What Will Be The End Result Of A Few Bad Actors?

By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL

"A few bad actors.” That is the phrase we’ve heard used by biopharma execs and industry trade association spokespeople in reference to older drugs receiving significant price increases. One of the latest such “outliers” making headlines is Mallinckrodt Pharmaceuticals. This past February, the city of Marietta, GA, filed a class action lawsuit accusing the drug company of “unjust enrichment” by keeping the price of Acthar (now marketed as Acthar Gel, repository corticotropin injection with multiple indications) artificially high. The drug, which once sold for $40 a vial, today exceeds $40,000. Marietta claims to have spent more than $2 million to cover just one patient.

Now, we’ve all heard the argument that if you want new and innovative therapeutics you need to be willing to incentivize biopharma R&D. This is why the U.S. has the patent exclusivity period it does and leads the world in developing new treatments for all sorts of diseases. However, Acthar is not some new revolutionary treatment; it was first approved for use by the FDA in 1952! At some point the product became owned by Aventis, which was sold to Questcor Pharmaceuticals in 2001. In other words, Questcor did almost zero R&D to bring Acthar to market, and yet, consistently raised the price, with perhaps the most appalling increases coming in 2007 (i.e., from $1,650/ vial to more than $23,000). Questcor argued that it needed the high price to keep the drug viable, as its principal market (i.e., infantile spasms) had fewer than 800 patients a year. And while a 2012 NY Times article, “Questcor Finds Profits, at $28,000 a Vial,” noted the manufacturing of Acthar being complex, it also specified, “it accounts for only about 1 cent of every dollar that Questcor charges for the drug.”

Questcor was acquired by Mallinckrodt for $5.6 billion (2014), and since, the company has raised the price by roughly $8,000 a vial. Mallinckrodt justifies these price increases by noting that it has invested more than half a billion dollars in the drug. Now you might be wondering, why would a company invest so much in a 68-year-old drug that already has 10 indications? Well, according to company reports, it is to “support efforts to ensure appropriate patient access and utilization.” In other words, it’s data to justify why a 68-year-old medication needs to be covered, because who in the hell could afford Acthar at these exorbitant prices otherwise? Spare me the free-drug program speech, for there isn’t anything that can be said to justify this 100,000 percent increase. Heck, the average price increase of a new automobile from 1952 to 2019 was only 2,059 percent, and for that there have been significant and noticeable product improvements.

Transparency in drug pricing is coming and it will be driven by a number of stakeholders, including the U.S. federal government. Initiatives are currently underway that will provide the feds with insight into how much it actually costs to manufacture some of these older products. Once that happens, the ability to price your drug however you want will be over, and like it or not, the casualties won’t be just a few bad actors in older medications.