A Decade Marked By Outrage Over Drug Prices
Rep. Elijah Cummings, D-Md., was in the middle of describing drug price gouging as a scheme to enrich a few industry executives at the expense of everyday patients when he stopped to reprimand a witness.
“It’s not funny, Mr. Shkreli,” said Cummings, the top Democrat on the House Committee on Oversight and Reform until his death this past October, said to a smirking man at the table before him. “People are dying. And they’re getting sicker and sicker.”
The man was Martin Shkreli, former CEO of Turing Pharmaceuticals, who was called before Cummings’ committee in February 2016. After hiking the price of an old drug for parasitic infections to $750 a pill from $13.50, Shkreli became the poster boy for pharmaceutical greed that helped define the decade.
During that time, new drugs emerged with higher price tags than ever, and many old drugs got sudden price hikes. Meanwhile, nearly 1 in 4 Americans has trouble affording prescription drugs, according to a recent Kaiser Family Foundation poll.
“Price increases that consumers have suffered under the last 10 years have been at a greater rate compared to inflation than we’ve ever seen in this country,” says Jim Yocum, a senior vice president of Connecture DRx, a health data firm.
Here are a few medicines that Americans depend on but that suddenly became much harder to afford in the last decade.
Daraprim: An old drug gets a huge new price
For decades, Daraprim has been the go-to medicine for treating toxoplasmosis, a parasitic infection especially dangerous for people with compromised immune systems, such as people living with HIV and patients who’ve undergone organ transplants.
The drug was approved by the Food and Drug Administration in 1953, and its patents expired long ago. But there wasn’t a generic version available, and there was only one supplier in the United States. Even so, Daraprim cost just $13.50 a pill in early 2015, which was a good deal for a lifesaving drug with minimal side effects, Wendy Armstrong, an infectious disease specialist at Emory University, told Shots.
Then Turing Pharmaceuticals — run by former hedge fund manager Martin Shkreli — bought the rights to the drug and raised its list price more than 5,000% overnight. Shkreli eventually left the company and went to prison for an unrelated crime (securities fraud), but not before becoming known as the “Pharma Bro.”
The pricing tactic didn’t start with him. It’s what another company called Valeant did the same year when it bought two old heart drugs — Isuprel and Nitropress — that had little competition. It’s also what Rodelis Therapeutics did when it acquired an old tuberculosis drug called Seromycin and hiked the price for a month’s supply to $10,800 from $500.
“Once you’re the sole manufacturer, you can do what you want,” says Vinay Prasad, an oncologist at Oregon Health & Science University. There’s no competition to drive prices down.
Today, many health insurance companies won’t pay for the drug, and it’s too expensive for many hospitals to keep in stock, says Armstrong. As a result, she says, doctors have been forced to turn to cheaper alternatives that have more side effects and less proof that they work.
One of her patients was diagnosed with toxoplasmosis after undergoing a kidney transplant. But when it came time to move the woman from the hospital to a rehabilitation facility, the rehab place wouldn’t take her.
“They wouldn’t assume the cost of the drug,” Armstrong tells Shots. “She ended up staying in a hospital for months, developing additional complications — simply because the Daraprim was priced out of range for the accepting facility.”
EpiPen: a steady stream of price increases adds up
By the time EpiPen’s list price reached $300 per auto-injector in 2016, its manufacturer, Mylan, had taken more than a dozen price hikes in just six years.
People clamored for a cheaper generic of the product, which injects a dose of epinephrine to counteract allergic reactions.
“These things have an expiration date,” Connecture DRx’s Yocum says. “So they have to be replaced on a regular basis, even if they are never used.”
And EpiPen wasn’t new, after all. The product was approved in 1987. But Mylan had a virtual monopoly on it. In spring 2016, the FDA had rejected two applications from other firms that wanted to make generic versions.
State and federal lawmakers took notice. For years, they had been passing laws that pushed for schools and other public places to have EpiPens on hand.
“My office has been contacted by dozens of concerned Connecticut residents, families, school nurses, and first responders who urgently require your lifesaving product, but fear that its skyrocketing price has put it out of reach,” Sen. Richard Blumenthal, D-Conn., wrote to Mylan’s CEO at the time. He demanded that the company lower its price.
It did. Well, sort of. Mylan started offering its own generic at half the price in December 2016, and left the price of its brand-name product where it was. Mylan’s new version is called an authorized generic. These are usually introduced to undercut competition from other companies’ generics — and eat into some of the competitors’ profits.
In this case, Mylan’s generic version was an apparent response to public pressure, but it still cost triple what the EpiPen had cost just a few years earlier.
In 2018, the first true generic version of EpiPen was approved, but it wasn’t cheaper than the authorized generic.
“It’s the new normal,” Yocum says. “The first several generics that come in have not typically been at a significant discount to the branded product.”
Sovaldi: a first-of-its-kind hepatitis drug with a sky-high price tag
Sovaldi was heralded as a turning point for people with hepatitis C when the FDA approved the medicine in 2013. It was the first drug that could cure most cases of the chronic liver disease in just a few months — and without the debilitating side effects of previous treatments. But there was a catch: Sovaldi was priced at $1,000 per pill. To rid a patient of the hepatitis C virus would cost $84,000 per person.
