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U.S. prices for brand-name drugs are rising faster than ever as patents expire on top-selling medicines and the pharmaceutical industry nervously eyes the future of healthcare reform.
Prices for the 15 best-selling drugs rose by much higher rates in 2010 than they did in each of the last five years, according to exclusive data from Thomson Reuters MarketScan, which measured the average cost of a daily dose as shown in medical claims data.
Two thirds of the drugs saw double-digit price hikes, well above inflation of 1.6 percent in 2010 measured by the consumer price index. The analysis indicates drug makers are scrambling to make as much money as possible from blockbuster drugs before their patents expire, while taking advantage of the fact that last year’s healthcare reform bill did not cap drug prices.
According to MarketScan, payments for Pfizer Inc’s Lipitor rose 11.4 percent last year, compared with 5 percent annually from 2005 to 2010. That meant the cost of a daily dose of the cholesterol drug rose from $3.17 at the end of 2009 to $3.53 at the end of 2010. Lipitor, which will soon lose patent protection, had 2010 global sales of $10.7 billion.
Drugs with price rises in the mid teens included: cholesterol drug Crestor made by AstraZeneca Inc; blood-clot preventer Plavix sold by Bristol Myers Squibb Co and Sanofi-Aventis; and asthma treatment Singulair, from Merck & Co.
AstraZeneca’s antipsychotic drug Seroquel topped the list with a 16.5 percent price jump, according to MarketScan data, which is particularly telling since it comes from actual payments by insurers, rather than manufacturer list prices.
Insurers often get a discount on the list price — but the fact that they are paying more for drugs is likely to push up the premiums they charge at a time when healthcare costs are already rising much faster than inflation.
“The price escalation is truly incredible,” said Judy Cahill executive director the Academy of Managed Care Pharmacy, a pharmacy trade group. She said that since drugs generally make up about 10 percent of medical spending, they are often not a top priority for cost-cutting.
IMS Health estimates that $25.4 billion in U.S. drug sales are at risk of generic competition this year as patents expire on iconic brands like Lipitor and Plavix. Another $26.1 billion in sales — about 9 percent of the $300 billion market — will lose patent protection next year.
“Because of the increased number of drugs going generic, they profit more from the brand drugs on the market by increasing prices,” said Nancy Stalker, vice president for pharmacy services at health plan Blue Shield of California.
Everett Neville, vice president of pharma strategy at Express Scripts Inc, which manages drug benefit programs for health insurers and employers, said drugmakers typically raise prices for drugs as they approach patent expiration, but “what we have seen over the last few years are bigger increases for products that are early or mid-way in their patent cycle.”
Drug manufacturers have an exclusive right to sell new products for up to 20 years from the date of a U.S. patent filing. Once the patent expires, a number of generic copycats typically enter the market, driving down prices.
IMS estimates that the U.S. healthcare system will reap at least $70 billion in savings over the next four years as brand-name medicines are replaced by lower-cost generics.
But until there is a generic competitor, there is very little pushback on the U.S. price of a brand-name drug.
“There are hundreds of (health insurance) plans, so each of them individually does not have a whole lot of price leverage,” said Joshua Cohen, professor at the Tufts Center for the Study of Drug Development in Boston.
NO PRICE CAPS
The accelerating price hikes come as a surprise to some given that the pharmaceutical industry dodged a bullet with healthcare reform. The Affordable Care Act, dubbed “Obamacare” by some, set no limits on drug prices, although the industry is on the hook for around $80 billion in discounts and taxes over 10 years.
“Medicare and Obamacare are two reasons you are seeing higher rates of branded price inflation these days,” said Joel Hay, professor of pharmaceutical economics and policy at the University of Southern California.
Other industry sources said it would make more sense to limit drug price inflation when healthcare costs are under scrutiny — but the looming patent cliff is forcing drugmakers to implement steep increases to stem revenue losses.
