A Cancer Drug's Big Price Rise Is Cause for Concern

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Wednesday, March 15, 2006 11:20 AM

HEALTH:: A Cancer Drug's Big Price Rise

Is Cause for Concern

 

 

March 12, 2006

A Cancer Drug's Big Price Rise Is Cause for Concern

By ALEX BERENSON

 

On Feb. 3, Joyce Elkins filled a prescription for a two-week supply of

nitrogen mustard, a decades-old cancer drug used to treat a rare form

of lymphoma. The cost was $77.50.

 

On Feb. 17, Ms. Elkins, a 64-year-old retiree who lives in Georgetown,

Tex., returned to her pharmacy for a refill. This time, following a

huge increase in the wholesale price of the drug, the cost was $548.01.

 

Ms. Elkins's insurance does not cover nitrogen mustard, which she must

take for at least the next six months at a cost that will now total

nearly $7,000. She and her husband, who works for the Texas Department

of Transportation, are paying for the medicine by spending less on

utilities and food, she said.

 

The medicine, also known as Mustargen, was developed more than 60

years ago and is among the oldest chemotherapy drugs. For decades, it

has been blended into an ointment by pharmacists and used as a topical

treatment for a cancer called cutaneous T-cell lymphoma, a form of

cancer that mainly affects the skin.

 

Last August, Merck, which makes Mustargen, sold the rights to

manufacture and market it and Cosmegen, another cancer drug, to

Ovation Pharmaceuticals, a six-year-old company in Deerfield, Ill.,

that buys slow-selling medicines from big pharmaceutical companies.

 

The two drugs are used by fewer than 5,000 patients a year and had

combined sales of about $1 million in 2004.

 

Now Ovation has raised the wholesale price of Mustargen roughly

tenfold and that of Cosmegen even more, according to several

pharmacists and patients.

 

Sean Nolan, vice president of commercial development for Ovation, said

that the price increases were needed to invest in manufacturing

facilities for the drugs. He said the company was petitioning insurers

to obtain coverage for patients.

 

The increase has stunned doctors, who say it starkly illustrates two

trends in the pharmaceutical industry: the soaring price of cancer

medicines and the tendency for those prices to have little relation to

the cost of developing or making the drugs.

 

Genentech, for example, has indicated it will effectively double the

price of its colon cancer drug Avastin, to about $100,000, when

Avastin's use is expanded to breast and lung cancer patients. As with

Avastin, nothing about nitrogen mustard is changing but the price.

 

The increases have caused doctors to question Ovation's motive — and

left lymphoma patients wondering how they will afford Mustargen, which

is sometimes not covered by insurance, because the drug's label does

not indicate that it can be used as an ointment. When given

intravenously to treat Hodgkin's disease, its other primary use, the

drug is generally covered by insurance.

 

" Nitrogen mustard has been around forever, " said Dr. Len Lichtenfeld,

the deputy chief medical officer of the American Cancer Society.

" There's nothing that I am aware of in the treatment environment that

would explain an increase in the cost of the drug. "

 

Dr. David H. Johnson, a Vanderbilt University oncologist who is a

former president of the American Society of Clinical Oncology, said he

had contacted Ovation to ask its reasons for raising Mustargen's price.

 

" I'd like to have some evidence from them that it actually costs them

X amount, so that the pricing makes sense, " Dr. Johnson said.

 

" It's unfortunate that a price adjustment had to occur, " Mr. Nolan

said. " Investment had not been made in these products for years. "

 

Ovation, a privately held company, also needs the money to conduct

research on several new drugs for rare diseases, Mr. Nolan said.

 

He acknowledged that Merck still made Mustargen and Cosmegen, an

antibiotic that is used to treat a rare childhood kidney cancer, for

Ovation. He said he was not sure when Ovation would begin producing

the drugs, and a Merck spokesman said that Merck would continue to

provide the drugs to Ovation as long as necessary.

 

But people who analyze drug pricing say they see the Mustargen

situation as emblematic of an industry trend of basing drug prices on

something other than the underlying costs. After years of defending

high prices as necessary to cover the cost of research or production,

industry executives increasingly point to the intrinsic value of their

medicines as justification for prices.

 

Last year, in his book " A Call to Action, " Henry A. McKinnell, the

chairman of Pfizer, the world's largest drug company, wrote that drug

prices were not driven by research spending or production costs.

