancer fighting medications.

Thirty three percent of a costly drug’s list price is a lot of money for most Americans who are not on Medicare.  Pharmacy committees that place the drugs in tiers meet regularly.  When the drug insurer also covers a person’s general medical care, committees realize some expensive prescriptions are not being filled.  If a person can’t afford a needed medicine, the drug’s absence may allow their condition to become so bad that they need to be hospitalized.  If that happens, the insurer will be on the hook for the cost of at least part of the resulting medical care.  Thus these committees need to walk the tight rope between keeping their plan solvent and avoiding prices that make people choose between their money and their health.⁵

One variety of $60,000 to $100,000 per year drugs that are on the top tier are medications used to help prevent flares of multiple sclerosis.  These are among the medications whose prices matter the most to manufacturers because they account for a major part of the profits.  An estimated million Americans are living with the chronic neurologic condition.  The cause is unknown but the immune system of people with the problem, attacks and destroys the myelin, the insulation that surrounds nerve fibers.  Over time the axons, the part of the nerve cell that conducts electrical impulses, can be destroyed. “The disease has a highly variable pace and many atypical forms.¹⁶.”   In 85% of the people neurologic deficits (which come in many forms and can be quite significant) come, stay for a while, and then disappear.  Symptomatic remissions can then improve or disappear over a period of time.

A number of drugs that block parts of the immune system seem to minimize the flares.  They are different in many ways, but each requires years of follow up on or off therapy to see if they prevent symptomatic flares or MRI changes.  And each of them, for unclear reasons, costs about $62,000 a year⁶

CURRENT CASH PRICES FOR A ONE MONTH SUPPLY OF Multiple Sclerosis MEDICATION

DRUG NAME——-DOSE————-WALMART–WALGREEN

Aubagio (Genzyme)	14MG (30)	(Pharmacist could not locate in database)	$4,757.19
Avonex (Biogen Idec)	Prefill 30MCG/0.5ML Kit	$4,877.08	$5,058.19
Betaseron (Bayer)	0.3MG INJ (14)	$5,154.54	$5,809.69
Copaxone (Teva)	20MG 1PK=30 INJ	$5,507.32	$6,000.09
Extavia (Bayer)	0.3MG INJ (15)	$4,430.46	$5,589.99
Gilenya (Novartis)	0.5MG CAP (28)	$5,372.18 FINGOLIMOD	$4,790.19
*	…	…	…
Rebif (Merck KGaA/Pfizer)	44MCG/0.5SYG INJ (12)	$5,150.54	$5,304.49
TysabriBiogen idec			$$5629.49

The man responsible for the 1990 law that ties the costs of drugs provided by Medicaid to the bargains obtained by insurance companies was Senator David Pryor.  The son and grandson of sheriff’s, he was “arguably the most popular Arkansas politician of the modern era.”  In 1975, when he was the state’s governor his “frazzled wife ran away from the state’s mansion and left her  three sons in the care of her husband, setting Little Rock on its thoroughly Southern ear.”   She went to school for two years, and produced a feature length film, a “kind of a witchcraft western”.  Then she returned to her family “as a complete person.”¹⁴

As the Chairman of the Senate Special Committee on Aging, Pryor believed “the high cost of prescription drugs was one of the biggest problems burdening seniors.” He held hearings and “attacked drug Industry leaders.”  Then he decided to help Medicaid—the government program for the poor and disabled.  It covers the cost of nursing homes for many and is funded by the state and federal government.  The feds on average, pay 57%, of the costs: 50% in wealthier states: up to 75% in states with lower per capita incomes. The program provides health coverage to about 64 million Americans.

In the late 1980s many states were in financial trouble.  They tried to limit the use of prescribed drugs by people on Medicaid by creating “restrictive formularies, co-pays, and monthly maximums.”  It didn’t work and their costs remained high.  At the time states were paying full sticker price for prescribed medicine while insurance companies and the VA were often given discounts of 30% to 40%.

