Hate high drug prices? Blame greedy companies and our politicians

One might first think that Acthar was an ancient civilization in Mesopotamia or a prison facility in upstate New York.

In fact, it is the most expensive drug for the U.S. government. In 2015, Medicare paid $504 million for H.P. Acthar Gel, an average of $162,300 per patient. So then it must at least be the hottest new drug for cancer or dementia, right? Not so, unfortunately.

Acthar is a natural form of adrenocorticotropic hormone (ACTH), discovered in 1933 and synthesized in an active form in the 1960s. Acthar Gel is an off-patent drug developed in the 1950s, used for illnesses including adrenal insufficiency and immune disorders.

It entered the market when the FDA required only that a drug be safe, not effective, long before it mandated rigorous research in the form of large clinical trials to support a treatment benefit. In 2010, the FDA approved Acthar Gel for the treatment of infantile spasms, but most of the sales are for adults, for indications “unproven and not medically necessary.”

{mosads}Questcor bought the drug for only $100,000 in 2001. At that time, the price of a vial of Acthar was $40.

Today, through maneuvers by Questcor and Mallinckrodt (which acquired Questcor in 2014), it is $38,000 per vial.

So a legitimate question is: If the drug is off-patent and has questionable benefits, why is it so expensive? The answer is that U.S. healthcare policies and market forces facilitate such strategies.

This is encouraged by legislation that, for example, prevents Medicare from negotiating drug prices while reimbursing all medications covered under its Part D plan. And price increases also are driven by business decisions limiting availability, as Questcor did in 2007 in restricting the distribution of Acthar Gel to a single source.

Mallinckrodt Pharmaceuticals joins a group of companies notorious for extreme price hikes on generic drugs, which have raised significant public concerns. This behavior may be shameful, immoral, offensive, and harmful, but perhaps not illegal.

Four of the companies — Turing, Valeant, Retrophin, and Rodelis — are the subject of an investigation by the U.S. Senate Special Committee on Aging. A fifth, Mylan, manufacturer of the EpiPen, was also the subject of public outcries because of questionable price hikes on a life-saving medication. The examples of Acthar and other high-priced generics are not aberrations, as the drug industry lobby tries to frame them.

They are part of the broad strategy by the pharmaceutical industry to increase the prices of patented and generic drugs by double-digit figures annually (10 percent-12 percent). Nor are the price hikes justified, as the Senate report concluded that the investigated drugs “had been off-patent for decades” and that none of the companies “had invested a penny in research and development to create or to significantly improve the drugs.”

Now, about “Girls’ Nights Out.” Many editorials have deplored the high prices of patented brand drugs. And while brand firms tend to charge high prices, the conventional wisdom has been that, after the patents expire, generic prices fall dramatically. But that is not always the case. Twenty states have accused six companies of colluding to sustain high generic prices.

Allegedly, generic company employees organized social outings, dinners, and “girls’ nights out,” during which they discussed strategies to maintain high prices. If true, these schemes would constitute a blatant violation of the antitrust laws. The problem is that behavior like this often flies under the radar, not easily discovered.

Our elected representatives must free themselves from the influence of pharmaceutical lobby and take the problem of high drug prices seriously. This is particularly important since insurers have recently shifted significant amounts of the cost of care and of drugs to patients.

Several immediate actions would lower drug prices:

1. As proposed by Sen. Tim Kaine (D-Va.) and colleagues, allow Medicare to negotiate drug prices.

2. Propose fair prices for off-patent drugs based on their treatment value, similar to medical societies incorporating price into treatment algorithms and consistent with the bipartisan Fair Drug Pricing Act that would require drug companies to notify the government and justify price increases of more than 10 percent.

3. Encourage generic applications by requiring the FDA to streamline its procedures to clear its bottleneck of 3,800 generics under review.

4. Aggressively prosecute drug companies that engage in price fixing and other behaviors that violate the antitrust laws.

5. Carefully scrutinize price increases accompanied by restrictions in distribution systems, as the proposed bipartisan CREATES Act would do.

Unjustified price increases for off-patent drugs cannot become the new normal. With health and lives hanging in the balance, Americans deserve better.                                                      

Hagop M. Kantarjian, M.D., is chairman of the Leukemia Department at The University of Texas MD Anderson Cancer Center, and a Baker Institute Special Fellow for Health Policies at Rice University. Michael A. Carrier is Distinguished Professor and co-director of the Rutgers Institute for Information Policy and Law at Rutgers Law School, Camden NJ.

The views expressed by contributors are their own and not the views of The Hill.