State health systems struggled to pay for the treatment, and health insurers denied the drug to all but the sickest patients. An investigation led by Iowa Republican Sen. Chuck Grassley and Oregon Democractic Sen. Ron Wyden found that state Medicaid programs spent more than $1 billion on the drug in 2014, but less than 2.4% of Medicaid patients with hepatitis C got Sovaldi.
“There were potentially a million people in the Medicaid program who had hepatitis C,” Matt Salo, executive director of the National Association of Medicaid Directors, tells Shots. “At the list price that we were getting back in 2014, 2015, we would have spent as much on that one drug for this one condition as we would have for every other drug in the entire Medicaid program combined.”
Now, there are a few other brand-name hepatitis C cures on the market, creating some competition.
“We were able to go to Merck and Gilead and the other manufacturers and say, ‘We’re going to cover one of these products. It might be yours. It might be the other guy’s. So if you want it to be yours, you’re going to have to bring your price down significantly,’ ” Salo says.
Now the negotiated price after discounts and rebates for hepatitis C medicines can be around $20,000 per patient, which helps improve access, Salo says. But even that price is not low enough to provide a cure to everyone who has hepatitis C.
Now attention has turned to Louisiana, which reached a five-year deal with drugmaker Gilead for an unlimited amount of an authorized generic of Epclusa — another hepatitis C drug, which Gilead makes — for its Medicaid and prison populations. Instead of paying per dose, Louisiana will pay a fixed annual dollar amount. The state is calling this subscription approach the “Netflix model.” The goal is to eradicate the disease from Louisiana.
Insulin: near-simultaneous price hikes draw a lawsuit
After insulin was discovered nearly 100 years ago, the rights to it were transferred to the University of Toronto for $1 so that insulin could be made widely available at a low cost.
But insulin prices have continued to creep upward at a rate that’s higher than inflation. As a result, some patients have rationed their medicine, skipping doses or cutting them in half.
In 2017, a group of patients sued the three major insulin makers — Sanofi, Eli Lilly and Novo Nordisk — when they noticed the companies were increasing their prices in lockstep.
Yocum calls these price hikes “mind-boggling.” They seemed to go up in a pattern, at certain times of year, despite the availability of products from competing manufacturers. “I can’t think of a product, over the last 10 years, where you have that sort of pricing leverage,” Yocum says, that hasn’t led to “some sort of competitive pushback from another manufacturer of prescription drugs.”
When Congress and the media took notice, the price hikes mostly stopped but prices didn’t drop.
“The last time we saw significant increases across the board in the list prices of insulins was between 2017 and 2018,” Yocum says. “Most of them have held the line on that pricing since then.”
One of the lawyers in the insulin-pricing suit tells Shots that his team is seeking an injunction against the insulin manufacturers that could lower prices.
“Hopefully, we will obtain a ruling to that effect within a year,” says attorney Steve Berman.
The drug companies, for their part, say the allegations against them are false, and they are fighting the suit.
Zolgensma: a gene-altering drug that could bust the bank
Despite increasing pressure from the White House and Congress in recent years to reduce the price of prescription medicines, Novartis introduced in 2019 the world’s most expensive drug: Zolgensma.
It’s a gene-altering injection that costs $2.1 million for a one-time treatment for a severe form of spinal muscular atrophy, a rare inherited disease that destroys certain cells involved in muscle movement. If left untreated, the young patients often don’t live past childhood.
“It’s a new phenomenon that we will see more of in the next decade,” Yocum predicts of seven-figure drug prices.
Novartis has offered insurers the choice of paying for the treatment in $425,000 installments over five years.
Critics were initially somewhat split about the propriety of such a price. On the one hand, the drug could add years to patients’ lives. On the other, even if a drug is covered by a patient’s health plan, insurers simply pass along the high cost to everyone else in the form of higher premiums.
Then came even more controversy. Novartis learned that data used in the marketing application submitted to the FDA for Zolgensma’s approval had been manipulated, but it didn’t tell the FDA until after Zolgensma’s approval. The manipulation by company researchers happened during testing on mice, not people, and the company fired two executives after the scandal broke. The FDA said it is still confident in the drug’s safety and efficacy.
Novartis plans to give away free doses of Zolgensma via a lottery in countries where the drug hasn’t yet been approved for use; but the move has been criticized as too simplistic and emotionally taxing for families to endure.
In December, the House passed a bill to lower prescription drug prices. The proposed legislation would allow the government to negotiate prices of some drugs prescribed to Medicare patients, cap Medicare patients’ out-of-pocket costs for prescription medicine and penalize drugmakers for raising prices faster than inflation. But the Senate isn’t expected to move forward on the House bill, and the White House vowed to veto it.
Still, action on drug prices is inevitable, says Oregon Health & Science University’s Prasad.
“What is the status quo?” Prasad asks. “Unrelenting price increases with no downward pressure in a system that at some point cannot take it anymore and will collapse.”
But until the nation has no choice but to solve its drug price problem, Prasad said pharmaceutical companies will “extract as much money as they can.”