 

" A number of factors go into the mix " of pricing, he wrote. " Those

factors consider cost of business, competition, patent status,

anticipated volume, and, most important, our estimation of the income

generated by sales of the product. "

 

In some drug categories, such as cholesterol-lowering treatments, many

drugs compete, keeping prices relatively low. But when a medicine does

not have a good substitute, its maker can charge almost any price. In

2003, Abbott Laboratories raised the price of Norvir, an AIDS drug

introduced in 1996, from $54 to $265 a month. AIDS groups protested,

but Abbott refused to rescind the increase.

 

And once a company sets a price, government agencies, private insurers

and patients have little choice but to pay it. The Food & Drug

Administration does not regulate prices, and Medicare is banned from

considering price in deciding whether to cover treatments.

 

While private insurers can negotiate prices, they have limited leeway

to exclude drugs from coverage based on price, said C. Lee Blansett, a

partner at DaVinci Healthcare Partners, which works with drug makers

on pricing and marketing.

 

" Price is simply not included in whether or not to cover a drug, " Mr.

Blansett said.

 

The result has been soaring prices for some drug classes, notably

cancer treatments. In 1992, Bristol-Myers Squibb faced protests for

its plans to charge $4,000 a year for Taxol, a breast cancer treatment.

 

Now, most new cancer treatments are priced at $25,000 to $50,000

annually. In some cases, companies are pushing through substantial

price increases on already-expensive drugs.

 

Last year, Genentech raised the price of Tarceva, a lung-cancer drug,

by about 30 percent, to $32,000 for a year's treatment.

 

In an interview last month, Dr. Susan Desmond-Hellmann, the president

of product development for Genentech, said that the company had raised

Tarceva's price because the drug works better than Genentech had

anticipated.

 

" Tarceva was a more powerful and more active agent than what we

understood at the time of launch, and so more valuable, " she said. In

an environment of soaring cancer drug costs, Mustargen's previous

price was a comparative bargain, giving Ovation the opportunity to

raise it substantially, said Dr. Richard Hoppe, a professor of

radiation oncology at Stanford University and an expert in treating

cutaneous lymphoma.

 

Mustargen's patent protection expired many years ago, so any company

can make it. But because its sales are tiny, no drug maker has

invested in a generic version.

 

" There's only one company that makes the drug, and they can decide

what it's worth, " Dr. Hoppe said.

 

Nitrogen mustard was initially tested as a chemical weapon. Its

properties as an anti-cancer agent were discovered more than 60 years

ago; today, it has been superseded by newer, less toxic medicines, and

it is a niche product, with sales of only $546,000 in 2004, according

to IMS Health, a market research firm.

 

Still, Dr. Hoppe and other oncologists call nitrogen mustard an

effective treatment for cutaneous lymphoma, which initially appears as

a rash but can turn deadly if it spreads inside the body. Some

patients need only tiny amounts of the ointment, but others must apply

it every day across large areas of their bodies.

 

For instance, Ms. Elkins has a severe case of lymphoma and must cover

much of her body with Mustargen each day, a process that requires her

to refill her prescription every two weeks. She said that the ointment

was working, so she and her husband would find a way to pay for it.

 

Mr. Nolan of Ovation said that his company intended to work to improve

access to insurance coverage for Mustargen. But Ovation has just begun

to petition insurers to cover the drug. Meanwhile, patients are paying

Mustargen's new, higher price out of pocket.

 

This is not the first time that Ovation has sharply raised the price

of a drug it owns. In 2003, the company bought Panhematin, a treatment

for a rare enzymatic disease called porphyria, from Abbott

Laboratories. While Abbott still produces Panhematin, Ovation raised

Panhematin's price, which had been $230 a dose, to $1,900, according

to Desiree Lyon, executive director of the American Porphyria Foundation.

 

" It was a major increase, " Ms. Lyon said. But she said that Ovation

had worked to improve insurance coverage for Panhematin and to find

ways for patients to get the drug even if they could not afford it.

 

Ovation also financially supports the porphyria foundation in its

efforts to increase awareness of the disease and of Panhematin as a

treatment, she said.

 

But many patients who rely on expensive drugs are stuck in a bind. Don

Schare of Saratoga, Calif., said he paid $1,260 last month for 200

grams of nitrogen mustard cream, about 10 times what he paid for his

prior prescription.

 

Mr. Schare, 69, said he was covered by the new Medicare Part D drug

program and by supplemental insurance from AARP, but that neither of

his plans covered Mustargen.

 

Jeffrey Malavasic, 58, a retired railroad worker in Florence, Ore.,

said he had decided to fill only half of his Mustargen prescription

when he learned of the price increase. He used the drug sparingly in

the past and will be even more frugal, he said.

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