Copyright 2000 The National Journal, Inc.
The National Journal
March 25, 2000
SECTION: HEALTH CARE; Pg. 948; Vol. 32, No. 13
LENGTH: 3817 words
HEADLINE:
The Price of Miracles
BYLINE: Marilyn Werber Serafini
HIGHLIGHT:
Can Congress Encourage The
Development Of Wonder Drugs Without
Making Pharmaceuticals so costly that
They're Out of Reach?
BODY:
Eight-year-old Colleen Cotter has been in and out of
hospitals since
she was 15 months old. She's had to endure toxic
chemotherapy and massive
doses of steroids. There have been times
when she was in too much pain to
get out of bed. "When we put her
to bed at night, she would wake up in the
exact same position,
because it hurt too much to move," her father, Patrick,
recalls.
"For three days in a row, she ate one kernel of popcorn. When
you're sore and crying all the time, the last thing you want to
do is
eat. She didn't walk. She didn't play. It was very tough."
Colleen, whose family lives in Madison, Wis., has
juvenile rheumatoid
arthritis, a debilitating disease that
attacks every organ of the body.
Until recently, the nation's 1
million rheumatoid arthritis sufferers had
two choices, neither
of which was very appealing. They could spend their
days in
extreme pain, maybe motionless, and eventually have joint-
replacement surgery on their hips, fingers, or elsewhere. Or they
could
submit to chemotherapy and steroids, knowing that they
would be likely to
throw up, suffer hair loss, experience
gastrointestinal troubles, and
eventually see their organs
damaged by toxins.
That was before Immunex Corp., a Seattle-based
biotechnology company,
began marketing a drug called Enbrel last
year. The morning after Colleen's
first injection, she got out of
bed as soon as she woke up, after having
spent the previous day
bedridden. "It was much more than I ever expected,"
said Patrick.
"She got a lot better right away, but even now she continues
to
get better in small increments."
Today,
Colleen can walk a mile. She gets up and goes to
school every day with other
8-year-olds in Madison, and her
parents feel confident that she will lead a
relatively normal,
productive life.
Of course,
Enbrel isn't the only drug working wonders.
Herceptin is shrinking tumors in
patients with advanced breast
cancer, Avonex is slowing the progression of
disability resulting
from multiple sclerosis, and Crixivan is slowing the
progression
of human immunodeficiency virus. And the future holds even more
promise. The National Institutes of Health is on the verge of
mapping
all of the genetic material in the human body, and many
drug developers are
in the final stages of testing potential
miracle drugs-maybe cures-for
devastating illnesses. Breakthrough
gene therapies are also on the horizon.
But there's a downside to the miracle drugs: their
cost.
Enbrel, which took 10 years to develop, costs $ 12,000 to $ 13,000
a year. That's not unusual for newer, breakthrough drugs. Some
cost as
much as $ 100,000 a year.
The Cotters were lucky.
They participated in a clinical
study that so far has footed the entire
bill. But if your
insurance doesn't cover Enbrel (about 10 percent of health
plans
don't), if you're one of the nation's 44 million uninsured, or if
you have Medicare, which doesn't cover outpatient prescription
drugs,
the bills can be prohibitive.
And for every
successful drug, there are dozens of others
that never make it outside the
laboratory and some, such as the
diabetes pill Rezulin, that end up getting
pulled off the market.
Their costs are spread around to drugs on the market,
driving up
their price. Indeed, the skyrocketing cost of pharmaceuticals is
a major reason health care inflation is on the rise.
Blue Cross Blue Shield health plans, for instance, are
preparing to
raise their prices by 10 to 15 percent when they
renegotiate contracts with
employers and individuals in 2000,
said Scott Serota, the acting president
of the Blue Cross and
Blue Shield Association. Serota attributed much of the
increase
to rising prescription drug costs. "It's 15 percent of the cost
of care, and it's approaching 25 percent," he said.
