Prescription Drug Prices
Should the government regulate prescription drug prices?
By Julie Rovner

The U.S. pharmaceutical industry is among the most profitable sectors of the nation's otherwise lagging economy. It's also one of the few bright spots on the international trade scene. But an increasing number of consumer advocates, as well as some lawmakers, say that many prescription drugs are becoming so costly they are beyond the reach of those they could help. Condemning pharmaceutical companies. . . .

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Are drug companies charging too much?

Ron Pollack Executive Families USA Foundation From Senior Watch, July 1992.. Americans like to think of themselves as wise consumers. We shop and compare, clip and save and buy on sale. Yet we're paying a whole lot more for the same old medications.	From Good Medicine March 1992.. In recent years, the rising cost of health care has become a national issue. The price of prescription drugs is also being questioned. While we now have more medicines to treat more diseases, they cost more than in the past. It is important to understand, however, the underlying factors that affect the price of drugs.

Does the Orphan Drug Act Need Fixing?

Congress sought to help a unique group of disease sufferers when it passed the 1983 Orphan Drug Act. These were people who, because of their rare disorders, had fallen through the cracks of the profit- motivated U.S. pharmaceutical business. The law was designed to stimulate the development of medications to treat uncommon disorders -- generally defined as those afflicting fewer than 200,000 people -- by providing incentives for the drugmakers.

Since the law's passage nine years ago, 60 new drugs to treat rare disorders have been approved, compared with only 10 in the decade before. The bad news is that some of those drugs are prohibitively expensive. Ceredase, for instance, the Genzyme Corp.'s breakthrough treatment for Gaucher's disease approved in 1991, costs an average of $350,000 per year, making it the most expensive drug in medical history.# And EPO, an anti-anemia treatment for patients undergoing kidney dialysis, costs about $8,000 annually and earns more than $350 million a year for its manufacturer, Amgen Inc.

Needless to say, creating unaffordable drugs -- and windfall profits -- hadn't been lawmakers' intent. The idea was simply to stimulate the development of drugs for a patient base so small that sales would almost certainly never recoup the costs of development. The law's incentives included tax credits and, crucially, seven years of “market exclusivity” for drugs that were otherwise not patentable.##

One reason for the high profits and prices has been the Food and Drug Administration (FDA) policy of granting “orphan” status to drugs long before the drugs themselves are approved. As a result, by the time approval is granted the patient base may exceed 200,000. Thus, several important drugs for AIDS -- whose patient base has grown exponentially -- are still considered orphan drugs. This includes aerosol pentamidine, used to treat AIDS-related pneumonia, which earned $131 million in 1991 for Fujisawa USA.

The flexibility of the Orphan Drug Act compounds the situation. While orphan drugs are usually developed for a specific disease, once approval has been granted they can be used to treat other ailments, broadening the sales potential. Human growth hormone (HGH), for example, was approved to treat a rare form of dwarfism. Now, however, doctors prescribe HGH for a variety of conditions, including obesity, aging and even to encourage the growth of children with dysfunctional pituitary glands.

Some observers think the law needs to be changed. “Billion-dollar drugs neither need nor deserve the special monopoly protections of the Orphan Drug Act,” said Abbey Meyers, executive director of the National Organization for Rare Disorders, in New Fairfield, Conn..

She gets no argument from Rep. Henry A. Waxman, D-Calif., chairman of the House Energy and Commerce Subcommittee on Health and the Environment and one of the law's authors: “Drugs that are profitable are not orphans. Sponsors are very interested in claiming heritage.”

But Robert K. Dresing, president and chief executive officer of the Cystic Fibrosis Foundation, is among those who want the law untouched. “Orphan drug development has worked beautifully since 1984,” he said. “Drug companies finally are willing to take a risk on people with orphan diseases. Tinkering with [the law] now will destroy the integrity of the program, and promising research efforts to save lives will be abandoned.”

And, adds Gerald J. Mossinghoff, president of the Pharmaceutical Manufacturers Association (PMA), a proposal to eliminate the problem by capping sales “in fact could become a cap on research.”

Congress has already tried to address the matter. In 1990, it passed a bill that would have paved the way for price competition by allowing two or more companies to share the exclusive marketing rights if they were developing the same orphan drug at approximately the same time. The law also would have terminated market exclusivity if a drug affected more than 200,000 people.

President Bush, however, vetoed the measure, echoing the PMA's concern that it would “certainly discourage development of desperately needed new orphan drugs.”* # National Organization for Rare Disorders, New Fairfield, Conn. ## See 1982 CQ Almanac, Congressional Quarterly, p. 490. * See 1990 CQ Almanac, Congressional Quarterly, p. 577.