Talking about drug prices #5. Double-billed: Why we’re paying high prices for drugs – and why we shouldn’t need to

Plos Blogs; October 21, 2015.By Manica Balasegaram, MSF Access to Medicines

Drug-Prices-Round-Robin-graphicLast month, Martin Shkreli, the CEO of Turing Pharmaceuticals, acquired Daraprim, a 60 year-old drug used to treat toxoplasmosis, and unapologetically raised the price 5,500% overnight. Shkreli caused such outrage that the wider public is once again talking about high drug prices.

There have been many instances of pharmaceutical companies charging developing and developed countries alike exorbitant prices on some drugs and vaccines for years. Cancer drugs are particularly prone to sky-high pricing; at often over US$100,000 per treatment in the United States, the anger over these prices prompted an open letter from a group of oncologists in the journal Blood two years ago.[i]  Oral drugs to treat hepatitis C are another example. Gilead Sciences produces sofosbuvir (which the company markets as Sovaldi), which can cure some forms of hepatitis C within 12 weeks. But in the US for example, Gilead charges $1,000 per pill, or $84,000 for a three-month treatment.

A key reason behind this is monopolies, whether created by patents or those that simply exist because there are no competitors. Patents confer a monopoly, with the understanding that firms will set a price that enables them to pay for their research and development (R&D) investments, and to invest such funds in new R&D.

Daraprim is 60 years old, but since there were no generic alternatives on the market in the US, Shkreli could charge whatever price he wanted. While the outrage has forced him to back down, public outrage is hardly a sustainable approach to ensure affordable prices.  Fundamentally, there’s not enough discussion on why medicines are so expensive to begin with, nor if our current system of awarding patents or monopolies really serves global public health needs. It’s worth addressing some key issues.

Monopolies, or high prices, produce the innovation we need: this is not quite true. We have unmet needs in important areas of global health. We do not have tools to deal with a range of different diseases, from Ebola to drug-resistant bacteria.

Monopolies, or high prices, justify the big investment in R&D: the public isn’t generally aware that the tax payer has already paid for some R&D costs thanks to the public funding of institutions. In certain disease areas like tuberculosis, public institutions like the NIH or philanthropic organisations like the Bill and Melinda Gates Foundation are the main funders. In effect, we’re being double-billed for many of our drugs.

R&D, taking into account attrition, is expensive: true, but by how much is another issue. The Tufts Center for the Study of Drug Development released a much ridiculed figure of $2.6 billion as the cost to bring a drug to market.[ii] Not-for-profit product development partnership Drugs for Neglected Diseases initiative has estimated that it’s more like $168 million[iii]. Moreover, only 16% of sales revenue from branded drug purchases goes back to R&D.[iv].

Finally, there is no transparency in the figures; even GlaxoSmithKline’s CEO Andrew Witty called the billion dollars needed to bring a drug to market ‘a myth’.[v]

Developers should be rewarded for life-saving drugs. But our current system is messy and open to abuse. It does not distinguish well between true innovation and incremental improvements. Incentives are lacking for diseases affecting poor populations.

So what can we do about this?

First, develop alternative incentives and models for R&D, especially where market failures exist. Plenty has been written on this.[vi] We need a model that does not put innovation and access into conflict. Médecins Sans Frontières is looking at piloting an innovative R&D financing method that would give us new drugs (in this case new regimens for tuberculosis, a relatively neglected disease) by pooling knowledge and intellectual property and paying for the R&D costs up front (through conventional grants, prizes and milestone payments).[vii]

Companies also need to proactively and systematically develop strong approaches to promote access. Realistic pricing, avoidance of ‘ever-greening’ strategies for patenting of medicines, fair and comprehensive voluntary licensing for developing countries, patent pooling and R&D investments in public health needs would be essential. Such approaches should be considered for all diseases.

Governments must take a clear line to promote needs-driven innovation and access through supporting alternative R&D models; negotiating pricing and implementing price controls or using international trade flexibilities. At a global level, innovation gaps and priorities need to be identified and funded, while countries should collectively promote price and R&D transparency.

Rage and public outcries are not a rational way to manage high drug prices. But fixing the root cause is. We need political courage and recognition that dithering is not the solution.

References:

[i] Kantarjian, H, et al. Price of drugs for chronic myeloid leukemia (CML), reflection of the unsustainable cancer drug prices: perspective of CML Experts. Blood. 2013, April 25. http://www.bloodjournal.org/content/early/2013/04/23/blood-2013-03-490003?sso-checked=true

[ii] Tufts Center for the Study of Drug Development. ‘Cost to Develop and Win Marketing Approval for a New Drug Is $2.6 Billion’. 2014, November 18. http://csdd.tufts.edu/news/complete_story/pr_tufts_csdd_2014_cost_study

[iii] DNDi. Research & Development for Diseases of the Poor: A 10-Year Analysis of Impact of the DNDi Model. http://www.dndi.org/media-centre/press-releases/1711-dndi-rd-model.html

[iv] IMS Institute for Healthcare Infomatics. The Global Use of Medicines: Outlook Through 2016 http://www.imshealth.com/deployedfiles/ims/Global/Content/Insights/IMS%20Institute%20for%20Healthcare%20Informatics/Global%20Use%20of%20Meds%202011/Medicines_Outlook_Through_2016_Report.pdf

[v] Hirschler, Ben. ‘GlaxoSmithKline boss says new drugs can be cheaper’. Reuters. 2013, March 14. http://www.reuters.com/article/2013/03/14/us-glaxosmithkline-prices-idUSBRE92D0RM20130314

[vi] See:

[vii] MSF Access Campaign. PUSH, PULL, POOL: Accelerating Innovation and Access to Medicines for Tuberculosis. http://www.msfaccess.org/3Ps-project

1405064936 (1)Dr Manica Balasegaram is the Executive Director of Médecins Sans Frontières Access Campaign, and is based in Geneva, Switzerland. Prior to his current post, Dr Balasegaram served as the Head of the Leishmaniasis Clinical Program for Drugs for Neglected Diseases initiative (DNDi). Dr Balasegaram has also worked in MSF medical projects in Uganda, Sudan, Republic of Congo, Ethiopia, India and Bangladesh he is a medical doctor who trained at the University of Nottingham in the United Kingdom and received further post graduate training in internal and emergency medicine in the UK and Australia. On Twitter @MBalasegaram

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