Two states tried to bargain with Pharma and were attacked by industry.   Pharma argued that if states withheld “brand-name drugs without generic equivalents from a Medicaid enrollee (they would be) endorsing “second-class medical treatment for the poor.”

In the late 1980s President George H.W. Bush and his White House staff decided to “shrink the budget deficit by about $50.5 billion.  The legislation they produced was “massive”– 533-pages long—“the 5-year Omnibus Budget Reconciliation Act (OBRA 1990)”.  Its size and scope allowed Pryor and colleagues to add their “Medicaid Prescription Drug Rebate Program” to the bill.  It granted Medicaid “most-favored customer” status, and required drug manufacturers to sell their meds to Medicaid at the “best price” available to any other purchaser.  If a company wanted their products to be covered by each state’s Medicaid prescription program they had to accept the federal pricing provisions.

In 1992 Congress created the 340B program.  It protected hospitals and some clinics from drug price increases.⁸

Countries around the world negotiate, but each nation does it a little differently:

• In most countries governments create formularies–lists of medicines they will, at least partially pay for.
• When a new drug is introduced in France the drug makers sign a series of five year price contracts.
• The Brits won’t pay for a cancer medication if an extra month of life costs too much.  The country’s “excellence institute,” NICE, usually only approves drugs that cost less than 30,000 pounds ($39,000) per quality adjusted life-year, which is equal to a year of life in perfect health.”

The Brits with prostate cancer recently bumped up against the institute and refused to keep a stiff upper lip.  Enzalutamide and abiraterone are expensive drugs.  Each of them can stop the growth of castration resistant prostate cancer for months.  They work in different ways and it’s possible that when one fails the other might still be effective.

Enzalutamide was approved by the British National Health Service in October 2013.  The following January NICE tried to prevent the government from paying for Enzalutamide if a man in England or Wales had already been treated with another expensive drug for prostate cancer, abiraterone.  Men in Scotland weren’t affected and they could still receive Enzalutamide.  There was an outcry and a petition.  Political leaders and “Tackle Prostate Cancer”, (an organization) protested.  And NICE changed its guidance saying:  “there is not enough evidence to make a recommendation about how the two drugs should be used.”

Chapter 15 CANDADIAN PHARMACIES

I used a Canadian Pharmacy to buy the eye drops I needed for my glaucoma.  The medicine would have cost $90 a month in the U.S.  Ordered through a Canadian pharmacy the thirty day price was $30.  I chose an online pharmacy that, best I could tell, was legit.  After speaking to a representative by phone, I placed my order, supplied proof that I was a licensed physician, and e-mailed a hand written prescription.  At the time I was able to pay with a credit card.  (That was three years ago and cards are no longer accepted.  I wonder why?)

Under the Prescription Drug Marketing Act of 1987, it is illegal for foreign “e-pharmacies” or anyone other than the original manufacturer to bring prescription drugs into the country.  My medication never touched ground in Canada.  It was processed by a Canadian pharmacy, but was mailed directly to my home from a factory in Germany (once) and Turkey (once.) The drops were brought into the country legally.

I’m a doctor and Bernie Sanders thinks everyone should be able to do what I did.  In 2017 the senator from Vermont introduced a bill that would allow the importation of prescription drugs from Canadian pharmacies, as long as they meet certain safety standards.”  Bernie’s bill, of course, went nowhere.

For Americans who live near one of the nation’s boundaries, it’s possible to buy cheaper drugs by walking or driving over the border.  There are special lanes in Tijuana for U.S. citizens to cross to Mexico and buy medications.  A million Americans use them each year.  The FDA told Vice News: it is “illegal” for individuals to import drugs into the U.S. for personal use.  As a practical matter, customs allows Americans to bring in 90 days worth of medications for personal use.

