Transcript Drug Prizing

Ethical Dilemmas
Concerning
Drug
Pricing
Andrea, Husain, James,
Muying & Shrinath
Introduction & Outline
 Pharmaceutical Corporation’s perspective: business model
 Consumer’s perspective & disease prevalence
 Comparison of global drug prices
 Government’s investment
 Case study 1: Daraprim
 Case study 2: EpiPen
High input in drug development
Table 1. Annual consumption estimation of drug development by
13 models
Study
Period
Primary data
source
Sample
Hansen and
Chien
Wiggins
1963 – 1975
Confidential
surveys
Published data
DiMasi
1970 - 1982
DiMasi
1970 - 1982
Sample of unspecified firmoriginated compounds
All types of new
pharmaceutical compounds
Sample of unspecified firmoriginated compounds
stratified by therapeutic category
DiMasi et al
1970 - 1982
1970 – 1985
Young and
1990 – 2000
Surrusco
Global Alliance ~2000
DiMasi et al
1983 – 1994
DiMasi et al
1983 – 1994
Adams and
Brantner
DiMasi and
Grabowski
Adams and
Brantner
Paul
1989 – 2002
1990 – 2003
1989 – 2001
1995 - 2010
Confidential
surveys
Confidential
surveys
Confidential
surveys
Published data
Confidential
surveys
Confidential
surveys
Confidential
surveys
Proprietary
databases
Confidential
surveys
Proprietary
databases
Confidential
surveys
stratified by unspecified firms
Cash estimate
(2009 $millions)
92
Capitalized
estimate (2009
$-millions)
162
113
218
193
391
69 - 140
98 - 229
202 - 238
388 - 581
All drug approvals by the US FDA 207
422
Unspecified TB treatment
-
139 - 291
Sample of unspecified firmoriginated compounds
stratified by category
499
993
312 - 448
464 - 609
Sample of unspecified drugs in
research databases
Sample of unspecified firmoriginated biotech compounds
Sample of unspecified drugs in
research databases
Sample of unspecified compounds
548
562 - 2623
614
1362
507
1535
884
1800
Morgan, Steve, et al. Health Policy (2011)
Business model in pharmaceutical industry
Input
R&D
Ad &
PR
LossFailure
of millions
Salary
Success
Profits
for decades
High input in Research & Development
Fig 1. Simulated effect of price controls on investment
in research and development
R&D spending without
price control
Estimated R&D
spending under price
control
Giaccotto, Carmelo, et al. Journal of Law and Economics (2005)
Statistics About The Major Diseases In USA
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Source: US Mortality Data, National Center for Health Statistics, Centers for Disease Control and Prevention, 2015.
Reasons For Expensive Healthcare in the U.S
1. Administrative Costs
Harvard Economist David Cutler
“About one quarter of healthcare cost is
associated with administration, which is
far higher than in any other country.
Duke University Hospital
-Contains only 900 beds
- 1,300 billing clerks
“Why it is costing $435.78 to process a $ 50 bill?”
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http://www.investopedia.com/articles/personal-finance/080615/6-reasons-healthcare-so-expensive-us.asp
Reasons For Expensive Healthcare in the U.S
2. Monopoly over drug prices
Martin Shkreli,
CEO of Turing Pharmaceuticals
Increased the price of Daraprim
by 5,556 %
i.e. from US $13.5 to $750 per tablet
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http://giphy.com/gifs/mic-news-martin-shkreli-daraprim-110MsGtQdiTNAY
Reasons For Expensive Healthcare in the U.S
3. Defensive Medicine
In 1994, the Congressional Office of
Technology Assessment gave definition:
“Defensive medicine occurs when doctors
order tests, procedures, or visits, or avoid
high-risk patients or procedures,
primarily (but not necessarily or solely) to
reduce their exposure to malpractice
liability”
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http://showmetheevidence.com/2014/09/defensive-medicine-wallet/
Reasons For Expensive Healthcare in the U.S
4. Technological expense
-U.S. medical practitioners tend to use
more expensive mix of treatments
-For example, the U.S. uses
•
3 times as many mammograms,
• 2.5 times the number of MRIs
•
31% more Caesarean sections
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http://www.investopedia.com/articles/personal-finance/080615/6-reasons-healthcare-so-expensive-us.asp
Government Investment
 NIH in 2006 - $25 billion
 Most goes towards general research
 Some directly funds pharmaceutical work
 General research indirectly contributes
 Some money goes to private companies
 Tax credits for R&D expenditures
 Controversy: If pharmaceuticals are so profitable, then
why should the government invest taxpayer dollars?
