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a “sustained release” version of an existing drug which is already marketed under the name Cystagon by Mylan Pharmaceuticals. Cystagon needs to be taken every six hours, which means patients need to be awoken from their sleep each night to take a pill. A doctor hypothesized that coating the pills would lead to the drug being absorbed more efficiently. Raptor licensed this discovery, ran a 43-patient, six-week trial, and won approval from the FDA to sell a coated version of Cystagon as Procysbi. This new version only needs to be taken every 12 hours, so the dosing is much more convenient, and it has a few other benefits as well. What’s the premium that Raptor decided to charge for this? Cystagon costs about $8,000 per year, whereas Procysbi entered the market at a staggering cost of $250,000 per year. Yes, there are only about 3,000 people with this disease worldwide, so one could make all sorts of arguments about value propositions, limited markets, unmet needs, etc. However, if Mylan can make a reasonable profit on Cystagon selling it for $8,000 per year, Raptors’s outrageous pricing of Procysbi simply looks like gouging.
Over the past few years you’ve probably read countless articles about the “patent cliff”, where many blockbuster drugs were going off patent. As a result, industry profits were going to be crushed as branded medicines were replaced with generic counterparts. Predictions were dire. It’s true that generic medicines now make up about 80 percent of prescriptions in the U.S. However, I suggested several years ago that the “patent cliff” was a myth and would not dent industry income. You can now this judge for yourself: here are the actual numbers over the past five years (from IMS Health):
US Drug Sales
2008 – $291.5B
2009 – $300.3B
2010 – $307.4B
2011 – $320.7B
2012 – $325.7B
Note that these are sales figures, not profits. During this same time period, and despite the fact that industry revenues were going up, BioPharma collectively laid off hundreds of thousands of workers. These layoffs are still going on at many of the largest biopharma companies. By my calculation, fewer employees + greater revenues = higher profits.
Have things changed since Charles Dickens’ day?
The data would suggest price gouging is clearly not limited to the healthcare field. Politicians of a certain persuasion today are only too happy to champion the freedom of the wealthy to pocket as much money as they can. Here’s how Michael Lewis described the root cause of the recent financial crisis in his book Boomerang: Travels in the New Third World “It’s a problem of people taking what they can, just because they can, without regard to the larger social consequences… Alone in a dark room with a pile of money, Americans knew exactly what they wanted to do, from the top of the society to the bottom. They’d been conditioned to grab as much as they could without thinking about the long-term consequences.”
The larger issue gets to the heart of much of our current political debate. Don’t we have a responsibility to help each other out, or should we, like Scrooge, only concern ourselves with grabbing for the biggest piece of the pie that we can? The healthcare industry has an unlimited potential to develop new treatments and medicines based on a plethora of recent scientific advances. However, costs need to be brought under control for this vision to succeed, which means the excesses detailed above need to be called out, protested, and curtailed. After all, what’s the point of discovering new drugs and developing new treatments if a good percentage of our citizens can’t afford them? Ebenezer Scrooge is ultimately redeemed at the conclusion of A Christmas Carol and becomes a generous man. We can only hope that his modern day successors undergo a similar transformation and help reform a healthcare system that too easily exploits the ill, the disadvantaged, and the uninsured.
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