Vice news used the price of insulin to show why so many people turn to medical tourism.   The list price for a 5 pack of a brand of insulin made by Eli Lilly, (according to Vice) was $147 in 2007, $295 6 years later, and $530 by 2017.  Insulin was first isolated and purified in the 1920s. People injected various forms of animal insulin for over 70 years and the medicine was safe and effective.  In the late 1970s scientists at Genentech using microbes and recombinant technology learned how to make human insulin and since the 1980s most American diabetics have been injecting the human hormone. 

90 percent of the global supply of insulin is made by Eli Lilly, Novo Nordics, and Sanofi.  Eli Lilly told Vice News that their net cost to make a box of insulin pens is $122.   That includes “manufacturing, labor, research and development, regulatory fees, promotional expenses, insulin donations and profits.”  The list price is $530.  In May 2019 Lilly introduced the generic version of its insulin (same drug, same packaging, and the same manufacturer). The price was cut in half.   The head of the diabetic association, like the manufacturers who appeared before Congress, argued that the discounts that currently go to pharmacy benefit managers should go to the patient.³

In most states drugs ordered through legit Canadian pharmacies are not paid for by insurance or Medicaid or Medical.  They require a lot effort by doctors and patients and take two weeks to get processed.  If they are newly released they often aren’t cheap.  Half of the businesses that sell pharmaceuticals on the web are located in the U.S. Some call themselves prescription referral services.

The National Association of Boards of Pharmacy claims “Rogue websites may be selling drugs that are counterfeit, contaminated, or otherwise unsafe.”  I’m sure they are right.  People have always been tricked by charlatans promoting cure-alls.  It’s hard to know how often we or our friends have been fooled by internet fraudsters.  People who use Canadian Pharmacies need to be attentive and cautious.

A number of international internet pharmacies import, process, and directly dispense medications.  A private company earns its keep by certifying their legitimacy.  Called PharmacyChecker.com, the “verifying” company charges an annual fee and insists that a licensed pharmacist makes sure the “medication is selected and labeled correctly.”

To be an “approved” marketer a pharmacy needs a license.  US pharmacies also need a DEA (drug enforcement authority) license.  International pharmacies are not allowed to send controlled substances to U.S. buyers.  Each medication filled must have a valid prescription.

 “In countries with the strongest regulations, Pharmacy Checker inspectors don’t visit pharmacies.  They verify their licenses with the relevant governing body like the College of Pharmacists of Manitoba, and the Singapore Ministry of Health.

In Mauritius, Turkey and Singapore, company representatives conduct onsite inspections during the application process and every 1-2 years thereafter.  In India they only certify pharmacies that dispense drugs that are made by manufacturers that have a global presence.

With regard to the drugs these pharmacies dispense:  More than half the medications Americans take are made in other countries.  The Swiss company Novartis produces pills in factories located in Spain, Germany, Switzerland, the U.S., the UK, Slovenia, Belgium, and Poland. Most of the North American supply of aspirin comes from China.  Over the counter Prilosec and the cholesterol lowering drug Simvastatin often come from Puerto Rico and India.

FDA inspectors are supposed visit the plants that supply our drugs and make sure they “are clean, follow proper manufacturing techniques and contain what is on the label (and nothing else)” To date agency inspectors have visited a little over half of the factories they have approved.  One day the FDA will have the money and manpower to comply with the law Congress passed but didn’t fund.

An agency of the Canadian government that regulates “foreign-sourced drug products… “conducted 35 inspections at foreign sites in the last five years”   76% of drug products imported into Canada come from countries whose plants Canadians (apparently) don’t inspect.

The companies that run American pharmacies are large and presumably politically influential.  The two largest by revenue in 2014 were CVS and Walgreen.   CVS Health took in $48 billion that year.  One billion seven hundred thousand prescriptions accounted for over 70% of the company’s revenue.  Mail-order service added an additional $88.4 billion.  Walgreen’s gross income was over $76.billion and prescription drugs accounted for nearly 2/3 of sales.⁵

MALPRACTICE

“Never go to a doctor whose office plants have died.” —Erma Bombeck

At 80 he was grey, trim, and smiled a lot. His heart had been damaged by a prior heart attack, but it still pumped well enough to get him through his daily 9 holes of golf. 

