The Strange Case About Off Patent Drug Pricing

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rx-bottle-and-cashThere is a conflict at the heart of pharmaceutical pricing in the United States. On one hand, it’s in the public’s interest for pharmaceutical companies to get a good return on the huge investments they make in developing new drugs; on the other hand, it’s in the public’s interest of affordability.

The system tries to resolve this by granting companies temporary monopolies (aka patents) on the drugs they develop — letting them effectively set the price unilaterally — but then allowing competition from generic substitutes once the patents expire. Many people have strong opinions about whether we have struck the right balance, or should regulate drug prices as most other wealthy countries do — although regulating prices appears to depress spending on research to develop new drugs.

However here is an interesting and too-little-emphasized fact: Most of the recent high-profile controversies over drug pricing do not have much of anything to do with this conflict. For example:

Epinephrine, the substance delivered by the EpiPen allergic-reaction injectors that drugmaker Mylan has been selling for more than $300 a dose lately, is a human hormone (also known as adrenaline) that was first isolated by a Japanese chemist in 1900. You can buy a vial containing half as much of the substance as an EpiPen does for $4.49 from Ace Surgical Supply.

Pyrimethamine, the anti-infection drug that under the brand name Daraprim made Martin Shkreli infamous when his company, Turing Pharmaceuticals, increased the price from $13.50 to $750 a tablet a year ago, was developed in the 1950’s at Burroughs-Wellcome, which later became part of GlaxoSmithKline. It has been off patent for decades.

Many of the drugs subjected to the biggest price increases by Valeant, the once-high-flying serial acquirer that ran into trouble about the same time Turing did last year, were similarly developed many decades ago and unprotected by patents.

None of the products mentioned above were developed by the companies selling them now. Mylan does not make the EpiPen (Pfizer does); Mylan acquired the marketing rights nine years ago. Mylan is able to charge so much because the design of the injector is proprietary. Competitor Sanofi did get Food and Drug Administration approval for its Auvi-Q injector in 2012, but abandoned the product early this year because of dosage problems.

With the brand name Daraprim, the market for the drug is quite small, so no one ever bothered to develop a generic competitor. And one of the (many) issues at Valeant was that it effectively controlled a specialty pharmacy, Philidor, that altered doctors’ prescribed generic orders to substitute more expensive Valeant drugs.

A new breed of pharmaceutical company has emerged (Valeant is, or at least was, the archetype) that does not develop drugs but identifies business opportunities in existing drugs —many of them with expired patents — that the previous owners were too lazy, timid, or decent to fully exploit. So they acquire them and increase the prices. One should take the price increases cited above with a grain of salt, meaning that with rebates and other incentives, most insurers pay nowhere near list price. However, the new discount price is now higher and the general idea has been to extract more money out of old drugs than was previously being extracted.

Increasing the value of off-patent drugs presumably gives drug companies at least a little bit more financial incentive to develop new drugs. But sudden big price increases in off-patent drugs may seem like a violation of the long-standing contract between the pharmaceutical industry and society.

In the case of the EpiPen, perhaps competition, not price regulation, is the solution to the problem. It’s a product for which there is a large and growing market, and there are already multiple competitors being sold in Europe, where prices for both the generics and brand-name EpiPens are much lower than in the United States. Tear down this wall, FDA!

The situation is totally different, though, for Daraprim, which is essential for treating certain parasitic infections but is (1) only prescribed to about 2,000 Americans a year and (2) does not need to be taken for long periods. That is not a market opportunity to warm a generics manufacturer’s heart. In fact, it may be a natural monopoly.


Chronic Illness: You Are Your Own Best Friend

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untitledIt is clear that what patients with chronic illness do outside the doctor’s office – how much they exercise, what they eat and whether they take their medication – can affect their health conditions.

But managing one’s own disease has been considered primarily a “nice extra,” said Kate Lorig, director of the Stanford Patient Education Research Center. Now, Lorig said, health systems, employers and insurers are starting to recognize that it is critical to good health care. And they are starting to invest in self-management programs.

“People with long-term chronic conditions spend 99 percent of their time outside of the health care system,” said Lorig, a professor at the Stanford University School of Medicine. “What they do with that time determines their quality of life, their health and also their utilization of the health care system.”

A recent study found that diabetic patients who participated in a largely online self-management program designed at Stanford had lower blood sugar levels and took their medication more regularly. The study, authored by Lorig along with others and published in the Journal of Medical Internet Research, also showed that many participants exercised more and had fewer symptoms of depression.

Self-management programs have been around for a long time, and Stanford is considered a leader in developing them. Researchers are experimenting with online and telehealth versions. In-person workshops have been proven effective in numerous studies, but the virtual programs have been less amply studied.

In the new, peer-reviewed study, 1,010 patients nationwide completed the six-week disease management workshop online and another 232 attended workshops in Georgia, Indiana and Missouri. The results were measured over a six-month period, although nearly 30 percent did not complete the questionnaire.

Nationwide, about half of adults have at least one chronic condition, and 1 in 4 has multiple illnesses, according to the federal Centers for Disease Control & Prevention.

Diabetes is one of the most commonly diagnosed chronic diseases with about 22 million people afflicted across the nation.

