A drug to help newborns with a rare heart condition increases from $108 to $1,500 in the space of a year. The price of a 40-year-old anti-cancer drug increases 8,000 percent. A treatment for babies with spasms jumps from $1,600 to $23,000 seemingly overnight. That’s the reality of the last decade as startup pharmaceutical companies buy up the rights to old drugs used to treat rare illnesses and jack up the prices overnight.
Sen. Amy Klobuchar convened a hearing of the Joint Economic Committee on Thursday to look into the price gouging. Entitled “Small Market Drugs, Big Price Tags: Are Drug Companies Exploiting People With Rare Diseases?” the hearing offered evidence that some drug companies dramatically increase the prices of drugs used to treat rare illnesses because for the patients and insurers there are no alternatives.
“I understand that we have a market-based economy,’’ Klobuchar told the committee. “It’s fine for companies to make money on the products they sell. But when you’re dealing with the well-being of sick patients – babies and the elderly and everyone in between – there has to be special consideration,’’ Klobuchar said. “I don’t think this is the law of supply and demand.’’
Klobuchar told several stories from constituents whose medical costs moved out of reach. The names of two companies, Ovation Pharmaceuticals and Questcor Pharmaceuticals, popped up again and again.
“An elderly woman from Park Rapids, Minn., who suffers from cutaneous T-cell lymphoma was forced to pay over $8,000 in out-of-pocket expenses for Mustargen, a drug sold by Ovation Pharmaceuticals whose single-dose price increased from around $50 to nearly $550 after the company acquired the rights to the drug,” said Klobuchar.
She showed the committee a chart of the price increases in drugs after pharma startups like Questcor and Ovation acquired the rights to certain drugs. Mustargen, a drug to treat rare cancers, increased 1,000 percent; Cosmogen, a drug used to treat kidney disease, went up 3,500 percent, and Matulane, an anti-cancer drug, rose 8,000 percent.
“We invited Ovation to take part in this hearing and they declined to come,” said Klobuchar.
Dr. Alan L. Goldbloom, president of Children’s Hospitals and Clinics of Minnesota, testified about the detrimental impacts that these dramatic price increases have on patients and providers.
“My testimony is not a rant against the industry as a whole, for this industry has produced extraordinary advances in health care, from which we all benefit,” said Goldbloom. “Rather, my concern is focused on the practices of some specialty pharmaceutical companies and the questionable pricing of some older drugs.”
Goldbloom spoke of Ovation, which purchased a drug called Indocin from Merck in August 2005, and with the sale, the price went from $108 to $1,500.
“Indocin is an old drug,” said Goldbloom. “It has been on the market for more than three decades, so this dramatic price increase cannot be attributed to the high cost of research and development. As purchasers, the children’s hospitals have had no other options. There have been no other manufacturers of Indocin.”
Goldbloom continued, “Effectively, one company has a monopoly and can use it to price-gouge.”
Indocin is used to treat newborns that have an artery defect that interferes with breathing and can lead to heart failure.
Klobuchar said she is asking the Federal Trade Commission to get involved in monitoring these pharma startups.
“In America we have a serious problem with health care inflation and runaway costs. It’s no wonder, when a handful of companies can increase prices to astronomical levels because of a lack of competition. They are able to exploit an extremely vulnerable and captive market,” Klobuchar said. “Beyond hospitals and patients, a dramatic increase in the price for one of these drugs has a significant impact on the federal government because if the wholesale cost of a drug goes up, Medicare or Medicaid has to pay for the increase. So this is also about taxpayers’ money.”