The way drugmakers are paid — and how consumers are reimbursed — may also be pushing prices up, experts say.
Since the 1990s, reimbursement rates have been structured to shift usage to the most cost-effective medicines.
“There was a time where payers said that a drug is too expensive — we won’t cover it,” but consumers rebelled at such restrictions, said Edgar Arriola, coordinator of the drug information center at the University of California, Los Angeles. “Now we have tiered systems. We make the co-pay higher for those drugs that are less desirable from the payer’s point of view.”
But those efforts are becoming less effective now that many drugmakers are reimbursing consumers for co-payments. Pfizer, for example, is advertising co-pay cards limiting out-of-pocket Lipitor costs to “less than the average cost of a generic statin.”
Those offers drive up costs, said Blue Shield’s Stalker.
Makers of expensive biotechnology drugs have traditionally covered costs for uninsured or indigent patients, but some are now reimbursing all patients for any out-of-pocket costs.
Amgen Inc, the world’s largest biotech company, is covering co-pays for users of Xgeva, its new bone drug for cancer patients, and for Neupogen and Neulasta, much older drugs used to boost the immune systems of cancer patients.
Neulasta’s price rose nearly 9 percent last year, according to the MarketScan data.
FUNDING RESEARCH
Drug makers argue they need the revenue to pay for developing new medicines.
“Other products aren’t regulated in the same way that we are,” said Kirsten Axelsen, vice president of worldwide policy at Pfizer. “Lipitor will immediately be copied by a bunch of different companies … we are still responsible for monitoring anything that happens with a generic into infinity.”
Winning regulatory approval for a drug takes, on average, 15 years and $1 billion, according to the Pharmaceutical Research and Manufacturers of America.
“It is the innovators’ investments that lead to pioneering advances that improve patient care,” said Karl Uhlendorf, the pharmaceutical trade group’s deputy vice president.
Drugmakers, of course, try to keep patent protection as long as possible. The U.S. Supreme Court earlier this month upheld a ruling that pharmaceutical companies can pay rivals to delay production of generic copies.
“Drug companies have a responsibility to their shareholders to maximize profits and that means charging us as much as they can for their drugs,” said Ben Weintraub, director of research at Wolters Kluwer inThought.
“The cost of developing drugs is also skyrocketing, and really the only place to make up for those costs is in the United States, because drug pricing is so tightly regulated everywhere else in the world.”
Prices of the 75 top-selling drugs in the United States rose another 4 percent in the month of January, according to brokerage firm Raymond James, which listed increases like a 29 percent hike in the price of Johnson & Johnson’s attention deficit disorder drug Concerta and a 13.5 percent increase for Pfizer’s erectile dysfunction drug Viagra.
“Right now they are trying to maximize and some would say squeeze as much as they can,” said Cohen at Tufts. “It makes sense from their perspective.”
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Gilead Sciences Inc said on Wednesday that its experimental HIV drug elvitegravir proved as effective as a drug made by Merck & Co in a late-stage clinical trial.
The trial showed that after 48 weeks of treatment, dosed once daily, elvitegravir was as effective as Merck’s Isentress, which is dosed twice daily in combination with other antiretroviral drugs.
Gilead’s shares rose 2.7 percent to $41.53 in midday trading.
Discontinuation rates caused by adverse events were comparable in both arms of the study, the company said. Gilead plans to submit the data for presentation at a scientific conference later this year.
Elvitegravir is designed to block the ability of the HIV virus to integrate into the genetic material of human cells.
The drug is also part of a four-medicine HIV pill being developed by Gilead known as the “Quad.” Last year a mid-stage trial showed the Quad works as well as Gilead’s widely used Atripla three-drug tablet.
Atripla combines Emtriva, Viread and Bristol-Myers Squibb Co’s Sustiva.
Data from Phase III, or late-stage, Quad trials, which investors are watching closely, are expected beginning in the third quarter of this year.
