Cancer Drug's Big Price Rise Disturbs

[RedOnce]

A Cancer Drug's Big Price Rise Disturbs Doctors and Patients

New York Times - March 12, 2006

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.

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...The increases have caused doctors to question Ovation's motive

http://www.nytimes.com/2006/03/12/business/12price.html?hp&ex=1142226000&en=e0e3e242c43c4e4c&ei=5094&partner=homepage

Now, most new cancer treatments are priced at $25,000 to $50,000 annually.

[napi21]

1. Yet another reason to believe the BIG problem in the health industry is

the Pharmaceutical houses!!!!!! Gee, what a dman big surprise! The one that drops millions to the Pub campaigns!!!!! The one that was specifically protected in the drug care bill!


Grrrrrrrrr!

[silverweb]

2. The justification?

"...vice president of commercial development for Ovation, said that the price increases were needed to invest in manufacturing facilities for the drugs."

Riiiight. What bullshit!

There is no justification for this kind of profiteering off human pain!

[Daphne08]

3. We will never have universal health care as long as the

Pharmaceutical and Insurance industries donate so much $$ to our "bought-off" representatives in Washington.

Congress has become a joke. They will not do anything meaningful about lobby reform.

[Trillo]

4. They want to make a profit.

I don't know why the article claims they bought rights, if the patent has expired, it seems anyone with the facilities and expertise could make it, but there are a number of representations about our economic system that don't quite mesh with reality.

[RedOnce]

5. Yep, everybody wants to make a profit. We just bought...

another company's product line and we raised prices to. But the increase was only 10% not 1,000% and we are making money.

[Trillo]

6. Did, um ... do you have competitors?

What I understand of capitalism says, especially under the new MBA pricing methods, is that competition is the critical price lowering mechanism. The purpose of patents is to protect intellectual property for a limited time from competition. Once that limited time runs out, why doesn't the supply increase?

If the new price is now 500+ bucks, isn't that an incentive for another manufacturer to make the drug? If not, then why has the competitive effect been marginalized once a patent has expired?

edited to add: I believe that Daphne08 has called it correctly.

[RedOnce]

13. Yes, we have competitors. We also have integrity.

[Celebration]

7. the business angle

This Ovation (private company) seems to have an angle.......find a drug that is off patent, that some people need, but not enough to lure other manufacturers into competition, and find that exact set point in price that will maximize their profit. From the article--

"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."

What they are banking on is that nobody will go into competition with them.

But here is the thing--earlier in the article it said that pharmacists used to make this stuff. So why in the heck can't couldn't compounding pharmacists do the same thing now? There may be an answer, but if I really needed the drug, I would look into getting it made by a compounding pharmacist. I wonder how difficult it is to make? I might consider brewing it in my backyard if I needed it.

Here is another thing that gave me a good laugh --

"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."

They are obviously trying to segment the market and get the very most out of taxpayer, Medicare and insuror money and then have some sort of unofficial sliding scale for everyone else to extract the last dollar out of everybody, rather than setting just one price. Problem is if we are going by who can actually afford these prices then our debt ridden federal government should not be included in that.

The second thing to note is their support of the porphyria group. Oh give me a break. All these drug companies are in bed with the main advocacy groups. It is so sickening. Lilly supports the ADA, the JDRF, etc. so where does the diabetes foundation money go? Oh, anything that supports Lilly with a few other dribs and drabs other places to satisfy the peons. Be careful where your charitable dollars are given because they *might* just be going into the pockets of the drug companies!!

[Trillo]

8. The article also says that

"they bought the rights". If the patents have expired, then what "rights" are now considered private property?

[Celebration]

9. people buy and sell everything nowadays

The "rights" are basically this--

I get the name, the list of buyers, suppliers, and all information about the product, and distribution channels. You will not compete with me in this business with a similar product.

There may be some other things too. It is basically--I get it now and you quit doing it.

No mistake about it--other people could enter the market if they wanted. They are banking on that not happening because the new manufacturer would realize that Ovation would just lower the price and it wouldn't be a windfall for them. Sort of an oligopoly type situation.