Congress attempted to balance cost and innovation in 1984
when it
approved the Drug Price Competition and Patent Term
Restoration Act, better
known as the Hatch-Waxman Act for its
authors, Sen. Orrin
G. Hatch, R-Utah, and Rep. Henry A. Waxman,
D-Calif. The law was intended to strike a balance between
promoting
innovation (by guaranteeing makers of brand-name drugs
a certain number of
patent years), and ensuring that consumers
have timely access to lower-cost
generic medicines (by
guaranteeing makers of generic drugs that those
brand-name
patents would eventually end).
But
that was 16 years ago, and times have changed. Now,
Hatch and
Waxman are examining whether the 1984 law should be
reopened. The
two legislators have been meeting separately with
representatives from the
brand-name and generic drug and
biotechnology industries, all of which have
reasons-frequently
competing-to reopen the law.
The biotechnology and brand-name drug companies are
seeking a
guarantee of enough patent years to make their
investments worthwhile.
Generic drugmakers, who complain that
their brand-name counterparts are
resorting to unfair tactics to
extend patents, want assurances that patents
will expire on
schedule. They also want license to produce generic versions
of
biotech drugs, called biologics-nearly impossible under current
law.
When Hatch and Waxman moved the
original bill through
Congress in the early 1980s, it took several years and
industry
consensus. But, in the end, Hatch said, Congress created a law
that "successfully balanced the interests of American consumers
in
obtaining both innovative and affordable medicines." This
time, however,
neither Hatch nor Waxman says he's sure how the
appropriate
balance can be achieved.
The challenges are many. If
drug manufacturers were able
to hold on to patents longer, they would make
more money, which
would presumably mean more money for research into
lifesaving and
life-enhancing drugs. But their holding on to patents longer
would result in fewer generic drugs, which means consumer costs
would go
up.
Watching intently will be millions of Americans
who rely
on pharmaceuticals. Thirty-seven-year-old Linda Wilson is one of
them. Because her arthritis is disabling, Wilson has Medicare.
She also
has supplemental insurance through a previous job, but
that coverage
excludes Enbrel. She says she would like to get
insurance that pays for
Enbrel, but she doubts she would qualify,
because of her condition.
She's been through a lot. She has had 35 surgeries
to
replace or fuse joints, and has tried anti-inflammatory drugs,
chemotherapy, gold injections, steroids, and other medications.
She
hasn't worked in five years, and she lives in an apartment
over her parents'
garage in Andover, Mass. "I had been on this
journey where nothing kicked
butt for me," she said.
Like the Cotters, Wilson
feels extremely grateful for
Enbrel. But she can't afford it on her own, so
her parents pay
the bill. "One day, I'm in the shower washing my hair, and I
felt
one finger touch the other finger behind my head. (Before
Enbrel),
it was nearly impossible for me to reach my arms up high
enough to touch the
back of my head. I know that sounds small.
(But Enbrel) was definitely the
first thing in my life that ever,
ever had the kind of impact that I wanted
to celebrate. I wrote a
letter to the CEO of the company." Wilson says she's
hoping that
Enbrel will help enough that she can eventually work part time.
The challenge that Congress faces in the patent
debate
in balancing cost and innovation is similar to one it faces in
other health policy issues, including whether to provide a
prescription
drug benefit for Medicare and whether to require
lower prices for retail
purchases of prescriptions.
Bio-Miracles
Although the biotech industry is applauded for tackling some of
the most
challenging diseases, it may be the most financially
endangered sector of
the pharmaceutical industry. Industry
leaders say biotech companies need to
be sufficiently compensated
for taking financial risks if they are to
continue as leaders in
the pharmaceutical revolution.
The biotech industry lost $ 5 billion last year, and
company
executives complain that because of the uncertainties of
the patent process,
attracting investors is difficult. "Having
intellectual-property protection
allows a company to make
investments in a product discovery, to bring it to
market, or
explore new uses for it," said Ed Fritzky, the chairman and CEO
of Immunex. "Without intellectual-property protection, there
would be no
incentive to do the research."
