More Abuse Of The Orphan Drug System: Taking Treatment From Free To $80,000 A Year

from the regulatory-loophole dept

Fri, Oct 10th 2014 4:09am — Glyn Moody

Last year, we wrote about a disturbing abuse of the orphan drug system in the US, which is designed to encourage the development of treatments for rare diseases, but which in practice can allow companies to increase prices hugely. Here's another example, reported by Adam Feuerstein in The Street, that is in some ways even worse. It concerns a company called Catalyst Pharmaceutical Partners, which has just reported what seems like good news for those suffering from Lambert-Eaton Myasthenic Syndrome (LEMS), a progressive, muscle-weakening disease. Catalyst has announced positive results from a final phase trial of a drug called "Firdapse." As The Street article reports, analysts believe that once approved by the US Food and Drug Administration, Firdapse could cost between $60,000 and $80,000 per year if it is designated an orphan drug, which brings with it seven years of marketing exclusivity. That might seem the going rate for new drugs, but there's a nasty twist in this tale, as Feuerstein notes: Firdapse is not a new treatment for LEMS. The active ingredient in Firdapse is a compound known as 3,4-Dap, which has been available in the U.S. for more than 20 years. Doctors treating the small numbers of LEMS patients in the U.S. can obtain inexpensive 3,4-Dap from compounding pharmacies. It's even given away for free to doctors and patients by a tiny New Jersey drug maker, Jacobus Pharmaceuticals.
That means that Catalyst took no risks with Firdapse. Indeed, it didn't really do anything at all, as Feuerstein explains: The company did no development work, made no effort to improve the drug's efficacy, safety or convenience for patients.
And yet despite that fact, it stands to profit handsomely: For the zero work done by Catalyst, LEMS patients and their insurance companies will be paying as much as $80,000 for the exact same drug they use now for a fraction of the cost, if not gratis.
Derek Lowe, writing on Corante, puts it well: I can think of no possible reason, no public good that comes from taking a drug that was easily available and working exactly as it should and have someone suddenly be able to charge $80,000 a year for it. This is not a reward for innovation or risk-taking -- this is exploitation of a regulatory loophole, a blatant shakedown, or so it seems to me.
What makes things worse, is that just a few weeks before, Lowe had described exactly this behavior from another company, Retrophin, which bought the marketing rights to a drug called Thiola. Here's what happened next: Retrophin hasn't done any new trials, and they haven't had to. They've just bought someone else's old drug that they believed could be sold for twenty times its price, and have put that plan right into action. No development costs, no risks whatsoever -- just slap a new sticker on it and put your hands over your ears. This is exactly the sort of thing that makes people go into fist-clenching rages about the drug industry, and with damn good reason. This one enrages me, and I do drug research for a living.
He's probably not alone in being enraged, but this kind of abuse is so lucrative for the companies prepared to take this route that we're probably going to see more of it until this particular loophole is closed.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Thank you for reading this Techdirt post. With so many things competing for everyone’s attention these days, we really appreciate you giving us your time. We work hard every day to put quality content out there for our community.

Techdirt is one of the few remaining truly independent media outlets. We do not have a giant corporation behind us, and we rely heavily on our community to support us, in an age when advertisers are increasingly uninterested in sponsoring small, independent sites — especially a site like ours that is unwilling to pull punches in its reporting and analysis.

While other websites have resorted to paywalls, registration requirements, and increasingly annoying/intrusive advertising, we have always kept Techdirt open and available to anyone. But in order to continue doing so, we need your support. We offer a variety of ways for our readers to support us, from direct donations to special subscriptions and cool merchandise — and every little bit helps. Thank you.

–The Techdirt Team

Filed Under: drugs, firdapse, monopoly rents, orphan drugs, pharmaceuticals
Companies: catalyst phamaceutical partners

31 Comments

If you liked this post, you may also be interested in...

Reader Comments

Subscribe: RSS

View by: Time | Thread

That One Guy (profile), 10 Oct 2014 @ 3:18am

It takes a special kind of scum...
Politicians can be nasty, self-serving, hypocritical and backstabbing assholes.

Layers, lobbyist, likewise.

A cop can ruin your life, rob you blind, shoot up your pets and house, potentially kill you or someone you know, all on a whim, and with absolutely zero repercussions, but even that's on an individual level.

But honestly, you'd be hard pressed to find a more vile, evil, twisted and sociopathic group than the people who run large pharmacy companies. They intentionally price life-saving drugs out of the range of many people around the globe, directly leading to massive suffering and deaths. They re-package the exact same crap once the patent on it is about to lapse by adding some useless 'addition' to it and therefor lock out affordable generics for an extra decade or two before doing it again once that patent is about to lapse.

