Finally, a US revolt on drug price

American legislators are trying to enact new laws to force the pharma industry to explain pricing of specialty drugs

By Latha Jishnu
Published: Wednesday 15 July 2015

Gilead sciences became the poster boy for high drug prices when it launched Sovaldi to treat hepatitis C, a course of treatment that cost US $84,000, or US $1,000 a pill. That shocked the world. There was outrage even in the developed world which has always defended the high prices charged by innovator companies as the cost of encouraging R&D and bringing new drugs to the market. But even the US Congress saw red over the Sovaldi price, which in India has been slashed to US $900 for the course. Besides, Gilead’s patents on the drug are under challenge.

Medicare, America’s national insurance programme for seniors which has 54 million members, found that its payout on hepatitis C drugs had gone through the ceiling last year at an astronomical US $4.7 billion, compared to just US $286 million the year before. But other health insurance programmes, Medicaid, for instance, which covers 70 million patients, paid a quarter of this amount for the same drugs. That’s because Medicare, unlike the others, is barred from negotiating drug prices with the pharma companies. If one thought Sovaldi was overpriced, there are other specialty drugs which cost as much as US $311,000 for a year’s treatment of cystic fibrosis.

Healthcare insurance companies are not the only ones who are burning up over the cost of drugs. Academics, physicians and policy analysts have been questioning the high prices charged for medicines, specially those used to treat cancer—these cost around US $100,000 a year up from US $10,000 just 15 years ago—while rubbishing the claims of the pharma industry. Research by doctors attached to the National Institutes of Health (NIH) and the Mayo Foundation have disproved the usual justifications used by companies for their price gouging such as high cost of R&D, drug development, comparative benefits to patients and the ability of markets to settle prices to reasonable levels. All claims have shown to be false.

The interesting corner in the fight against big pharma, though, is the states. Here, the revolt is out in the open with legislators in five states, California, Oregon, Pennsylvania, North Carolina and Massachusetts, bringing out bills that seek transparency in drug pricing. One of the heroes of this long delayed uprising is California Assembly member David Chiu, a Democrat from San Francisco, who moved a bill asking drug makers to explain their pricing, the first legislative attempt to demand accountability from the industry.

Chiu’s trailblazing Prescription Drug Pricing Transparency Act would have forced drug companies to report profits and production expenses for any drug whose treatment exceeds US $10,000. More significantly, they would have to explain expenditure related to several steps of the drug-making process, including a break-up of research and regulatory costs, apart from marketing and advertising costs. In sum, every aspect would need auditing.

That move, as expected, was defeated with big pharma swinging into action with a practised defence to stymie the bill. But an undeterred Chiu says he would bring a revised version next January. A similar bill was stalled in Oregon, but the fires are spreading with influential papers like the New York Times urging lawmakers to act on the “runaway drug prices”.

Industry’s whine is that some of the costs are hard to quantify and that compiling the data would be burdensome. Interestingly, in India too we have heard this excuse. Bayer, while challenging a compulsory licence issued to Natco for its cancer drug Sorafenib, had claimed the royalty rate was too low for the costs it had incurred. Yet, it failed to give the Supreme Court its break-up of R&D expenses claiming that 98 per cent of the cost was on account of failed drugs, which made precise accounts impossible. India’s Supreme Court did not buy this argument. Neither should the people of America.

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