And the hope for
biologics is enormous. For example,
rheumatoid arthritis may be only the
beginning for Enbrel.
According to Fritzky, Immunex is studying the drug for
30 other
applications, including chronic heart failure. Another drug the
company is testing could cause cell deaths in tumor cells while
not
affecting normal cells.
"Without funding from
investors, we will not be able to
develop novel lifesaving and
life-enhancing therapies for
desperately ill patients," said Chuck Ludlam,
the vice president
of government relations at the Biotechnology Industry
Organization. The Washington-based association represents about
half of
the nation's 1,300 biotech firms. "Investors want to know
that if the
company can do the science, secure (Food and Drug
Administration) approval,
and (pitch) to managed care that they
have a full-term patent to protect
their invention."
Congress last year enacted the
Patent Reform Act, which
contains protections against patent-term erosion
due to delays at
the Patent and Trademark Office. But after a patent is
secured
there, the FDA must approve drugs for safety and effectiveness.
All the while, the patent clock is ticking toward the 20-year
mark, and
the longer the FDA takes, the shorter the patent
becomes. The average drug
patent is 11.2 years, compared with an
average of 18 years for products of
other industries.
Breakthrough products such as Enbrel and other biologics
often
get even less than the 11.2-year industry average.
The FDA has become quicker at processing applications,
but
Ludlam says that breakthrough drugs are at a disadvantage,
because they
often require more clinical trials to prove their
safety and efficacy.
Enbrel, for example, is a live protein that
is made with the ovary cells of
Chinese hamsters. Scientists take
the deoxyribonucleic acid sequence of the
pertinent molecule and
put it into the removed hamster cells, which then
produce the
drug. Enbrel works by mopping up excess tumor necrosis factor,
which plays a role in the buildup of inflammation in rheumatoid
arthritis and other inflammatory diseases.
"Because these diseases develop slowly, and complex and
lengthy
clinical studies are needed to prove safety and efficacy,
the development
and regulatory process can easily consume a good
portion of the patent term
for the underlying technology," said
Ludlam. According to the Pharmaceutical
Research and
Manufacturers Association, the Washington-based association
that
represents most big drugmakers, 40 new medicines were approved in
1999. The FDA approved the 35 new synthetic drugs in an average
of 12.6
months, and the five biologics were approved in an
average of 17.1 months.
Ludlam worries that patent terms may grow even
shorter
now that the new 20-year patent term set by the General Agreement
on Tariffs and Trade is in effect. Under the law, patent
applicants are
given incentives to rush applications through the
patent office. "If they
don't, they will end up with patents that
are much shorter than the old
guaranteed 17 years." Ludlam and
others in the Biotechnology Industry
Organization are pushing for
a guarantee of 17 patent years.
What's in a
Name?
The generic drug industry wants Congress to enable its companies
to compete with biotech companies by making it easier for them to
produce generic versions of biologics. Currently, virtually no
generic
drugmaker will attempt to develop its own version of a
biologic, because of
the time and cost of the FDA approval
process. For other types of drugs,
generic drug companies are
able to use an abbreviated approval process at
the FDA, because
the drugs have already been tested comprehensively. That
helps
the companies sell their drugs at lower prices.
But when Hatch-Waxman was enacted in 1984, biologics were
in their infancy, and no expedited approval process for them was
written
into the law. As a result, biotechnology companies have
enjoyed indefinite
monopolies on their drug sales.
Biotech
representatives say that they're not worried
about competition from generic
companies, because they don't
believe that those companies will be able to
reproduce biologics
easily-if at all. Generic industry representatives
counter that
their companies have the science, and that they're limited only
by a regulatory roadblock.
