Healthy Skepticism Library item: 3860

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Publication type: news

Berenson A.
A Cancer Drug's Big Price Rise Is Cause for Concern
New York Times 2006 Mar 12
http://www.nytimes.com/2006/03/12/business/12price.html?ex=1142830800&en=923825ad9a0a6ec5&ei=5070&emc=eta1

Keywords:
Ovation Pharmaceuticals

Notes:

Ralph Faggotter’s Comments:

Some pharmaceutical companies seem to have a new motto-

“Bleed the patients dry before they die!”

Full text:

March 12, 2006
A Cancer Drug’s Big Price Rise Is Cause for Concern
By ALEX BERENSON
New York Times
http://www.nytimes.com/2006/03/12/business/12price.html?ex=1142830800&en=923
825ad9a0a6ec5&ei=5070&emc=eta1

On Feb. 3, Joyce Elkins filled a prescription for a two-week supply of
nitrogen mustard, a decades-old cancer drug used to treat a rare form of
lymphoma. The cost was $77.50.

On Feb. 17, Ms. Elkins, a 64-year-old retiree who lives in Georgetown, Tex.,
returned to her pharmacy for a refill. This time, following a huge increase
in the wholesale price of the drug, the cost was $548.01.

Ms. Elkins’s insurance does not cover nitrogen mustard, which she must take
for at least the next six months at a cost that will now total nearly
$7,000. She and her husband, who works for the Texas Department of
Transportation, are paying for the medicine by spending less on utilities
and food, she said.

The medicine, also known as Mustargen, was developed more than 60 years ago
and is among the oldest chemotherapy drugs. For decades, it has been blended
into an ointment by pharmacists and used as a topical treatment for a cancer
called cutaneous T-cell lymphoma, a form of cancer that mainly affects the
skin.

Last August, Merck, which makes Mustargen, sold the rights to manufacture
and market it and Cosmegen, another cancer drug, to Ovation Pharmaceuticals,
a six-year-old company in Deerfield, Ill., that buys slow-selling medicines
from big pharmaceutical companies.

The two drugs are used by fewer than 5,000 patients a year and had combined
sales of about $1 million in 2004.

Now Ovation has raised the wholesale price of Mustargen roughly tenfold and
that of Cosmegen even more, according to several pharmacists and patients.

Sean Nolan, vice president of commercial development for Ovation, said that
the price increases were needed to invest in manufacturing facilities for
the drugs. He said the company was petitioning insurers to obtain coverage
for patients.

The increase has stunned doctors, who say it starkly illustrates two trends
in the pharmaceutical industry: the soaring price of cancer medicines and
the tendency for those prices to have little relation to the cost of
developing or making the drugs.

Genentech, for example, has indicated it will effectively double the price
of its colon cancer drug Avastin, to about $100,000, when Avastin’s use is
expanded to breast and lung cancer patients. As with Avastin, nothing about
nitrogen mustard is changing but the price.

The increases have caused doctors to question Ovation’s motive – and left
lymphoma patients wondering how they will afford Mustargen, which is
sometimes not covered by insurance, because the drug’s label does not
indicate that it can be used as an ointment. When given intravenously to
treat Hodgkin’s disease, its other primary use, the drug is generally
covered by insurance.

“Nitrogen mustard has been around forever,” said Dr. Len Lichtenfeld, the
deputy chief medical officer of the American Cancer Society. “There’s
nothing that I am aware of in the treatment environment that would explain
an increase in the cost of the drug.”

Dr. David H. Johnson, a Vanderbilt University oncologist who is a former
president of the American Society of Clinical Oncology, said he had
contacted Ovation to ask its reasons for raising Mustargen’s price.

“I’d like to have some evidence from them that it actually costs them X
amount, so that the pricing makes sense,” Dr. Johnson said.

“It’s unfortunate that a price adjustment had to occur,” Mr. Nolan said.
“Investment had not been made in these products for years.”

Ovation, a privately held company, also needs the money to conduct research
on several new drugs for rare diseases, Mr. Nolan said.

He acknowledged that Merck still made Mustargen and Cosmegen, an antibiotic
that is used to treat a rare childhood kidney cancer, for Ovation. He said
he was not sure when Ovation would begin producing the drugs, and a Merck
spokesman said that Merck would continue to provide the drugs to Ovation as
long as necessary.

But people who analyze drug pricing say they see the Mustargen situation as
emblematic of an industry trend of basing drug prices on something other
than the underlying costs. After years of defending high prices as necessary
to cover the cost of research or production, industry executives
increasingly point to the intrinsic value of their medicines as
justification for prices.

Last year, in his book “A Call to Action,” Henry A. McKinnell, the chairman
of Pfizer, the world’s largest drug company, wrote that drug prices were not
driven by research spending or production costs.