His abdominal aorta, the main blood conduit in his abdomen, was bulging,

had an aneurysm that was visible on X ray because a rim of calcium had formed on the inner wall of the large artery.  When it reached a size where the risk of rupture and sudden death outweighed the hazard of an operation I sent him to a surgeon. 

The operation went well and 6 weeks post op he was again golfing His only complaint was abdominal pain that was tolerable but strange.  I ordered an x ray.  Later that day the radiologist called.  The surgeon had left a sponge in the abdomen.  Surgical sponges are marked with radio opaque threads and are easy to spot on x-ray. 

Replacing an aorta is bloody business.  A portion of the large vessel has to be closed off at both ends before the replacement graft is sewn or stapled in.  When the bulge is cut out blood leaks into the abdomen and the surgical team suctions some from the cavity and blots the rest with cotton diaper like “sponges”.  The outside of the intestines and organs are covered with a red film and it gets hard to tell a rag from normal tissue.  When the sponges are thoroughly soaked, they are removed and stacked in a corner of the room.  Before the operation starts the sponges are counted and before the abdomen is sewn shut they are counted again.  If a sponge is missing the abdomen is scoured until the fabric is found.  In this man’s case someone obviously counted wrong. 

Large foreign materials left in the abdomen don’t always cause problems, but they can get infected and their presence is a clear sign that a mistake was made and another operation is indicated.  The Latin term res ipsa loquitur, the thing speaks for itself, indicates a situation where lawyers don’t need a witness to prove malpractice.  The evidence of “wrong doing” is obvious and irrefutable. 

I called the patient and told him about the x ray findings.  When he met with the surgeon my colleague was contrite and offered to perform another operation.

First thing doctors are taught in malpractice lectures.  If there’s a mistake admit it as soon as you know something went wrong.  Accept the blame.  Treat the injured party as you would like to be treated.  Most mistakes don’t lead to a law suit.  Legal action becomes more likely when the harm is great and prolonged or when the patient or family is upset with the care they received and/or the attitude of the medical staff.

My patient wasn’t angry or vengeful, and he didn’t want to risk a second operation.  He filed a law suit and asked for $50,000.  Our insurance people reviewed the file, admitted guilt, and offered $10,000.  They may have been low balling him, but it didn’t work.   

Months passed, neither side was giving in, and an expensive trial seemed imminent.  Then one day my patient had a heart attack on the golf course and died.  His family was not compensated.

During the last 50 years medical providers have grown in their ability to improve the quantity and quality of the average person’s life, and physicians and patients are taking more risks.  At the same time the price of medical care has grown and “medical liability costs (as well as malpractice insurance premiums) are thought to be the source of 2.4 percent of the money we spend.¹¹   

Unfortunately at times doctors and nurses seem to have poor people skills.  We doctors may be good students, technically proficient, and methodical.  But too often we are running late.  Our schedules are too tight.  We seem to be impatient, and –in the age of computerization– we spend too much of the visit looking at a screen. .    

Errors happen.  The wrong medicine. The wrong dose.  Bed sores.  A preventable fall that leads to an injury.  A sponge left in an abdomen.  A cancer that should have been discovered early. Harm at the time of birth that has lifelong consequences. 

The majority of physicians in a quoted survey said that when something goes wrong they provide “only a limited or no apology; limited or no explanation; and limited or no information about the cause.”   The article’s author, a physician who specializes in malpractice, thinks that too often the problem is caused by a physician’s  need to protect his or her ego and a system that allows doctors to blame shift.¹

Prior to 1970 medical malpractice suits were rare.   That year an estimated 12,000 claims were filed but a third were quickly dropped.  Many who had a legitimate case did not sue.  Of those who did, four of five cases ended in favor of defendant.  Many of the awards didn’t cover the victim’s litigation cost.¹³

