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Drug Pricing -- and What You Can Do About It

June 2006

Over the last few years, a great deal of attention has been devoted to lowering the cost of HIV treatment in developing nations. Due to generic competition, activist and political pressure, and movement within the pharmaceutical industry itself, the cost of a typical three-drug anti-HIV combination has plummeted in some countries. Regimens that cost $15,000-$20,000 per person per year in the US are now being delivered in some places in Africa, Asia and South America for as little as a few hundred dollars per person per year. Some drugs from major pharmaceutical companies are delivered at their raw cost, while generic equivalents of others are sold at unheard of low prices. The crisis of AIDS in developing nations has done a great deal to show that good drugs needn't be prohibitively expensive.

The success in lowering the cost in some developing countries, however, has had no positive effect on prices in the US, In fact, prices for new drugs have skyrocketed in the US in recent years, while the prices of older drugs have been raised annually. It is appropriate and necessary for health care insurers in richer countries to bear more of the cost for drugs. However, the impact of rising costs on the US health care system can't be overstated. Higher drug prices are one of the primary drivers in skyrocketing health care costs, causing restriction of public programs, making private health care unaffordable, and increasing the already dramatic numbers of the uninsured. A significant portion of the increased (but still inadequate) funding provided by the Congress to meet the growing number of people needing treatment has been consumed by the higher cost of drugs. This trend must stop and it must stop now.

When the first protease inhibitors (PIs) were released in 1995 and 1996, their price ranged from roughly $4,500 per year for the lowest priced (Crixivan from Merck) to approximately $7,000 year for the higher priced (Norvir from Abbott and Invirase from Hoffman-La Roche). The two most recently approved PIs, Reyataz (Bristol-Myers Squibb) and Aptivus (Boehringer Ingelheim), each set new records for initial price. The basic price for Reyataz is $10,862 per year when used alone, or $14,774 when used with a small "booster" dose of Norvir (which is required for people who have used other protease inhibitors before). Roughly a year after Reyataz set a new price threshold, Aptivus leap-frogged it, selling for $13,596 alone. As bad as that sounds, Aptivus must always be used with a large booster dose of Norvir, a booster dose that costs private insurance payers as much as $15,654 per year, bringing the total cost of using Aptivus to $29,240 per year. (The high cost of Norvir in both cases reflects a huge 400% increase in the price of Norvir that was implemented more than year ago. The increased price applies only to private insurers and individual buyers, while the price was not raised for the various government payers such as AIDS Drug Assistance Program [ADAP] and Medicaid. See "Free Drugs -- and How to Get Them" in this issue for information about how people using Aptivus can get free Norvir.)

As high as these prices sound, they are not the total cost of the regimen. Both Reyataz and Aptivus must also be accompanied by at least two other anti-HIV drugs, which typically add more than $9,000 to the total cost of a treatment regimen, bringing the regimens somewhere in the range of $24,000-$38,000. But wait, we're still not done! The data available on the use of Aptivus further demonstrate that the drug really only works well in the patient population it is licensed for when combined with another very pricey drug, Fuzeon (Hoffman-La Roche), which adds an astounding $27,000 to the cost the regimen. So now we're looking at regimen costs that could be as high as $65,000 per year. With costs like these, plus future annual price increases, is it reasonable to expect our advocates to successfully petition Congress for the needed funding year after year, for the next 25 or 50 years?

To be fair, it must be acknowledged that these are all approximate "retail" prices. The majority of people with HIV get their medicines through government programs and the prices charged to these programs include substantial discounts of at least 25% or more. Still, even a 25% discount leaves a huge cost for these drugs.

Such prices represent a transfer of wealth from taxpayers and purchasers of health insurance directly to the pharmaceutical industry. Unlike many other expensive drugs that are used only during periods of acute illness, pharmaceutical products for treating HIV are envisioned to be a daily, lifelong requirement or, from the perspective of the drug companies, a lifelong revenue stream. In almost any other industry, long-term sale of a product results in gradually reduced prices since the development costs of the product have long since been recovered by the manufacturer. Not so for the pharmaceutical companies, which have somehow convinced the payers and patients that their products should increase in price with each passing year. It's true that the pharmaceutical industry must reinvest a portion of its profits into research and development of new products, but the percent spent this way is not very different from many other industries. In fact, it is lower than in a number of other industries. The pharmaceutical industry's hunger for profits must be challenged. The health and well-being of the sick and the needy, whether in the developing or developed worlds, must not be exploited.