“A number of factors go into the mix” of pricing, he wrote. “Those factors
consider cost of business, competition, patent status, anticipated volume,
and, most important, our estimation of the income generated by sales of the
product.”

In some drug categories, such as cholesterol-lowering treatments, many drugs
compete, keeping prices relatively low. But when a medicine does not have a
good substitute, its maker can charge almost any price. In 2003, Abbott
Laboratories raised the price of Norvir, an AIDS drug introduced in 1996,
from $54 to $265 a month. AIDS groups protested, but Abbott refused to
rescind the increase.

And once a company sets a price, government agencies, private insurers and
patients have little choice but to pay it. The Food & Drug Administration
does not regulate prices, and Medicare is banned from considering price in
deciding whether to cover treatments.

While private insurers can negotiate prices, they have limited leeway to
exclude drugs from coverage based on price, said C. Lee Blansett, a partner
at DaVinci Healthcare Partners, which works with drug makers on pricing and
marketing.

“Price is simply not included in whether or not to cover a drug,” Mr.
Blansett said.

The result has been soaring prices for some drug classes, notably cancer
treatments. In 1992, Bristol-Myers Squibb faced protests for its plans to
charge $4,000 a year for Taxol, a breast cancer treatment.

Now, most new cancer treatments are priced at $25,000 to $50,000 annually.
In some cases, companies are pushing through substantial price increases on
already-expensive drugs.

Last year, Genentech raised the price of Tarceva, a lung-cancer drug, by
about 30 percent, to $32,000 for a year’s treatment.

In an interview last month, Dr. Susan Desmond-Hellmann, the president of
product development for Genentech, said that the company had raised
Tarceva’s price because the drug works better than Genentech had
anticipated.

“Tarceva was a more powerful and more active agent than what we understood
at the time of launch, and so more valuable,” she said. In an environment of
soaring cancer drug costs, Mustargen’s previous price was a comparative
bargain, giving Ovation the opportunity to raise it substantially, said Dr.
Richard Hoppe, a professor of radiation oncology at Stanford University and
an expert in treating cutaneous lymphoma.

Mustargen’s patent protection expired many years ago, so any company can
make it. But because its sales are tiny, no drug maker has invested in a
generic version.

“There’s only one company that makes the drug, and they can decide what it’s
worth,” Dr. Hoppe said.

Nitrogen mustard was initially tested as a chemical weapon. Its properties
as an anti-cancer agent were discovered more than 60 years ago; today, it
has been superseded by newer, less toxic medicines, and it is a niche
product, with sales of only $546,000 in 2004, according to IMS Health, a
market research firm.

Still, Dr. Hoppe and other oncologists call nitrogen mustard an effective
treatment for cutaneous lymphoma, which initially appears as a rash but can
turn deadly if it spreads inside the body. Some patients need only tiny
amounts of the ointment, but others must apply it every day across large
areas of their bodies.

For instance, Ms. Elkins has a severe case of lymphoma and must cover much
of her body with Mustargen each day, a process that requires her to refill
her prescription every two weeks. She said that the ointment was working, so
she and her husband would find a way to pay for it.

Mr. Nolan of Ovation said that his company intended to work to improve
access to insurance coverage for Mustargen. But Ovation has just begun to
petition insurers to cover the drug. Meanwhile, patients are paying
Mustargen’s new, higher price out of pocket.

This is not the first time that Ovation has sharply raised the price of a
drug it owns. In 2003, the company bought Panhematin, a treatment for a rare
enzymatic disease called porphyria, from Abbott Laboratories. While Abbott
still produces Panhematin, Ovation raised Panhematin’s price, which had been
$230 a dose, to $1,900, according to Desiree Lyon, executive director of the
American Porphyria Foundation.

“It was a major increase,” Ms. Lyon said. But she said that Ovation had
worked to improve insurance coverage for Panhematin and to find ways for
patients to get the drug even if they could not afford it.

Ovation also financially supports the porphyria foundation in its efforts to
increase awareness of the disease and of Panhematin as a treatment, she
said.

But many patients who rely on expensive drugs are stuck in a bind. Don
Schare of Saratoga, Calif., said he paid $1,260 last month for 200 grams of
nitrogen mustard cream, about 10 times what he paid for his prior
prescription.

Mr. Schare, 69, said he was covered by the new Medicare Part D drug program
and by supplemental insurance from AARP, but that neither of his plans
covered Mustargen.

Jeffrey Malavasic, 58, a retired railroad worker in Florence, Ore., said he
had decided to fill only half of his Mustargen prescription when he learned
of the price increase. He used the drug sparingly in the past and will be
even more frugal, he said.