Thursday, April 17, 2014

Summarizing the “Market Failure” Special Issue of the New England Journal

Three articles in this week’s New England Journal of Medicine all combine to illustrate “market failure” in the pharmaceutical industry. As you can guess, the editors of NEJM didn’t adopt my suggested title for their issue. (See the end if you want more explanation as to why I’m calling it that.)

First is the editorial by Drs. Hoofnagle and Sherker—
--that talks about what would ordinarily be considered unalloyed good news elsewhere in the issue. Hepatitis C, which up till now has been quite resistant to treatment, appears to be well controlled by a new family of antiviral medications, with a minimum of side effects. This indeed appears to be one of those all-too-rare-today “breakthroughs” in drug treatment.

So what’s not to like? As the editorialists explain, the price tag. A complete course of one of the drugs comes in at $84,000, which works out to $1000 per tablet. The authors note a collision course between newly expanded public health efforts to do a better job of detecting the additional 1.6 million Americans who have Hep C and don’t know it, so that they can get this wonderful new treatment, which then many of them will not be able to afford—or if we could provide it for them, would break the bank of what the authors delicately call an “already overburdened medical care system.” The authors work for the NIH and as dutiful government employees are apparently discouraged from saying anything bad about the pharmaceutical industry, so they offer no ideas on what might be done about this problem.

Now jump to two “Perspectives” pieces in the same issue. One is from our good friends at the Harvard-Brigham and Women’s program in Pharmacoepidemiology and Pharmacoeconomics, including Dr. Jerry Avorn:

The P&P gang describes what has happened under a program begun by the FDA in 2007, the Risk Evaluation and Mitigation Strategy. The idea when this passed Congress was to speed the entry onto the market of useful new medications that also posed safety issues. If the company could come up with a special plan to limit the use of the drug in such a way as to lower the risk of adverse reactions, then the drug could go on the market. But the proviso added on was that this plan ought not be used as a way to stop generic products from entering the market later.

Unfortunately the amendments that passed Congress also included a monkey wrench that was virtually guaranteed to undermine this intent (assuming that Congress intended what they said, and that Pharma lobbyists did not rewrite the law in the back room). The company that developed this special safety plan for the new drug could also patent the plan.

So Dr. Avorn and colleagues list several cases where the drug company has sued generic competitors claiming patent infringement if the generic guys use the same safety plan, and also filing suit to stop any generic that uses a different safety plan as raising the risk level for the public unacceptably. The only sensible way to fix this problem, say the Harvard guys, is to use the same safety plan for all versions of the drug regardless of manufacturer, but to make this happen Congress would probably have to amend the 2007 act. Bottom line—a policy that was intended to allow patients access to drugs while assuring safety, that was not supposed to interfere with generics entering the market, is being used by Pharma precisely as an “evergreening” tool to prevent generic competition.

Now we come to another Perspectives article authored by Drs. Sham Mailankody and Vinay Prasad:

They also address the cost of new drugs, in this instance for cancer. Their basic point is—there are newly developed drugs for cancer treatment that provide small but apparently real benefits, such as an average extension of life by a few months. These drugs work by mechanisms very similar to old, generic drugs. (They give the example of the new drug abiraterone, which works in much the same way as an old anti-fungal antibiotic, ketoconazole.) So the ideal scientific question now to be asked is how well these same cancer patients would do if instead of getting the very expensive new drug, they got the very cheap old drug, ketoconazole. They might do just as well, or it might be that the new drug has some advantage—until we did the study we wouldn’t know.

The kicker that Mailankody and Prasad now note is—how would this new study be paid for? No way that the drug company that’s making a mint off abiraterone is going to bankroll a study that might pull the rug out from under its golden goose. So suppose some neutral investigators try to organize the study? Well, assuming that for the very same reasons, the manufacturer won’t just give away abiraterone for free (especially knowing for what purpose it’s going to be used), the investigators would have to pay market price and buy the drug. And the authors calculate that for a study large enough to answer the question of non-inferiority of ketoconazole, the cost of the drug alone—forget the rest of the cost of the study—would be about $69 million. In other words, no study of this sort will ever be done.

These authors also work for the NIH, and so are also apparently leery of saying anything controversial, and so don’t offer any proposals for a solution to this problem.
OK, so we have three articles in the same issue of NEJM, all of which have the same basic theme—in the name of profits, the drug industry is working contrary to the public health and the advancement of science. This is what old-time economist Kenneth Arrow famously called the market failure of health care—it simply does not follow the laws of supply and demand. Those who continue to extol the supposedly “free” market as the right way to manage all of our affairs, pharmaceuticals and health included, have to stick their heads in the sand and pretend that market failure never happens. As this blog has shown extensively, it happens all the time.

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