Big pharma puts its control of patents ahead of its care of patients

Author: Joe Nocera

January 1 isn’t just a day for making New Year’s resolutions and watching American football. It’s also become the day when the pharmaceutical industry unveils price increases, more or less en masse.

The good news, as a number of pharma and biotech analysts have noted, is that the increases for 2018 are smaller than in the past. According to Deutsche Bank’s Gregg Gilbert, between 2013 and 2015 — that is, before Martin Shkreli jacked up the price of an AIDS drug from $13.50 to $750 a pill and made rising drug prices a national issue — the cost of drugs was rising more than 20% a year.

In recent years, however, most price hikes have been in the single digits; they averaged 7.2% in 2017, for instance. That’s a whole lot better than a 20% rise. Still, even these smaller price hikes mean that many patients are being gouged.

Take, for instance, AbbVie’s rheumatoid arthritis drug Humira. According to Forbes, it can cost up to $50,000 a year per patient. It is also the best-selling prescription drug in the world, with some $12.7bn in annual US sales. For 2018, AbbVie has raised the price of Humira by 9.7%. But as the Wells Fargo analyst David Maris pointed out in an e-mail to clients, not only does this latest price hike mean that Humira’s price has doubled in five years, it “also represents an added $1.2bn to the healthcare system”.

What makes it even worse is that Humira’s patent expired in 2014, meaning that generic competition should have entered the market and brought the price way down. Instead, as the patent expiration date approached, AbbVie began filing one new patent after another until it had surrounded Humira with a thicket of more than 100 patents, for everything from dosage tweaks to method of delivery.

Some of those patents extend to 2034. Limiting price increases to single digits may sound great, but it’s really patent gamesmanship, more than price hikes, that have caused spiraling drug prices.

Poster boy

Which brings me to the current poster boy for patent abuse, Allergan. In 2017 it made news with its outrageous attempt to protect its dry-eye medication Restasis from generic competition by transferring its patent rights to a sovereign Native American tribe. What made Allergan’s move especially offensive is that just a year earlier, the company’s CEO, Brent Saunders, had claimed to be personally angered by unwarranted price increases.

In a September 2016 blog post, he laid out what he described as the industry’s “social contract with patients”, which he said Allergan wanted to reclaim. Basically, in this social contract, patients understood that making new medicines required significant investment. At the same time companies, doing the hard, long and risky work of bringing new medicines to market, understood they had to price medicines in a way that made them accessible to patients while providing sufficient profit to encourage future investments.

Saunders then wrote, “Those who have taken aggressive or predatory price increases have violated this social contract!” He vowed that henceforth, Allergan would only raise prices once a year, and that the price increase would always be in the single digits.

Sure enough, on January 1, Allergan raised prices by single-digit percentages on virtually its entire portfolio, 75 drugs in all. “The majority of these price increases are 9.5%, falling just within Allergan’s self-imposed social contract limit,” wrote Maris, the Wells Fargo analyst. To take a closer look at some of these Allergan drugs is to understand why Saunders’s social contract isn’t worth the paper it’s written on.

I remain convinced that the way to gain control of drug costs is to stop letting pharma companies extend their monopolies past the original patent. That will help patients a lot more than single-digit price increases. Perhaps Saunders could include it in his next social contract.


Source: Business Day