They pay generic drug manufacturers money in order to keep affordable generic drugs off the market, allowing them to continue to charge obscene amounts for the identical 'brand name' versions.

And all of that for nothing more than money.

And then to turn around and have the absolute gall to claim that they are doing all this in order to save lives(when they aren't bluntly stating that they don't care if people who can't pay suffer or die), as though offering drugs at reasonable prices would somehow utterly destroy their ability to make enough of a profit to stay in business... yeah, you're talking about evil to the point where burning down an orphanage or hospital with the people still inside it for chuckles practically ranks alongside helping the homeless in comparison.
[ link to this | view in thread ]
Ninja (profile), 10 Oct 2014 @ 3:23am

And they complain when countries like Brazil and India break their patents. You know, most of us do believe that some compensation should be provided and we'd be happy to provide a SANE one. But really, act like assholes (the pharma industry) and we will screw you.
[ link to this | view in thread ]
That One Guy (profile), 10 Oct 2014 @ 4:27am

Re:
Just tossing the idea out, but I think that a company like that should be allowed to price gouge(within reason) until they have recouped development costs(and only R&D costs, no adding in marketing and advertising to boost the numbers), and made the same amount in profits. So spend 1M in R&D, they can charge what they want until they've made 2M off of that drug, at which point the limits kick in.

At that point, strict price limits would be put into place so that the common people in the area could reasonably afford the drugs, and they can make a reasonable profit selling them.

They make their profits, recoup their costs, and the public get cheaper, affordable drugs once that happens, while they still make a profit, just not as insane of one.
[ link to this | view in thread ]
JH, 10 Oct 2014 @ 4:30am

There are proposals to entrench this in #CETA.

Has anybody checked the small print, to see whether it contains any checks against similar abuses ?
[ link to this | view in thread ]
Anonymous Coward, 10 Oct 2014 @ 4:56am

Jazz Pharmaceuticals
Don't forget Jazz Pharmaceuticals who is charging around $100,000 a year for Xyrem, a drug first synthesized in 1874 by Alexander Zaytsev.
[ link to this | view in thread ]
LduN (profile), 10 Oct 2014 @ 5:11am

this makes me sick... so sick I need to spend 50k a year on medication to control it
[ link to this | view in thread ]
Anonymous Coward, 10 Oct 2014 @ 5:50am

Re: Re:
I have a better idea.

Nationalize the drug companies. Show up at their front doors with heavily-armed National Guard and take them over. Throw out the executives, the marketeers, the salespeople and keep the scientists.

There are people dying, all day every day, for NO REASON other than the horrific cost of drugs. This is nothing less than a national health emergency and it needs to be addressed in an appropriate fashion.
[ link to this | view in thread ]
New Mexico Mark, 10 Oct 2014 @ 5:55am

Re: Re:
At that point, Hollywood math would kick in and every cup of coffee (valued at $100 each -- this is good coffee don'cha know) provided in the break room would be part of the "R&D" budget.
[ link to this | view in thread ]
Anonymous Coward, 10 Oct 2014 @ 6:48am

Re:
Not very sick then, are ya?
Proper illness requires 50k a month, at least.
[ link to this | view in thread ]
Anonymous Coward, 10 Oct 2014 @ 7:13am

Crimes against humanity, organized genetic cleansing , yup that what we have here.
[ link to this | view in thread ]
OldMugwump (profile), 10 Oct 2014 @ 7:22am

Re: It takes a special kind of scum...
All I care to know is that a man is a human being--that is enough for me; he can't be any worse.
--Mark Twain
They are human; nothing more and nothing less. Don't blame them for being human, blame the politicians who set up the insane incentives that make them want to this.
[ link to this | view in thread ]
Anonymous Anonymous Coward, 10 Oct 2014 @ 7:31am

Re: Re: Re:
No need to nationalize companies, that just creates another bureaucracy for the government to screw up.

Better yet, just get rid of the patents, on pharmaceuticals, plants/seeds, and other life necessities, or altogether.
[ link to this | view in thread ]
Deniable Sources, 10 Oct 2014 @ 7:55am

Right, because nationalization of corporations always leads to better availability, lower prices, and superior quality. Always.

The orphan drug program is indeed a disgrace. It allows the re-imposition of a government-mandated monopoly over a previously well-understood compound, simply to give a company an incentive to make and sell the drug. Getting rid of the company does nothing except make the drug unavailable again.

