By Donald Zuhn --
Last week, Senator Amy Klobuchar (D-MN) (at right) convened a hearing of the Joint Economic Committee (JEC), a bicameral Congressional Committee composed of ten members from both the Senate and the House of Representatives, to examine rising pharmaceutical prices and the impact of such price increases on the pharmaceutical market and patient medical bills. During the hearing, entitled: "At What Cost?: Egregious Price Increases in the Pharmaceutical Drug Industry," the Committee heard statements from Senator Charles E. Schumer (D-NY), Chairman of the JEC, and Senator Klobuchar, as well as testimony from the parent of a young patient, the CEO of Minnesota Children's Hospital, and Madeline Carpinelli, a Research Fellow from the PRIME Institute at the University of Minnesota (which researches policy issues related to pharmaceutical economics). According to the JEC website, the hearing was convened for the purpose of exploring the causes of recent price increases for rare disease therapeutics and the negative impact on affected families' fiscal stability and access to care.
Senator Schumer (at left) opened the hearing by offering one example of what he believed was an egregious increase in price -- he noted that the drug Matulane, which is used for treating Hodgkins Lymphoma, cost less than $70 per dose in late 2004, and then just six months later, jumped to $5,568 (an 8000% increase). The JEC Chairman also noted that this astounding price increase was "not for a groundbreaking new drug [but rather was] for a drug that was put on the market in the 1960s." Concluding that the creation of a regulatory pathway for follow-on biologics was "an important development for American consumers," Senator Schumer stated that he believed the next Administration would make the establishment of such a system a priority, and asserted that "[g]enerics and market competition works."
Ms. Carpinelli provided some of the most interesting testimony. She noted that her analysis of drug prices between 1988 and 2008 showed "that certain drug products have experienced extraordinary price increases that are well beyond what would normally be expected in a competitive market" (see table entitled "Huge Drug Price Increases"), and further, that the number of branded drug products showing extraordinary price increases (i.e., a price change of more than 100% at a single point in time) had been rising sharply in recent years (see chart entitled "Extraordinary Price Increases are Becoming More Common"). Ms. Carpinelli explained that while brand name drug prices rose an average of 7.4% between 2006 and 2007 (as compared with a 2.9% rate of inflation over the same period), certain brand name drugs saw price increases that far exceeded the 7.4% average. She pointed out, for example, that the price of Ambien rose 27.7% in 2007. However, Ms. Carpinelli found that the increase in Ambien pricing paled in comparison with the 500% to 10,631% price increases observed for a handful of other branded drug products (interestingly, the 10,631% price increase was for a branded off-patent drug).
While noting that the "pharmaceutical market is extremely complex and vexing to most observers," Ms. Carpinelli suggested that extraordinary increases in drug pricing were likely the result of a drug company's "unique position in a market with respect to intellectual property, legal status, barriers to entry, [or] product features that offer a competitive advantage." She also informed the JEC that "[t]he number and magnitude of these extraordinary price increases also raises the possibility that antitrust issues may be present." Ms. Carpinelli, however, did not discount the possibility that the intellectual property and exclusivity status of these drug products may have facilitated the extraordinary price increases. For example, she noted that some of the large price increases were associated with old drugs for which a patent covering a new use or new dosage form had been issued, thereby providing a period of market exclusivity for the drug product.
In response to the JEC hearing, the Generic Pharmaceutical Association (GPhA), which represents manufacturers and distributors of finished generic pharmaceuticals and bulk active pharmaceutical chemicals, issued a press release stating that "the availability of a workable pathway that provides timely patient access to safe, affordable and life-saving biogeneric medicines would save consumers and the health care system billions of dollars." The GPhA noted that while generics represent 65% of the total prescriptions dispensed in the U.S., they only account for 20% of all dollars spent on prescription drugs. GPhA President and CEO Kathleen Jaeger asserted that "safe and affordable biogenerics would allow [patients] to improve their lives while reducing their health care costs." In support of her assertion, Ms. Jaeger cited a study commissioned by Insmed that estimates $67 billion to $108 billion in cost savings over 10 years, and $236 billion to $378 billion in cost savings over 20 years, for generic versions of the top twelve biologics covered by patents that have expired or will soon expire (see "Dr. Robert Shapiro Discusses Follow-on Biologics Report"). She also cited a Pharmaceutical Care Manufacturers Association (PCMA) study that estimated $14.9 billion in cost savings over a 10-year period for certain biopharmaceuticals in the top 200 Medicare Part B reimbursed categories, and an Express Scripts report estimating $71 billion in savings over 10 years for products in four therapeutic categories: interferons, erythropoietin, growth hormone, and insulin. Ms. Jaeger concluded that such cost savings could not be ignored, and necessitated the creation of a "workable approval pathway for biogenerics -- one without lengthy and overreaching market exclusivity provisions or patent extensions that simply result in an empty promise to patients."