As the 20^th century wore on the legal rules of the road changed in one state after another.  Lawyers were increasingly allowed to file claims based on errors that were so obvious that –res ipsa loquitur – the blunder “spoke for itself.”  Claims could be based on the absence of adequate informed consent.  Charitable and nonprofit hospitals had for decades had been shielded from litigation—in the belief that “paying money to the victims could damage the facility’s ability to treat patients.”  In one state after another, hospitals now became responsible for errors that were their fault. (Massachusetts limited their financial vulnerability to $20,000.⁷)  Jury awards started fluctuating wildly.  At one point injured parties in “California and Nebraska” on average received awards that were 20 times higher than they were in “low-activity states, such as Maine.⁸

The majority of the injured don’t sue.  In one analysis “Approximately 70 percent of claims were closed with no payment.  Defendants won the majority of cases that went to trial.”  People who litigate tend to have more severe injuries and there has been an increase in the number of million dollar plus awards.  (In New York in 1984 one percent (20,000) of the people who had been hospitalized suffered an in- hospital “negligent adverse event” and 7000 died, but only 3500 of the injured filed a law suit.¹¹)

During the last half century there were three periods of time when malpractice insurance premiums rose dramatically and insurers left some states.  When the lack of “coverage” for medical care was deemed “critical” some legislatures established patient-compensation funds and joint underwriting associations.”   In 1975 California lawmakers limited medical malpractice non-economic damages—compensation for “pain and suffering to $250,000.  No limit was place on the amount of money that could be awarded for costly medical care, lost income, or inability to earn a living because of the malpractice.^10.’

Insurance policies have gotten pricey, and they contribute to the cost of medical care.  Between 2008 and 2017 for example, the annual cost of insurance for obstetricians and gynecologists in Connecticut, Illinois, and Pennsylvania was in the $170,000 to $200,000 range.  In California similar premiums had price tags of $50,000 to $60,000 a year.¹² 

I was a salaried doctor in a large physician owned group (Kaiser). During my 40 years I was sued a few times, and it was emotionally painful.  I’d prefer to not judge myself.

I don’t really know what happens to physicians who practice fee for service medicine.  Some share small offices with one or several colleagues.  When sued I assume they are forced to deal directly with representatives of an insurance company. 

I never had to pay a malpractice premium.  Kaiser, my employer, was big enough to be self insured.  In the event of a multi-million dollar settlement—a severe injury that led to expensive lifelong care—an umbrella insurance policy kicked in.

I wasn’t forced to deal with a representative of an insurance business or company lawyers whose chief tactic was delay and endless expensive depositions. 

Suits that alleged malpractice initially went to a fellow physician who was not always that sympathetic, but who usually was one of the groups brightest and best.  Our malpractice doctor typically spent half of his or her time deal with legal allegations and the other half dealing with patients.  After a lawsuit arrived on his or her desk, our colleague read the chart, evaluated the case, and reached a preliminary conclusion. 

All doctors who participated in the care of the injured person were always named, and everyone who was being sued was informed. In serious cases the group hired one or several outside experts and asked them to assess the case.  When necessary they got opinions from additional experts. Physicians who were paid for advising us could not become a witness or consultant for the plaintiff.  If the outside experts thought we were negligent, our people tried to settle.

A large medical-legal department handled the paper work, the release of information and the technical matters associated with lawsuits.  Skilled, knowledgeable company lawyers gave advice and guided physicians through depositions.  When indicated, outside lawyers were hired to handle individual cases.        .

In my later years working for Kaiser everyone insured by the plan signed an arbitration contract. Cases could not go to a jury.  The Judges chosen were acceptable to the lawyers from each side.  I’m told the approach does not affect overall malpractice costs, but it was easier on the psyche.

          When a plaintiff is awarded compensation in excess of $30,000 the state of California gets involved.  If the case was settled our group has to name the physician most responsible, and that name is posted on a state web site.   If there was a trial and the money was awarded by a judge, the board of medical examiners gets to decide who to blame.    