"Now, it would be
nearly impossible (to develop a generic
biologic), not because the science
isn't there, but because
there's no regulatory pathway to do it," said Jake
Hansen, the
vice president of government affairs for Pomona, N.Y.-based Barr
Laboratories, one of the largest generic drug companies in the
United
States. "I'm confident we could create a product that
meets the same
standards (that the biotech companies) meet."
Generic drugmakers also want assurances that brand-name
drug patents
will expire when they are supposed to, so that they
can step in with
cheaper, generic versions. Generic company
executives complain that
brand-name drugmakers have resorted to
unfair tactics to extend their
expiring patents.
For instance, Schering-Plough
Corp., the maker of
Claritin, the nation's top-selling allergy medicine, is
seeking
legislation that would allow it to extend its patent on the
grounds that FDA delays in approving the drug wasted several
potentially
lucrative years of Claritin's patent.
"We want to
make sure that when a drug is coming off of a
patent that there aren't a
number of ways that companies can
extend patents for a number of years,"
said Hansen. "There are
always companies that feel they have a product that
needs special
treatment."
Kathleen Jaeger, a
consultant to Barr Laboratories, says
that drug companies use different
methods to manipulate the
system. For example, she said, some companies try
to string out
the different patents that may apply to one drug.
The most egregious example, she said, involved a
drug
called Platinol, a cancer treatment produced by Bristol-Myers
Squibb Co. The drug needs to be kept in a brown container,
because it is
sensitive to light, and the company patented its
storage method to extend
the life of the patent. Generic
companies can challenge the validity of
patents, but they have to
go to court, and litigation can buy the patent
holder 48 months
during litigation, Jaeger said.
To buttress their industry's case, generic companies
point to studies
showing the savings in health care spending
resulting from the use of
generic drugs. Indeed, a July 1998
study by the Congressional Budget Office
found that generic drugs
have "played an important role in holding down
national spending
on prescription drugs from what it would otherwise have
been."
Generics saved roughly $ 8 billion to $ 10 billion in 1994,
according to the CBO. Many health plans insist on the use of
generic
drugs when they are available. Although generic drugs
account for only 10
percent of what people spend on
pharmaceuticals, they constitute 45 percent
of all written
prescriptions.
Brand Aid
Like the biotechnology
industry, the brand-name pharmaceutical
industry supports a guarantee of
more patent years than the 11.2
years it cites as the industry average
(although the PhRMA won't
say how many years it wants).
"Why in the world would 11.2 years be the right number of
years, when potato chips (and other products that require less
development) get about 18 years," said Judy Bello, the executive
vice
president of the association. "Patients should want strong
intellectual-property protection to get tangible effects," she
said.
But there's some question about whether big
drugmakers
have more to lose than to gain from opening the law. For one
thing, the image of big drugmakers has been suffering lately,
mostly
because both drug prices and drug company profits have
been rising. "People
recognize that the industry has big
technological developments, but they
also think it's an industry
that charges too much. There are conflicting
views there," said
Robert J. Blendon, professor of health policy and
political
analysis at the Harvard School of Public Health.
Drug industry officials counter that the percentage of
health
care dollars that Americans spend on pharmaceuticals is
low by international
standards. "Japan spends 20 percent of its
health care yen on
pharmaceuticals. We spend 8 percent. Only one
industrialized country spends
less than we do," said Alan Holmer,
the president of PhRMA. Added Bello:
"Drug spending is rising
significantly, but from a very, very low base. The
majority of
health care spending is still spent on hospitals and doctors."
Moreover, Holmer argued, spending on pharmaceuticals
reduces health care costs in other areas-an assertion that rings
true
with Patrick Cotter, the father of 8-year-old Colleen.
Because she doesn't
require as many hospital visits and regular
treatments, he says, her care is
actually cheaper now that she is
using Enbrel, despite its cost.
"She'll probably never be in a wheelchair, and
she'll be
a functional adult who can hold a job and not go onto Social
Security. She will not need a lot of hospitalization, joint
replacements, or any number of things that complicate the lives
of
persons with severe arthritis."
