PHARMA: Big pharma gets aggressive over pricing

Two of my favorite contributors both have found me interesting stories about pharma company tactics today.  Jane Sarasohn Kahn sent me an article about the ongoing US-Australia talks on drug pricing.  Recall that the Aussies joined us in invading Iraq because they were promised in a nudge-nudge wink-wink way a free trade deal which would allow their agricultural products into the US market. However, fresh from victory in the Medicare drug coverage arena, the US pharmas a going after price "discounting" by governments abroad.  (For background info look at this latest edition of the Pfizer sponsored Health Politics which basically trots out Mark Pauly’s not entirely untrue line that Canadian drugs aren’t any cheaper than US drugs overall when you factor in that fact that they don’t use so many generics and don’t allow access to the some of the newest and most expensive drugs). As part of the Australian negotiations things are getting a little heated. The Australian (which is the pretty unsuccessful result of Murdoch’s attempt to create a highbrow national paper there) wrote that

    US drug lobbyists were peddling misinformation about Australia’s medicine subsidy scheme to secure a better deal under a free trade agreement, federal Health Minister Tony Abbott warned a delegation from Washington yesterday.

    During a meeting with a powerful US congressional delegation yesterday morning, Mr Abbott also said the Australian Government would not change the "basic architecture" of the $5.8 billion-a-year Pharmaceutical Benefits Scheme to secure a trade deal. But he left open the prospect of other concessions to multinational drug companies, saying he would be happy to talk with them about demands for greater transparency. After the talks with Acting Prime Minister John Anderson and eight influential Republican congressmen in Sydney yesterday, Mr Abbott accused drug lobbyists of waging a dishonest campaign against the scheme. "Misleading information is being peddled in Washington," he said in a statement. "The PBS is not a rationing system but a subsidy system. The PBS does not deny access to US drugs but treats them exactly the same as drugs made in Australia or elsewhere."

Now despite the party name (which harks back to the old European meaning of liberal not its American derviation) the Aussies have a very right wing government in power by all but US standards. (Randomly enough I’m a friend of Tony Abbot’s sister who’s political views are somewhat pinkish and despite the fact her brother is the rising star of the Aussie Liberal party and a likely future Prime Minister, she basically thinks he’s a right wing nut!) So if the Aussies feel that they can’t sacrifice their drug pricing system despite the huge carrot of free-trade in agriculture that the US is dangling, there’s no chance of the Europeans doing so.

Meanwhile, the Industry Veteran sends me this story about Abbot’s huge price increase in Novir, its protease inhibitor which is used as a component of many anti-viral HIV regimen. Basically Abbot has increased the price of a drug five-fold that is used in combination with its competitors anti-virals, but if you take Novir in a combo form with Abbot’s new protease inhibitor Kaletra, it’s now cheaper than taking it separately with the competitors’ drugs. The Seattle Times reports

    Abbott is pricing Norvir as though it is a "full component" in the drug cocktail, complained Shalit. "But it’s not being used for its activity against the virus — it’s used as a booster for the other drugs." While Abbott vigorously denies it, Shalit and others believe the Norvir price increase was aimed at Abbott’s competition. In essence, Shalit said, increasing Norvir’s price raises the cost of taking Abbott’s competitors’ drugs used in combination therapy. That could push patients toward Abbott’s newer drug, Kaletra, a combination drug with Norvir built in. With the Norvir price increase, Kaletra’s competition has become more expensive than Kaletra, approved by the Food and Drug Administration in 2000.

    In their letter to Abbott, the local doctors also expressed worry that the increased cost of Norvir would have a chilling effect on development of other drugs designed to work with its boosting power; at least one such drug is now being tested in Germany.

The Industry Veteran comments

    Here’s an ominous trend that I see as more pervasive than just the HIV area. Big Pharma will seek to extend patent protection and up-sell patients by exorbitantly raising the price of single-compound products, thereby coercing people onto fixed-dose combinations (one pill containing two or more compounds) that contain the unconscionably priced compound. Watch for this trend in (y)our favorite category: the statins.

In any event both these stories prove that big pharma, conscious of its potential problems with future drying pipelines, is going to fight hard to maintain its profits and protect its turf.  That’s to be expected and it is also part of their fiduciary duty which, lest we forget is not to Canadians, Australians or AIDS patients, but to their shareholders.  The question is will this type of behavior cross the line and cause sufficient resentment that politicians bring a backlash against them. That may yet happen in their incredibly unpopular opposition to Canadian imports.

Then again there is the other question that Jane posed in her post here a month or two back. She wrote

    Pharmas are looking to biotech for new formulations, but they’re also looking to smaller pharmas too for licensing deals. This will be important over the next few years. Obviously, biotech will be important in the longer term, but the juries are still out on so many very expensive drugs. We will be hitting the wall on who is going to pay for those expensive bio drugs, and I anticipate that will be a big area of contention. It’s not clear really who will be willing to pay for innovation.

Jane’s follow up goes to the heart of the "how much will who pay, and be able to pay?" question.

    In today’s news, I see that the small pharma Trimeris based in NC which produces the $20K/year drug, Fuzeon, for HIV/AIDS, is now laying off and looking like it could close shop…for a few weeks, literally, a few payers last year said they’d be willing to pay for such an expensive HIV drug. However, as I recently told one of my clients who is big in HIV, that’s one disease state where that high cost just won’t get rationalized….now an expensive prostate cancer drug used by rich old white (mostly) men, sure…but even $20K a year for that wouldn’t be chronically taken virtually ‘forever.’ Some discussions are afoot about whether we have "enough" innovation for now.

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