Abstract:

From popular media portrayals of Martin Shkreli as the “pharma bro” to the discussion of insulin during presidential debates, soaring drug prices have garnered national attention. In particular, prescription drug prices in the US have skyrocketed in recent years, denying access to proper treatment and care especially for the poor and uninsured. More and more, healthcare seems to resemble a privilege rather than a right as drug prices continue to increase.

The exorbitant cost of drugs in the US is primarily driven by poorly regulated drug markets, allowing pharmaceutical companies to institute and perpetuate monopolies. Most notable are the loopholes in drug patent legislation that have been taken advantage of by pharmaceutical companies. Through such exploitative practices, pharmaceutical companies have been able to generate anti-competitive effects, preventing other companies from entering the market. In turn, without substantial government regulation or competition from other companies, pharmaceutical companies have been given free reign over the prices of drugs that they have established a monopoly over. Patients, left without alternatives, are forced to comply.

This piece aims to capture the three main actors involved in this conversation: the individual patients, the pharmaceutical companies, and the legislation that aims to regulate pharmaceutical companies. It draws upon narrative medicine in order to relate the discussion of inanimate agents to their very human repercussions. It implements the usage of colors and visual components found in graphic novels to supplement the transition between the three main perspectives. It incorporates satirical elements found in popular culture and rhetoric used in the newspapers to highlight the farcical yet potent ways that pharmaceutical companies have tried to capitalize on loopholes within the law. In all, it hopes to contextualize and address how inadequacies within the law help perpetuate monopolistic practices of pharmaceutical companies, ultimately resulting in a human toll.

 

Insufficient Insulin

 

A thousand tiny needles prickle his parched throat. His tongue is sandpaper, and his dry lips are cluttered with cracks. He opens his eyes slowly, gradually adjusting to the darkness. The bedside clock reads 4:42 AM. He is dismayed; the sun had yet to rise, but the young man knew that his blood sugar level was already too high.

The young man stumbles out of bed and shuffles wearily into the kitchen, waves of nausea sweeping over him with every step. After a much-needed glass of water, he listlessly rummages through a kitchen drawer until his fingers graze over the familiar grooves of a blood glucose monitor and lancing device. The kitchen clock reads 5:01 AM; his morning routine had begun.

The young man tears open an alcohol wipe packet, the pungent odor nudging him awake. While he rubs his index finger with the wipe, he notices the black scars that litter it, the physical manifestations of regularity of his need to measure his blood glucose levels. He winces slightly as a speck of blood begins to pool from the puncture formed by the lancing device. A five year accumulation of blemishes but still unaccustomed to needles, he thinks bitterly to himself. Quickly, he stains the testing strip on the glucose monitor with a drop of blood. His heart sinks as the digits “298” appear on the display; his blood sugar level had to be under 140 mg/dL. He needed insulin fast.

The young man walks towards the refrigerator where his insulin is stored. Instead of relief, though, he is met with increasing dread; he knew that his supply of insulin was dwindling and that the remaining vials would last him only for a few more days. He opens the refrigerator door and is received by the empty clink of the meager collection of vials, reminding him of his bleak reality: a dissipating lifeline and an inability to sustain it.

---

The young man’s monthly prescription cost him $275. His $9.50 hourly wage as a cashier at a local convenience store was barely enough to sustain his food and rent, let alone a costly monthly insulin prescription. The Monday the week before had marked the end of the 29 days that his prescription was meant to cover; drastic rationing of insulin throughout the month had allowed him to last this long. The 8 units of insulin he should have taken after lunches became 5 units, and the 9 units after dinners became 7 units. Yet, in spite of this consistent rationing, he did not have enough money to cover a new prescription.

Of course, rationing came with inevitable consequences. The young man’s day was a murky slurry of headaches, blurry vision, and vomit– a desperate struggle for survival.

It had not always been like this. When the young man was first diagnosed, a monthly prescription had cost only $35. Though it was difficult, insulin was cheap enough for him to afford it. He was able freely administer the correct amount of insulin he needed; rationing insulin was an unfathomable fantasy. But, most of all, he was able to live, unfettered by the incapacitating repercussions of the almost-chronic hyperglycemia that plagues his current reality.

---

The young man gingerly removes one of the vials, and a mirthless laugh escapes him– the vial had barely a single unit of insulin left, falling hopelessly short of the six units he needed. He stares intensely at the vial, questioning if he should take it now and risk not having enough later in the day. The kitchen clock reads 6:17 am; he had spent an hour mulling over this dilemma. 