“We view this as good news for Gilead and believe this data helps de-risk the key Quad Phase IIIs,” said Brian Abrahams, an analyst at Wells Fargo, in a research note.
Gilead licensed elvitegravir from Japan Tobacco Inc in March 2005. Gilead has exclusive rights to develop and commercialize the drug everywhere except Japan.
Results of the Phase III elvitegravir trial showed that after 48 weeks of treatment 59 percent of patients taking elvitegravir achieved target reductions in levels of HIV in the blood, known as viral load, compared with 57.8 percent of those who received Isentress, which is also known as raltegravir.
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The US Food and Drug Administration on Wednesday said it wants 500 unauthorized prescription drugs for cough, cold and allergy symptoms pulled from the market because of risks to the public.
“We don’t know what’s in them, whether they work properly or how they are made,” FDA director of the Office of Compliance, Center for Drug Evaluation and Research Deborah Autor told reporters.
The FDA published a list of 500 medications that are available only through a doctor’s prescription, and said companies must “stop manufacturing them within 90 days and stop shipping the products within 180 days.”
Autor said “all or almost all” of the drugs are made in the United States.
“We believe there are doctors out there who continue to prescribe these drugs,” said Autor, noting that some of the drugs are listed in physicians’ desk reference books and advertised in medical journals.
Some of the more commonly known drug names include Cardec, Lodrane 24D, and Organidin, she said. Another, called Pedia-Hist, is labled for children as young as one year old but has not been cleared by the FDA.
Charlie Lee, a doctor who participated in the FDA conference call with reporters, said the drugs are mainly cough and cold combination formulas and that “sedation, drowsiness, irritability” are among the complications reported.
However, the FDA noted that such reports were “limited” and said it was unclear how many of the drugs were actually on the market.
It was also unknown how many people could be taking them because most people treat such symptoms with drugstore remedies.
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The problem of so-called “designer drugs” is running out of control in many regions of the world, the U.N. global drugs watchdog said Wednesday.
The International Narcotics Control Board (INCB) said detailed instructions for how to make designer drugs, which are slightly altered to bypass existing control systems, are often shared via the Internet.
The report said the problem was “escalating out of control” and “major efforts” were needed to counter it.
“Given the health risks posed by the abuse of designer drugs, we urge governments to adopt national control measures to prevent the manufacture, trafficking in and abuse of these substances,” Hamid Ghodse, the INCB’s president, said at a briefing in London as the board’s annual report was published.
To address the problem of designers quickly changing a single component of a drug to avoid bans, some governments have adopted measures to control entire groups of structurally related synthetic compounds, the INCB said, recommending that others follow suit.
The INCB’s report cited the designer drug 4-methyl-methcathinone, known as “mephedrone,” which it said is being abused in a growing number of countries and regions.
Designer drugs are often produced by slightly modifying the molecular structure of controlled drugs, making a new drug with similar effects which can elude national and international bans.
Mephedrone is available through the Internet and also through retail outlets known as “smart shops,” sometimes advertised as bath salt, plant food or research chemical to avoid detection and legal proceedings.
The drug has effects similar to cocaine, amphetamine and MDMA, or “ecstasy.” A number of reports of deaths from using it have been reported in recent years in Britain and Europe.
“Mephedrone has now become a problem drug of abuse in Europe, North America, Southeast Asia and in Australia and New Zealand,” the INCB report said.
It added that mephedrone was just “one example of a large number of designer drugs that are being abused.”
In Europe alone there are 15 other designer cathinones — the class of drugs that includes mephedrone — currently being monitored by the European Monitoring Center for Drugs and Drug Addiction, and in Japan 51 drugs have been recently placed under control.
The INCB called on governments to remain vigilant in monitoring trends in drug abuse and in identifying new drugs of abuse. “Bilateral and international cooperation is essential in sharing information on this cross-border phenomenon,” it said.
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