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Drug Pricing: Soaring Prices, Soaring Sales

December, 1998

Last August, news leaked that DuPont Pharmaceuticals and Glaxo Wellcome were about to set unparalleled prices for their new drugs, efavirenz (brand name Sustiva) and abacavir (Ziagen). Hoping to circumvent such actions, an ad hoc coalition called the Fair Price Working Group mobilized and began circulating a consensus statement demanding that these drugs be priced in the same range as other drugs in their respective classes. Within a few weeks, there was a groundswell of support, with endorsements by several hundred HIV/AIDS organizations and individuals worldwide (see Treatment Issues, September 1998). The ensuing controversy has been marked by further increases in the cost of antiviral therapy, but also by some movement toward cost containment.

DuPont's Debacle

Despite previous denials, DuPont officials stunned treatment advocates summoned to its corporate headquarters on September 10 by announcing that the price of efavirenz would be 60% above other nonnucleoside reverse transcriptase inhibitors (NNRTIs), with an annual retail cost approaching $5,000. Advocates presented the consensus statement and vehemently protested DuPont's decision, but to no avail. Conspicuously absent from the meeting were officials with authority over pricing. Demanding a meeting with DuPont's president, Nicholas L. Teti, advocates were informed he was unavailable.

After announcing the price of efavirenz to wholesalers, a rancorous meeting with Nicholas Teti made it evident that the company considered the efavirenz price nonnegotiable. The company cited the drug's potency, once-daily dosing, and high manufacturing costs as justification for its exceptional price. DuPont also claimed that following through on its "commitment" to antiviral research necessitates this revenue stream -- the development of new HIV drugs would be threatened without high income from efavirenz. A pledge that the DuPont Patient Assistance Program would provide efavirenz to anyone unable to access the drug was the only concession offered at the time.

Several of the largest state AIDS Drug Assistance Programs (ADAPs) refused to add efavirenz to their drug formularies, which elicited a 48-hour "take it or leave it" offer of a 5% rebate. California, New York, Illinois, Pennsylvania, Puerto Rico and Texas rejected this token offer, insisting that DuPont engage in good faith negotiations. DuPont officials declined all meetings, until after an ACT UP/New York demonstration spurred them to reconsider. They agreed to meet on November 9 with several ADAP directors only. These interlocutors left the meeting with the impression that another offer would be forthcoming.

On December 1, World AIDS Day, DuPont announced that it had renewed its original offer of a 5% rebate, this time guaranteed for five years and coupled with a three-year overall price freeze. "World AIDS Day is a time to be a force for change and DuPont Pharmaceuticals is proud to be the first company to offer price stabilization and long-term additional rebates to state ADAPs," stated Nicholas Teti. "Our goal has always been to provide access to this drug to as many people living with HIV/AIDS as possible." "Price stabilization"? Efavirenz' cost will be prohibitive for many, especially treatment-experienced patients who must take it along with a protease inhibitor. It will likely undermine the 1999 fiscal year ADAP budget recently approved by Congress. Partly due to the high price of efavirenz and other drugs, the fiscal 1996 ADAP budget of $52 million will increase to $700 million by fiscal year 2000.

DuPont has engaged in a deceptive marketing campaign to obscure the financial hurdles it has placed in the way of treatment access. A recent company press release stated, "Sustiva (efavirenz) is priced in the middle of the range for currently marketed antiretrovirals, substantially less than all protease inhibitors. In fact, the price of a regimen including Sustiva is about 28% less expensive than the current standard of care regimen which includes the most commonly dispensed protease inhibitor." This statement suggests that efavirenz can replace protease inhibitors, but such use meets federal guidelines only in initial therapy. DuPont again is ignoring that efavirenz plus a protease inhibitor is extraordinarily expensive.

Glaxo's Gold

Other drugs have also been the center of controversy. The FDA Antiviral Advisory Committee recommended accelerated approval of abacavir (formerly known as 1592) on November 3, and the FDA officially approved the drug on December 18. The same November week that DuPont was stonewalling ADAP directors, Glaxo had agreed to hold a small meeting with upper level executives, prior to price-setting. After receiving the community consensus statement urging Glaxo to price abacavir in line within other nucleoside analogs, the company had been carefully observing the DuPont debacle. A protease inhibitor-type price for abacavir was being hotly debated within the company. Several ADAP and Fair Price Working Group representatives were given an opportunity to voice their apprehensions with Glaxo officials. As anticipated, however, they were negotiating against a newly established pricing standard set by DuPont.

On December 1, Glaxo announced that the average wholesale price (AWP) of abacavir would be $3,540 per year or $9.70 per day, with an annual ADAP price of approximately $3,000. The price is roughly $1.50 to $2.00 per day less than efavirenz, and is at the top of the range for nucleoside analogs but far below the protease-like price under consideration. The price was acceptable to the ADAP representatives with whom Glaxo had met and in keeping with the ADAP 1999 budget projections. Most importantly, it did not create a new benchmark, as had efavirenz, and shifted the focus once again to DuPont. "While drug prices in general are still too high, Glaxo Wellcome is to be commended for its decision in an environment which has been destabilized recently by the pricing of other new agents," said Martin Delaney, founding director of Project Inform and member of the ad hoc Fair Price Working Group.