Many chronic diseases could be prevented — up to 80 percent of strokes and cases of heart disease and type 2 diabetes, for example — by eating better, getting more exercise and reducing stress, according to the California Department of Public Health. And that, in turn, could reduce health care expenditures, research shows. In California alone, 42 percent of annual health care expenditures are for treating arthritis, asthma, cancer, cardiovascular disease, diabetes and depression, a 2015 study found.

The patients in the Stanford study were recruited through Anthem, Inc. Throughout the course of the program, called Better Choices, Better Health, patients discussed several topics, including how to take medicine correctly, deal with fatigue and pain and communicate with family and friends.

Dr. Laura Clapper, a medical director for Anthem Blue Cross, said self-management for any chronic disease — and diabetes in particular — is crucial for members. “It strengthens the patient as a health care consumer,” she said. “They are empowered to ask good questions.”

And that, she said, makes for cost-effective care. Clapper said members who are better informed are “better users of health care dollars.”

The self-management program, licensed by Los Angeles-based Canary Health, isn’t designed only to give patients information. Rather, it allows them to discuss what matters to them and to draw up individual plans to improve their health, said Canary Health’s CEO, Adam Kaufman.

“The consumer should be an equal if not a greater partner in their health journey,” Kaufman said. “We have under-invested in this primary question in the health care system: What matters to you?”

Canary Health also offers Stanford’s online self-management programs for other diseases, including arthritis, heart disease and depression. Previous studies have shown that patients who participated in self-management programs had fewer emergency room visits and hospitalizations.

Lorig said one of the keys to the success of the workshops is getting patients to believe they can make changes. “The secret sauce seems to be giving people the confidence they can do things,” she said.

Ruby Mims, 71, who has had high blood pressure for the past decade, participated in one of the online self-management workshops this summer. The retired IRS agent from Raleigh, N.C., learned about it through her insurer, the Government Employees Health Association.

Mims said her older sister died of a stroke last year and she is doing everything she can to stay healthy, including walking and cutting back on soda and sweets. She said talking to others with hypertension gave her new ideas for managing her illness and made her feel less alone.

“Being able to help each other … was very uplifting,” Mims said.

Hospice Care – Although Not Actually Dying?

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The service of hospice care is intended for patients who are terminally ill and expected to die.

But over the past decade [as a 2014 Washington Post investigation found] the number of patients who outlived hospice care in the United States has risen dramatically, in part because hospice companies earn more by recruiting patients who are not actually dying.

Now government inspectors have turned up information about how that happens.

About one in three hospice patients were not given key information about what the choice of hospice entails at the time they enrolled, according to a report released on September 15, 2016 by the Office of Inspector General of the Department of Health and Human Services.

In their investigation, government inspectors reviewed a random sample of the documentation that patients sign to indicate they want hospice care. In many cases, the patient was not informed that electing hospice meant that they intended to forgo a cure for their terminal illness — a critical distinction between hospice care and other health services. Hospices instead provide “palliative care”- that is,  care focused on the prevention and alleviation of suffering.

“When people elect hospice care they are forgoing curative care – and it’s important for them to know that,” Nancy Harrison, one of the investigators, said in a interview.

Moreover, in about 14 percent of cases reviewed, the physician who is supposed to approve the enrollment of a patient in hospice care paid only cursory attention to the matter. They provided scant information about the patient’s prognosis, and “appeared to have limited involvement  in determining that the [patient] was appropriate for hospice care,” according to the report.

The trend is “alarming” said Jodi Nudelman, who also worked on the report.

Medicare, the government insurer, pays for the vast majority of hospice care in the United States. In 2013, it paid $15.1 billion for hospice services covering 1.3 million people. The federal government in recent years has sought to recover more than $1 billion from hospices that, according to attorneys, illegally billed Medicare for patients who were not near death.


Patients who are not near death are more profitable because they typically require fewer services. Hospices are paid a flat daily rate for hospice patients.

The Office of Inspector General at HHS “has investigated and is investigating hundreds of hospice fraud schemes,” a spokesman said.

The report follows the 2014 series in The Post, “Business of Dying,” that examined how hospice care, which had begun as a service provided by nonprofit groups, had changed as businesses began to provide the service.

The series reported that at hundreds of United States hospices, more than one in three patients are dropping the service before dying, a sign of trouble in an industry who’s responsibility is to care for patients until death.

With that many patients leaving hospice care alive, experts said, the hospices are likely to be either driving them away with inadequate care or enrolling patients who aren’t really dying in order to pad their profits.

It is normal for a hospice to release a small portion of patients before death — about 15 percent has been typical, often because a patient’s health unexpectedly improves. But research showed that at some hospices, and particularly at new, for-profit companies, the rate of patients leaving hospice care alive is double that level or more.

The number of “hospice survivors” was especially high in two states: in Mississippi, where 41 percent of hospice patients were discharged alive, and Alabama, 35 percent. 

The new findings by the government inspectors are part of a larger body of work by the government that, in the inspectors words, reveals “numerous vulnerabilities” and raises serious questions “as to whether Medicare is paying appropriately for hospice.”