Doctors responsible for larger settlements often have to appear before a really tough California medical board.  Most walk away with a reprimand, but about one in 10 medical licenses are revoked or suspended.  .

Our tort system is based on blame and fault.   To prevail—to win– a plaintiff has to prove that the defendant owed a duty of care, that the defendant breached the duty, and that the breach caused an injury.”

In California people must file suit within a year after they learn they were negligently harmed. (As mentioned previously) the state capped the amount that’s paid for pain and suffering at $250,000 per person.  There is no dollar limit on actual injuries. 

Plaintiffs’ attorneys usually work on a contingency-fee basis, and take a percentage of the award when they win and nothing when they lose. 

Numerous surveys have concluded that in most cases of negligence the doctor was not sued, and when doctors are sued the harm was usually NOT the result of negligence.

In one recent study (12,000 to 17,000 insurance policies a year), 7.4% of the doctors were sued at least once annually.  Most of the allegations were dropped or dismissed, but 1.6% of those suing were paid some money.  The most targeted subspecialties were neurosurgeons, chest surgeons, and general surgeons.  On average 15 to 19 percent of them were sued each year.  That turns out to be an average of a suit every 5 to 6.5 years. The least targeted physicians were generalists, pediatricians and psychiatrists.  Physicians in these specialties generally got legal notice every 20 to 40 years, or one to two times during their medical careers.²

The number of “paid medical malpractice claims” decreased significantly between 2001 and 2016.  They went from 16,000 to 8500 a year, and the average payout “dropped about 23%”.  During that 15 year period the number of suits where people are paid more than half a million dollars didn’t change much.  They led to annual payouts of about $2.5 billion.  Between 2012 and 2016 as many as 60 in a million people filed malpractice claims in our two most litigious states New York and New Jersey.³

Some doctors claim that the fear of malpractice leads to unnecessary testing and plays a major role in health care costs.

“Many countries- like Sweden, Finland, New Zealand, Quebec Canada, and Australia, have a no-fault system”.  Compensation is based on proof of “causal” connection between treatment and injury. Their structure awards damages to patients without proof of provider’s fault or negligence, and it encourages physicians to collaborate in their search for the cause of the injuries.  Although the application of no-fault system differs slightly in each country, the basic idea is to eliminate fault or blame and make the claim process simple so patients with meritorious cases can access the system easily.” It also makes it easier to identify and fix problems.⁴

It’s possible to get some sense of what would happen if American physicians could no longer be sued for medical malpractice.  Doctors in the military aren’t immune from patient complaints or administrative action, but the government can’t be sued.

In the 1940s a serviceman died after a surgeon “left a towel in his abdomen”.  The family sued. In 1950 the U.S. Supreme court, by creating a “doctrine” called the Feres rule, decided the government was not liable.  The decision was later extended to include anyone receiving medical care from “the government.”  The court rationalized the approach by discussing the special relationship that exists between service members and the U.S. and they pointed out that the laws of malpractice vary from state to state.  That makes litigation complex.  They noted that injured service members who were disabled were paid accordingly.  Some judges apparently feared law suits might affect military discipline.  The decision of the court has been challenged.  Additional suits have been filed, but the court did not choose to re-hear the matter. 

In a recent article a few lawyers felt “repeal (of Feres) may not serve the best interests of service members.”  Most people who are harmed, they pointed out, don’t sue.  Without the threat of legal action, mistakes could be openly discussed, problems could be identified and the system could be improved.   We don’t know, they argued, that giving lawyers standing would make the care people received any better or safer.  “There is little empirical evidence,” they wrote that civilian malpractice litigation provides incentives to improve the safety of care.⁵”

Sometimes doctors can’t fix or help some sick people because we don’t know how.  Metastatic cancer and dementia top the lack of knowledge list.  But too often the knowledge exists but we don’t deliver.  Gawande.¹⁵ (paraphrase)

Delays in retrieving a person’s records, time pressures, and illegible physician notes are common impediments.  Robert Pearl, the former head of Kaiser thinks a computerized health record that pops up every time a physician is visited, one where a person’s medical information is presented to each treating doctor, should make a big difference.¹⁶

Chapter 14-GOUGING

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 living 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 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 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%.²  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. 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.