He even said that
Enbrel has made a difference in his
productivity as a stockbroker. "I work
on commission. Many more
hours of my workweek were occupied by things like
taking Colleen
to school, delivering her from school. It was cutting into my
income. Now I'm back at work, making a lot more money, and paying
a lot
more in taxes."
But nationally, statistics do not
suggest much in the way
of savings from increased drug utilization for the
general
population. For example, Blue Cross Blue Shield's Serota says his
health plan members haven't experienced any overall reductions in
hospital stays or physician visits to offset additional drug
expenditures.
Rebalancing Hatch-Waxman
In a process
that could take years to complete, both Hatch and
Waxman
are talking to industry representatives and consumer
groups about reopening
the 1984 act. Waxman said in an interview
that he would support reopening
the act only if it preserves the
balance of the original legislation. He
appeared to be
sympathetic to the generic drug industry's requests, saying
he
would support providing an expedited method for approving generic
biotech drugs.
Waxman was particularly critical
of political efforts to
extend brand-name drug patents, such as for
Claritin. "There's
always a desire by any business, particularly brand-name
companies, to see if they can get more. Drugs are going off-
patent, and
they would like to hold on to their monopoly power
for longer. It means
billions of dollars for a company," he said.
Several
members of Congress-Waxman, Rep. Fortney H.
"Pete" Stark, D-Calif., and
Marion Berry, D-Ark.-this month
applauded a March 16 decision by the Federal
Trade Commission to
charge two drugmakers with conspiring to keep a generic
version
of a popular heart medication off the market. The FTC accused
brand-name drugmaker Hoechst Marion Roussel (now Aventis
Pharmaceuticals), the maker of Cardizem CD, of paying Andrx Corp.
millions of dollars to delay bringing its competitive generic
product to
market.
The FTC also announced a proposed settlement
with two
other drugmakers, Abbott Laboratories (a brand-name drug- maker)
and Geneva Pharmaceuticals (a generic division of a brand-name
company),
to resolve charges that the companies had entered into
a similar
anticompetitive agreement, in which Abbott paid Geneva
to delay marketing
its generic version of Hytrin, a hypertension
and prostate drug.
Waxman said that he "can't see Congress making drugs
cost
more by giving a longer period of time of exclusivity to
manufacturers to charge whatever they want. If there's a Medicare
drug
benefit, it's hard to imagine we'll be able to hold down
some of those costs
if it artificially keeps generics from
competing."
Both Democrats and Republicans say that they're committed
to giving
seniors a prescription drug benefit under Medicare, but
the cost of doing so
has slowed them down.
Meanwhile, Vice President Al
Gore and Texas Gov. George
W. Bush have both made reference to the high cost
of drugs, and
both have talked about the cost benefits of generics.
Gore, in a campaign speech to senior citizens in
Cleveland on Feb. 25, criticized the large pharmaceutical
companies'
concentration of power in the marketplace. "We want to
give them the
exclusive right to sell some valuable new medicine
that they've spent the
money to discover and develop. That's part
of our American way," he said.
However, he added, "it's been
taken a little bit too far. They've used some
of their wealth to
block the approval or delay the approval of generic
versions of
the same medicine that can come in and compete with them after
their limited period of protection is over with. We need to take
steps
to facilitate the legitimate and healthy competition that
can bring prices
down."
Linda Wilson, who's been taking Enbrel for
more than a
year now, agrees. "Something needs to be done about the access
to
medicine," said the arthritis sufferer. "There are new biologics
out
there that can make an extreme difference in people's lives,
but people
can't get them, because of no insurance and the high
cost of drugs. There's
got to be a combined answer. There's got
to be a place where this becomes
(achievable). It's not right to
live in a world where we can't get to
something that can heal
you."
LOAD-DATE: March 29,
2000 