Want to solve the "national health emergency"? Easy. Make the regulatory and market protection of orphan drugs contingent on a price that is exclusively tied to the cost of making the compound, plus a reasonable markup. Provide full litigation immunity for anything short of gross negligence. Get the bottom-feeding marketeers and the bottom-feeding lawyers out of the pool, and things are likely to improve quickly.
[ link to this | view in thread ]
Mason Wheeler (profile), 10 Oct 2014 @ 7:57am

Re: Re: Re: Re:
As I mentioned a few days ago:

- The cost of medical treatment has increased several times faster than the rate of inflation for decades.
- The biggest driver of this trend has been the increase in costs of pharmaceuticals. (The second-biggest is our ridiculous, insane medical insurance system, but that's a matter for a different comment.)
- The biggest factor behind high pharmaceutical prices is a lack of competition, as shown by the far lower prices at which generic versions of the same drug are offered for almost every drug that has a generic version.
- The reason little to no competition exists in so many cases is the ability for pharmaceutical companies to obtain patent coverage on their drugs and charge monopoly prices rather than market prices.
- The baby boom generation, the largest demographic group in America, is currently beginning to retire, to age, and to draw on government benefits such as Medicare.
- With aging comes health problems, and the increased need to use Medicare.
- An exponentially increasing demand for expensive pharmaceuticals will inevitably strain our already-overstressed, over-indebted Treasury beyond the breaking point.
- A nation running out of money has far greater repercussions than simply a financial crisis; it historically leads to systemic meltdown, riots, shortages of food and other basic supplies, and the breakdown of social order very quickly.

Conclusion: We are on the verge of reaching the point at which there is an irreconcilable conflict between the existence of pharmaceutical patents and the national security of the USA. It will be interesting to watch politicians who are strongly in favor of both concepts try to deal with this simple truth.
[ link to this | view in thread ]
Anonymous Coward, 10 Oct 2014 @ 8:12am

what is even more annoyingly wrong, if i remember correctly, is that when people try to buy medicines from outside the US, they are actively discouraged from doing so. they are even threatened with the seizure of them at the various borders! that being the case, why does the government do nothing to stop this practice of ripping people off? i appreciate that, like the entertainment industries, there is a whole lot of too-ing and fro-ing between the industries heads and politicians, but when peoples lives are in danger, there is no excuse for doing nothing just because a 'brown envelope' has been shoved under the door!
[ link to this | view in thread ]
John Fenderson (profile), 10 Oct 2014 @ 8:43am

Re:
"why does the government do nothing to stop this practice of ripping people off?"

Because they're being paid to do nothing to stop it.
[ link to this | view in thread ]
Ninja (profile), 10 Oct 2014 @ 9:03am

Re: Re:
they have recouped development costs

Later in pharma accounting department:

Toilet paper used during research = $1200 per roll
Reagents used in RD = $ 1.000.000.000,00 total

etc

Can you see the problem already?
[ link to this | view in thread ]
Ninja (profile), 10 Oct 2014 @ 9:04am

Re: Re: Re:
That, saw your post after posting exactly the same thing.
[ link to this | view in thread ]
CatalystDeservesToDie, 10 Oct 2014 @ 11:00am

If I were one of the people who goes blind with rage when this kind of abuse occurs, I would ask one question.

"Are there any pro-bono hitmen available to take out the every executive of Catalyst?"
[ link to this | view in thread ]
Maurice Michael Ross (profile), 10 Oct 2014 @ 12:00pm

Clinical Trial
Didn't the company pay the costs of the clinical trials for this new indication? Isn't this a new use for an old drug? To get FDA approval of a new use for an old drug, companies need to spend millions on clinical trials. If so, then it is misleading to say the least to suggest that this company incurred no development costs. Further, the market for this drug seems relatively small--which may explain in part the high cost. I don't think any of us disagree that this company should be able to recoup its costs in developing this new use for the drug. I have no idea as to whether $80,000 per patient is the price necessary to allow the company to recoup its costs, but it might be.
[ link to this | view in thread ]
John Fenderson (profile), 10 Oct 2014 @ 12:03pm

Re: Clinical Trial
By my reading of the articles, this is not a new use of the drug at all. This is the use the drug was originally put to. I may have misunderstood this point, though.
[ link to this | view in thread ]
Maurice Michael Ross (profile), 10 Oct 2014 @ 12:34pm