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.  Once they owned the competition Mallinckrodt “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 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

Journey

the history of medicine and of the delivery of health care.

by Steve Fredman m.d.

A montage of people, insights, drugs, devices, money and the struggle to deliver care.

Montage:  the process of selecting, editing, and piecing together events and people and forming a continuous whole.

Our ancestors would have called it Magical realism

 Like Aladdin being able to fly to the far corners of the earth

Like a mystic being able to gaze and talk to people thousands of miles away or hear symphonies or amazing melodic voice while strolling in the park

And, of course healing

A new heart –a new liver—knee—hip

Going poof and witnessing the death of bugs that once caused a lethal strep throat or pneumonia

Observing the inner workings of a body

Allowing a person who was bitten by a rabid dog to be avoid a slow painful death

Turning a deadly heart attack into day at the hospital.

This is the story of the how we created a magical world. 

it’s also the story of how we are delivering and distributing –or failing to deliver and distribute–the wonders, marvels, and miracles—and about looming problems.

Books that I referred to, learned from, and quoted from:

A Crack in Creation, Jennifer A. Doudna and Samuel H. Sternberg, Mariner Books, 2017

An American Sickness, Elizabeth Rosenthal, Penguin Press, 2017

Angiogenesis, Napoleone Ferrara, Taylor and Francis Group LLC. 2007

Better, Atul Gawande, Metropolitan Books, 2007

Bottle of Lies, Katherine Eban, HarperCollins, 2019

Cold War Triangle, Renilde Loeckx, Leuven University Press, 2017

Complictions, Atul Gawande, A Metropolitan Book, 2002

Cutting Edge, Norman M. Covert, Public Affairs Office U.S. Army, 1997

Deadly Spin, Wendell Potter, Bloomsbury Press, 2010

Eminent Victorians, Lynn Strachey

Evarts A. Graham, C. Barbara Mueller, BC Decker Inc., 2002

Genentech, Sally Smith Hughes, University of Chicago Press, 2013

King of Hearts, G Wayne Miller, Crown Publishers, 2000

Love and Science, Jan Vilcek, Seven Stories Press, 2016

Mistreated, Robert Pearl, Public Affairs, 2017

The Antidote, Barry Werth, Simon and Shuster, 2014

The Emperor of all Maladies, Siddhartha, Mukherjee

The Merck Druggernaut, Fran Hawthorne,John Wiley and Sons, 2003

Privatization of Public Hospitals, Charles Brecher, Sheila Spiezio

The Puzzle People, Thomas E. Starzl, University of Pittsburg Press, 1992

The Rise of the For-Profit Hospital Chains, Dave Lindorff

The Scalpel and the Silver Bear, Lori Arviso Alvord and Elizabeth Cohen, Van Pelt, Bantam, 1999

The Troubled Health Dollar, Steve Fredman, Virtualbookworm, 2012

The Truth About the Drug Companies, Marcia Angell, Random House Trade Paperbacks, 2004

Vaccinated, Paul A. Offit, Harper Perennial, 2007

Websites that are available by subscription

New England Journal of Medicine, UpToDate

Each chapter has a bibliography.  Some are extensive. 

I decided to both identify my sources and make them easily accessible. 

My approach is twenty first century and uses every day technology

In the past, to write a history authors would spend hours in libraries. 

The quoted sources would be listed but they would be hard or impossible to access. 

In 2020 many old original sources are available on the web.  They are available and accessible.

For the convenience of the reader I have listed most sources by their URL.  Instead of putting them in the back of the book I put them on a website.

A reader who wishes to check out and learn from a source can copy its URL and paste it into a browser.

They website that contains the bibliography is  www.savingobamacare.com