I still wonder about the compounding pharmacists though. Have any of you guys ever comparison shopped those? They are ALL OVER THE MAP.

[Trillo]

10. "distribution" makes sense,

most of the other items you list seem like they should be open, public information, in a free society with widespread electronic communication.

I wonder, if a pharmacist were to decide to make it and put up a webpage advertising it for sale, would this pharmacist be blacklisted in some roundabout way? Would the pharmacist start having trouble buying other drugs he/she doesn't make from the syndicates he usually does business with? Delays in delivery, something else?

The drug psuedoephedrine hydrocloride has recently been disrupted upchain by the DEA to limit some perceived meth problem, is this a practice long established by business syndicates but only recently made "popular" by the elimination of a widely used allergy medicine whose patent had expired? Since the drug in question is claimed to be manufactured from a chemical weapon of mass destruction, have new distribution or financial 'realities' been engineered into the system by Homeland Security?

In the book biz, distribution is wound up tighter than a golf ball winding. If you want distribution on your book, you go through a very small number of places that warehouse your book whom the bookstores are used to buying from. If a book retailer buys from the warehouse, the name of the purchaser is obscured from the publisher: this is one purpose of warehousing, another is that it's inherently expensive because it's based upon real estate and additional middlepeople. Even talking to some of the distributors as a single book publisher is refused by the wholesaler or made nearly so by difficult hoops to jump through to open the door. Amazon broke this model, but doesn't offer wholesale distribution. Flat fees are sometimes priced into distribution in such a way as to lock out competition from single-book publishers.

The travesty of this applied to a drug, if a similar thing is occuring here, is that there shouldn't be any wholesaler locking anyone out because people's lives are at stake. If a patent has expired, other methods of exclusion such as you mention should be strictly limited by law, otherwise, these limited numbers of people who are sick with an uncommon disease are the only ones who pay for a manufacturing and distribution system supposedly designed to serve everyone as a mass market without discrimination.

[Celebration]

11. can't comment on everything but

Compounding pharmacists have gotten a little more marketing oriented and it has caused some stirrings. You do find them on the internet, though most try not to make a big splash. There is a fair amount of this stuff crossing state lines (ho hum) and this has been some small issue. They started out just doing little things for doctors about town as a favor and it just grew and grew and grew. So the drug companies don't like it because they can put together two things, for instance, that are not FDA approved for being together. Anyway the problem might be more along those lines--moves to stop this or something--than other threats. There have been rumblings about not allowing this stuff to cross state lines. Still many, many doctors do love and support these compounders, so, who knows?

I don't *think* this is an issue of locking people out of the market. I doubt if Ovation has that power. It is immoral of course to do what they have done. Face it, we seem to have a society based on greed rather than morals.

It just isn't a lucrative enough market for someone to invest in the manufacturing when a price war would break out in the end.

Oh, don't forget that Merck is still MAKING the stuff for Ovation. LOL. Nothing changed but the dollars.

People will pay big bucks just for a NAME--ridiculous I know. But we consumers tend to pay more for brand names than generic, even for things like equivalent paper towel rolls.

[Trillo]

12. The Wholesale/Retail schism is a lockout.

Many wholesalers refuse to do buisness with the general public *unless* those they will do biz with meet discriminatory criteria of various kinds.

Free market my ass.

[Sgent]

14. Its not cheap to get a generic to market

It doesn't cost 100's of millions like with a new drug, but it could easily cost 5 or 10 million.

Even though the process is abbreviated, you still have to have clinical trials (to prove bioequivalence), factories inspected and approved by the FDA, manufactoring methods approved, etc. The fact that this is a chemical weapon in other forms means that you also have to deal with some signifcant export controls and the like. Finally, there is currently an 18mos backlog for a generic application to even be looked at -- and priority is given by total sales of the brand name.

The company expects to go from 1million revenue a year to 10million. My guess is that they don't believe anyone will be able to get a generic to market with the production and distribution issues to make it worthwhile.

[RedOnce]

15. In other words, 10x is their estimate of what the traffic will bear...

to re-market this 60 year old drug without drawing competition into the game!

[Sgent]

16. Much more succient

thanks!