Research indicates that the situation is more nuanced. A small family company, Jacobus Pharmaceuticals, had been giving the drug away for this purpose for more than 20 years to about 200 patients per year, but had not conducted clinical trials, sought FDA approval, or done any of the other work required to get a drug on the market. It was apparently content to make and give away the drug to a small number of patients without compensation. However, the demand for the drug was much higher than 200 patients to whom Jacobus supplied it. Further, Jacobus' facilities failed repeated FDA inspections and it was unclear if it would ever be adequate to produce the drug in a manner approved by the FDA in sufficient quantities to meet demand. Catalyst sought to meet his consumer demand and to take advantage of the failures of Jacobus. Catalyst invested in the clinical trials and in developing manufacturing facilities that conform with FDA requirements. After Catalyst started its clinical trials, the small family business suddenly launched a small phase II clinical trial of its own---but many see that as an act of retaliation against Catalyst. Catalyst surely is seizing on a business opportunity, but opportunity arose because the smaller company, Jacobus, did not invest the funds necessary to bring this drug to market, get it approved by the FDA and meet consumer demand. Catalyst can be seen as doing a public service insofar as it has financed necessary clinical trials and sought FDA approval. Thus, it is not accurate to say that Catalyst did nothing to develop the drug or is engaging in free-riding. Here is a link to an article the explains this situation in a credible manner. http://www.lavoiegroup.com/news-and-events/bid/349029/Catalyst-Pharma-Fights-Greed-Charges-Over-Orph an-Drug
[ link to this | view in thread ]
John Fenderson (profile), 10 Oct 2014 @ 12:52pm

Re:
Thank you, that brings needed clarity to the situation.

Still, it's hard to see how this can be called a "public service", considering that the costs of the drug to the patient are now prohibitive, and there will be no other way to get it for the next seven years.
[ link to this | view in thread ]
Anonymous Coward, 10 Oct 2014 @ 1:40pm

Re:
Try the local SWAT team.
[ link to this | view in thread ]
art guerrilla (profile), 10 Oct 2014 @ 1:51pm

Re: Re: Re: Re: Re:
just to remind kampers:
Big Pharma spends A TON MORE on marketing than they do on R&D, FAR MORE...
AND they 'hide' a LOT of marketing bullshit under R&D: whether the pill is pink or blue has NOTHING to do with the efficacy of the drug, and EVERYTHING to do with marketing, but they call that baby shit 'R&D'...
[ link to this | view in thread ]
John Fenderson (profile), 10 Oct 2014 @ 2:24pm

Re: Re: Re: Re: Re: Re:
I understand (and agree with) your point, but the pedant in me had to comment on this:

"whether the pill is pink or blue has NOTHING to do with the efficacy of the drug"

Numerous studies have shown that the color of the pill can have a rather large effect on its efficacy. Sleep aids, for example, are much more effective if they're blue rather than red (those particular colors were tested for this, which is why I mention them specifically).

This is clearly a placebo effect, and which colors help or hinder which types of medications are pretty much set culturally. Nonetheless, placebo effects are real effects.
[ link to this | view in thread ]
Mason Wheeler (profile), 10 Oct 2014 @ 5:16pm

Re: Re: Re: Re: Re: Re: Re:
That's fascinating. Can you cite any of those studies? It would be interesting to look at the research...
[ link to this | view in thread ]
Alex Elsayed, 10 Oct 2014 @ 9:30pm

Hmm, I wonder...
How much does it take for a _company_ to be toxic enough to make the list of Things I Won't Work With, alongside "Azidoazide Azides, More or Less" and "Sand Won't Save You This Time"

I mean, this whole scenario stinks like thioacetone.
[ link to this | view in thread ]
John Fenderson (profile), 11 Oct 2014 @ 9:34am

Re: Re: Re: Re: Re: Re: Re: Re:
Sure, here's one: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2359128/

If you search the web for "pill color placebo effect," you can find more.
[ link to this | view in thread ]
GEMont (profile), 12 Oct 2014 @ 12:21am

Answer: 3-7 years minimum, to insure maximized profits.
Simple math problem.

How many politicians does it take to close an obvious loop hole in law?

Divided by;

How many politicians can a drug company bribe per year with all of the free money its making from the loop hole?

---
[ link to this | view in thread ]
GEMont (profile), 19 Oct 2014 @ 6:06pm

Re: Re: Re: Re: Re: Re: Re:
Oddly enough, this is best seen in the clothing we put on children. Pink for Girls, Blue for Boys.

Studies in prisons showed that Pink painted cells led to lowered aggression in the occupants. Blue on the other hand, tends to create or enhance aggressive reactions.

We are indeed far more than just what we eat. :)

---
[ link to this | view in thread ]