High Biotech Drug Prices = A Failed Industrial Policy

Insurance companies are charging many patients thousands of dollars a month in co-pays for very expensive drugs, the New York Times reported this morning. A quick glance of the list of drugs that the insurance industry funneled onto this so-called "Tier 4" co-pay list are recombinant proteins, products of the nation's biotech industry.

About half of the one dozen drugs highlighted in the graphic accompanying the article are made by Amgen and Genzyme, two of the nation's leading biotech companies. But rather than re-exploring the failures of these biotech industry giants, let's look at Copaxone for multiple sclerosis, which was the drug featured in the lead anecdote in the story and is made by Teva Pharmaceuticals, an Israeli company whose original claim to fame was as a maker of low-cost generics.

From the FDA Orange Book, we learn that the Food and Drug Administration approved this drug in 1996. From the nation's public registry of clinical trials, we learn that the primary approval trial for Copaxone (copolymer 1, a combination of four recombinant proteins) involved about 250 patients with relapsing MS, half of whom were randomized to placebo.

This trial, according to the government, was conducted at the University of Maryland on a National Institutes of Health grant with information provided by the Office of Rare Diseases at the Food and Drug Administration. In other words, taxpayers like you and me paid for the seminal research that brought this drug to market.

According to this website produced by a Brit with MS, we learn that Copaxone reduced the rate of relapses among patients taking the drug by about 29 percent. Subsequent trials, funded by Teva, showed that it was slightly superior or equal to the other drugs for the condition that are on the market (Betaseron by Bayer and Avonex by Biogen, both of which are recombinant forms of interferon). Most of these trials involved just a few hundred patients, and often did not have the statistical power to prove anything in these head-to-head comparisons.

Teva continues to fund research. Again, a quick glance at Clinicaltrials.gov suggests most of these trials compare Copaxone to other drugs for the condition. There are also a few companies seeking to get approval for their own brands of interferon to fight MS, undoubtedly attracted by the high prices set on Copaxone. The government is also still involved. The National Institute of Neurological Diseases and Stroke (NINDS) has financed Dr. Fred Lublin of Mt. Sinai Medical School to test 1,000 patients randomized to either Copaxone, Avonex or placebo. Unfortunately, that trial, which began in 2005, won't be completed until 2012, just two years before Copaxone goes off patent.

Now let's follow the money. A drug company brings a new drug to market based on government-funded research. It charges a huge price for the drug, but since its the insurance companies money, it's everyone's money, which means it's no one's money. So no one complains -- for a while. What does Teva do with the huge cash flow that comes from selling this very expensive drug to a small population of MS sufferers? It funds clinical trials to show it's drug is superior to other in the field, which it shows, sort of. But the trials are never really good enough to prove superiority, just good enough to establish market dominance, which was probably the real goal of the trials. So the government has to sort things out, but it gets back into the game very late and very slowly. The insurance industry, fed up with paying extraordinarily high prices, starts putting the financial onus on patients.

The only justification for the high prices slapped on this government-funded discovery is that it would generate research into new drugs and significant therapeutic insights. Consumers, who paid the tab through their insurance premiums, got neither for their investment. And the government, which could have used that money and much less of it to get started earlier in funding definitive trials, now must come with another huge infusion of cash (a 1,000-person trial will cost at least $10 million) to sort out the mess.

In 1991, when then Secretary of Health and Human Services Louis Sullivan was hauled before Congress to explain why it was paying so much money through the Medicare program for Amgen's Epogen, which is used in dialysis patients, he testified that it was to show Wall Street that this new exciting industry -- biotechnology -- would generate generous returns if it came up with innovative products. Isn't it time to call a halt to this failed industrial policy, especially when it comes to drugs brought to market with taxpayer support? Surely the patients like those now paying 25 percent of the cost these drugs in Tier 4 co-payments deserve better.

Posted by gooznews at April 14, 2008 08:03 AM