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Private Investment
 Pharmaceutical Research and Manufacturers of America
spent $40 billion out of their own pockets
 On average, 18% of budget goes to R&D
 Small firms -> 50%
 Larger firms -> 18%
 Average cost to take a drug from paper to the market:
$4 billion
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Benefits of Government Subsidy
 Niche drugs can be developed
 Private companies unwilling to spend billions
when only a few hundred thousand might be
recuperated
 Riskier projects can be pursued
 Private companies might be unwilling to risk
billions on an idea that might not work
 Government has significantly larger cash reserves
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Overall
 Niche populations benefit
 General population benefits
 Drugs that otherwise would not have been pursued
may be researched and produced
 Pharma benefits
 Less financial risk to R&D = more R&D
 Profits from drug discoveries
 Reinvested into research or taxed
 Government benefits
 Citizen well-being
 Taxes from Pharma’s profits
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Case Study 1: Daraprim Price Increase
 Treatment for toxoplasmosis
 Developed by Gertrude Elion in 1953
 Distributed by Turing Pharmaceuticals in the US
 Price $13.50 to $750
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Government Reaction
 President Obama would sign executive order
 Yet to happen
 Plans to form a Senate Special Committee
 Dem. Presidential candidate Hillary Clinton
 Vowed to do something about it
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https://twitter.com/HillaryClinton/status/645974772275408896?ref_src=twsrc%5Etfw
Turing Pharmaceuticals Response
 Increase necessary for drug development
 Will reduce price by up to 50%
 Only for hospitals
 Will reduce amount of tablets per bottle
 From 100 to 30 tablets
 Provide free startup packages for doctors
Doctors and Patients
 50% discount not enough
 No need to improve Daraprim
 No discounts for health insurance companies
 Patients would pay full price after leaving hospital
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/
Case Study 2: EpiPen Price Increase
 EpiPens are a medical devices for injections of epinephrine
into a muscle in response to a severe allergic reaction, called
anaphylaxis.
 Epinephrine is the recommended
medication by the World Health
Organization and all published
national guidelines
 Risks: Injection of the wrong
dose/injection into a vein
can be fatal
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http://www.forbes.com/sites/emilywillingham/2016/08/21/why-did-mylan-hike-epipen-prices-400-because-they-
EpiPens: The preferred medication, but at a cost
 From 2007-2016, 400% increase in price
 Limited competitors to
Mylan’s EpiPen
 Sanofi US recalled in
2015
 Teva pushed their
release back to 2017
19
http://www.businessinsider.com/the-history-of-the-epipen-and-epinephrine-2016-8/#when-mylan-acquired-the-epipen-the-drug-was-making-about-200million-a-year-now-it-makes-more-than-11-billion-a-year-mylan-has-about-90-of-the-market-share-for-epinephrine-devices-9
The Backlash
 The high cost of the EpiPen and the high salary of
Mylan’s CEO have come under public scrutiny.
 Mylan is not a company that traditionally invests
in R&D, so where are the profits going?
 In August, Mylan announced they would sell a
generic at $300; however that is still not available.
 Is $300 a reasonable price for $1 of epinephrine
in an auto-injecting device?
 This controversy has further fueled public distrust of
pharmaceutical companies.
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Conclusion
• Drug pricing is a complex issue with no straightforward
solution.
• Pharmaceutical companies must have incentive of
profitability for new drugs, but cannot increase prices
without reasonable cause.
• Government subsidy can help fund R&D in riskier, less
profitable rare disease.
• Patients need access to key medicines; however in the
US these are often at a much higher cost than other
developed countries.
• Patients must be able to afford life-saving medicines.
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“Medicine is for the people. It is not for the
profits. The profits follow, and if we remember
that, they never fail to appear.”
-George Merck
Founder of Merck
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Thanks
Andrea, Husain, James,
Muying & Shrinath
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