What Can We Do About It?

This brings us to the question of what can be done. Though many think of price limits as an obvious solution, they are unlikely in the current political economic climate. This leaves public pressure and market competition as the primary levers of pricing. This issue is extremely timely because at least four new drugs for treating HIV are likely to be approved in the next 18 months, some as early as June of 2006. Two are from a new company, Tibotec Therapeutics (owned by Johnson & Johnson). One is a new protease inhibitor, darunavir, that appears to work well even against protease inhibitor-resistant HIV. A second, TMC 125, may be the first non-nucleoside RT inhibitor (NNRTI) that works against virus that has become resistant to other drugs of this class. A third new drug, from Merck, is the first of a new class of drugs called integrase inhibitors. Every indication so far is that the drug will rank among the most potent yet seen, and unlike darunavir, it does not require using a booster dose of Norvir. The fourth new drug heading for approval is maraviroc from Pfizer, which represents another in the relatively new class of drug called entry inhibitors, which should work despite any prior form of resistance. The prices set for these four drugs will determine whether the juggernaut of higher and higher prices and ever higher profits will prevail, or whether the pharmaceutical industry will finally come to its senses and begin to play the role of good citizen in a time of worldwide health crisis.

You can help determine the outcome.

A campaign is currently underway to petition the leadership of Tibotec Therapeutics to break ranks with its competitors and set a new standard of responsible corporate citizenship. They can price their important new drug substantially lower than the last two protease inhibitors and still make a very healthy profit. We know this because the best selling protease inhibitor, Kaletra (made by Abbott Laboratories), is priced far lower than its newer competitors. Perhaps even more importantly, darunavir will reach FDA approval based on some of the easiest and least expensive requirements the FDA has asked of any company in the last ten years. Early on, the FDA apparently recognized the promise and potency of the drug and invited the company to submit for approval on the basis of Phase II data, without waiting for completion of the normally required Phase III studies. This represents a large economic advantage for the company, one that should be compensated with a respectively lower price.

The case for demanding a lower price from Tibotec is spelled out in a Consensus Statement that is being circulated throughout the country by an ad hoc action called the Fair Pricing Coalition (for more information about the Fair Pricing Coalition, see The Fair Pricing Coalition Consensus Statement asks that Tibotec price its new drug no higher than Kaletra, which is still far from inexpensive ($9,555 annually, ritonavir boost included). The Statement does not ask that they cut the price to the bone, but only that they reverse the incessant trend toward higher and higher prices. As always, we expect additional discounts for government payers and a rock bottom price when the drug enters the market in developing nations.

The Consensus Statement can be read at this address: Hundreds of community organizations and individuals have already signed on and you can add your name, or your organizations name, via the earlier web address. Each week, an updated list of all those groups and people demanding a fair price is delivered to the Glenn R. Mattes, the President of Tibotec Therapeutics. If and when any indication is seen that Mr. Mattes is not taking the petition seriously, it will be redirected to the highest levels of Johnson and Johnson, owner of Tibotec Therapeutics.

If you really want to make a strong impression on Mr. Glenn R. Mattes, write him a personal letter:
Mr. Glenn R. Mattes
President, Tibotec Therapeutics
430 Route 22 East
Bridgewater, NJ 08807-0914

It needn't be long -- just a few strong words about why you are fed up with excessive, unfair drug prices and encouragement for Tibotec to act as a responsible corporate citizen in the pricing of their new anti-HIV drug. The more such letters he gets, the more pressure the company will feel. Companies look forward to high praise and appreciation when they bring a new drug to market, and Tibotec's new drug appears to be a very good product that warrants praise. But not if the company takes advantage of the drugs benefits and sets an exorbitant price. Tibotec needs to know that such a decision on their part will result in a nationwide chorus of protest to the press on the very day they hope to hear applause.

This can only work if people support it. This is your chance to make an impact. Join the fight for fair drug pricing. Demand that Tibotec, which has thus far listened well to the communities affected by HIV, now listen to this cry for lower pricing.

And when Tibotec finishes with its protease inhibitor, we must raise the same cry about the pricing of their non-nucleoside RT inhibitor, and turn our attention to Merck and Pfizer as each brings an entirely new class of drug to market. This is just the beginning of a long fight. Your help is needed at every step.

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This article was provided by Project Inform. It is a part of the publication Project Inform Perspective. Visit Project Inform's website to find out more about their activities, publications and services.