Agouron's Advance

Just as Congress was approving the fiscal 1999 ADAP budget, treatment advocates soon learned that Agouron had quietly raised the price of nelfinavir (brand name Viracept) by almost 5%. Nelfinavir was already one of the two best-selling protease inhibitors, so there is little rationalization for raising a price that was already relatively high. Though Agouron had met with treatment advocates the previous day, there was no mention nor any forewarning of this startling announcement. This 5% increase, coupled with recently presented data on twice-daily dosing, will actually represent close to a 15% price increase and will put an additional strain on scarce ADAP funds, as these increases were not anticipated. When complaints were raised, Agouron's response was that the extra money was needed to support development of its new anti-HIV drugs (a protease inhibitor, an NNRTI and a therapeutic vaccine). In any case, the price rise was a fait accompli. The community will continue making an issue of the price as Agouron prepares to launch its new twice-daily labeling indication for nelfinavir.

Bristol's Bombshells

On December 10, Bristol-Myers Squibb astonished community advocates with their bewildering announcement of a 4.5% price increase for both ddI and d4T. This is the fifth incremental price increase since March of 1996 for ddI and d4T and represents a cumulative increase of approximately 16.5% and 12.5%, respectively. One of the justifications for this latest price increase are the R&D costs associated with the new once-a-day enteric-coated formulation of ddI, which may be a year away from FDA approval. (The company is also developing a new protease inhibitor and testing hydroxyurea's potential in HIV therapy.) It refuses to comment about whether it is considering another price increase when the new ddI formulation is introduced, but has pledged to consult with community representatives prior to any future price increases. Advocates further pressed for an ADAP rebate and price stabilization for three years and are awaiting Bristol's response.

Profit vs. Profiteering

Sales of Agouron's nelfinavir are booming, and it is now the most popular first-line protease inhibitor. Similarly, Bristol's sales of d4T and ddI have doubled over the last two years and now total $800 million per year. As sales increase and research and development costs are recouped, one would expect unit prices to remain level or even drop. Investment in drug discovery and development should be covered by such increased sales. Community concerns about the runaway cost of therapy is stymied by a lack of financial accountability, which hinders the Fair Price Working Group's ability to monitor pharmaceutical pricing to determine whether or not profits are ethical. Still, the Group made its mark on industry decision-making this fall. The discussions that have taken place may have resulted in only modest victories, but they have established a precedent for openness and dialogue on a hitherto taboo subject. A continuing dialogue, prior to price-setting, will lead to a greater understanding of the underlying corporate pricing process and the needs of the community. Such an understanding is required for an overall strategy to fix drug prices at a level that encourages investment in developing new antiviral products while increasing access to present treatments. Exploring avenues for reasonable returns on investment while eliminating profiteering ought to be the united goal of both industry and community.

Hepatitis C Drug Pricing Controversy

Schering-Plough in the last six months had received FDA approval for a combination of its interferon alpha-2b (Intron A) and ribavirin (Rebetol) to treat hepatitis C. The indication now includes treatment-naïve patients as well as those failing to respond to interferon monotherapy. The company is packaging the two together as "Rebetron." The average wholesale cost for six months' treatment is at least $8,000. Meanwhile, relatively cheap ribavirin is available in Mexico and other countries. Various AIDS buyers clubs have been importing it for years. The PWA Health Group in New York charges about $2,000 for a six-month supply at the doses prescribed for HCV. Ribavirin by itself is not considered an effective therapy for HCV, which is Schering's justification for packaging the two together.

Intron A alone costs only about $2,500 for six months' anti-HCV therapy, so individuals facing economic constraints could obtain a cheaper therapy by separately purchasing imported ribavirin. Individual packaging also would be very beneficial for persons who have found Intron A intolerable or ineffective and who want to try ribavirin in combination with a different alpha interferon. Right now, they cannot do so short of buying a lot of superfluous Intron A along with their ribavirin. Even researchers who want to test ribavirin with the other alpha interferons have faced this obstacle.

Schering-Plough's pricing and packaging policies have come under fire from newly formed hepatitis C activist groups, such as San Francisco's Hepatitis C Action and Advocacy Coalition (HAAC). HAAC has been negotiating with Schering to establish a compassionate use program that would provide ribavirin without Intron A. That program should start soon, but HAAC considers its eligibility criteria too restrictive. Under discussion, too, is a broader financial assistance program for uninsured patients. While HAAC follows in the footsteps of AIDS activists, HAAC member Brian Klein feels that the HIV/AIDS community should be more attentive to the hepatitis C situation. "This sets precedent for drug bundling and pricing that could spread to HIV," he says.


Back to the GMHC Treatment Issues December 1998 contents page.

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This article was provided by Gay Men's Health Crisis. It is a part of the publication GMHC Treatment Issues. Visit GMHC's website to find out more about their activities, publications and services.