Yesterday, he was forced to ration the morning basal insulin he needed. Today, he is considering skipping it altogether.

 

Novel Namenda

 

The Onion Rice

November 2015 | theonionriceisnotreal.com | No 7852

Innovative drug heralds a breakthrough in Alzheimer treatment

Kihan Sung, Health Editor, Fakesitee

In a recent press release, Actavis unveiled their new Alzheimer’s medication, Namenda XRR, that is to replace their previous version, Namenda XR. According to Actavis, the innovations found in Namenda XRR were made possible only by extensive research and development financed by the $1.5 billion revenue generated from Namenda sales in 2014. ¹

Similar to Namenda XR, Namenda XRR helps improve memory, awareness, and concentration in the user; Actavis has touted Namenda XRR’s ability to reproduce these effects to identical degrees as Namenda XR. In particular, Actavis declared that the most exciting feature is Namenda XRR’s new dosage schedule. Rather than taking one whole pill a day like Namenda XR, only half a pill of Namenda XRR is needed to fulfill daily dosage requirements. When asked how this was an improvement, Actavis claimed that it was more convenient as it significantly decreased the number of times users had to take medication in a day. Though it is unclear how this conclusion was reached, given that taking half of a pill each day still constitutes a once-a-day pill, the editors of Onion Rice are diligently running the numbers to find out. 

The announcement of Namenda XRR comes after Actavis’s recent attempt at product hopping with Namenda XR and Namenda IR last year. Product hopping is the process by which pharmaceutical companies replace an old formulation of a drug that has a patent that has already expired or is about to expire with a new formulation of a drug with a new patent.² In turn, by the time that the market exclusivity granted by the patent of the old formulation expires and generics of the old formulation are able to enter the market, patients have already come to depend on the new formulation.³ Moreover, state substitution laws prevent pharmacists from replacing new formulations with generic versions for the old formulation if the new formulation differs in dosage, strength, or delivery compared to the old formulation.⁴ In effect, product hopping allows pharmaceutical companies to undermine competition generated by generic drugs, extending their monopoly by the duration of the patent of the new formulation.⁵

In particular, Actavis announced that it would discontinue its original Alzheimer’s medicine, Namenda IR and, instead, sell only its new formulation, Namenda XR, in 2014.⁶ Namenda IR differed from Namenda XR only in dosage schedule, with the newer version requiring only one pill a day, rather than two.⁷ Namenda XR was awarded a patent lasting until 2029 while Namenda IR’s patent was set to expire by 2015.⁸ By discontinuing Namenda IR, Actavis prevented state substitution laws from replacing Namenda XR with generics and forced Namenda IR users onto using Namenda XR, essentially extending Actavis’s monopoly by the 14 years granted by Namenda XR’s patent.

In 2015, the Second Circuit in New York v. Actavis ruled that Actavis’s replacement of Namenda IR with Namenda XR violated section two of the Sherman Act.⁹ Moreover, because Actavis’s Namenda XR offered little improvement to Namenda IR, the anti-competitive effects caused by the discontinuation of Namenda IR were judged to be unjustified.¹⁰ Had Namenda XR demonstrated substantial consumer benefit, Actavis would have been allowed to replace Namenda IR with Namenda XR, but since Actavis acted with the deliberate intention to eliminate generic alternatives, the court ruled against Actavis.

“Clearly, we weren’t ambitious enough in our last attempt,” said Actavis CEO Brenton Saunders during the press conference.  He believes that Namenda XRR’s new daily dosage schedule of half a pill will significantly better Namenda XR users’ quality of life. He cited that the stark contrast between Namenda XRR and Namenda XR is enough to warrant a new patent for Namenda XRR. Future improvements, such as changing the color of the pill, were hinted at as well.

Actavis has emphasized that this move has no correlation with its expiring patent on Namenda IR and is not a deliberate attempt towards extending its monopoly.

 

Lawless Loopholes

 

INTRODUCTION

Over the past decade, the prices of prescription drugs have skyrocketed; since January of 2010, the price of prescription drugs have increased by more than 136%.¹¹ Between 2014 and 2018, the price of Humira, the best selling drug in the US, increased from $1325.19 per dosage unit to $2446.91 per dosage unit for Medicare Part D.¹² Moreover, the average annual cost of orphan drugs, which are drugs with small patient populations of 200,000 people or less, increased from $7,136 in 1997 to $186,758 in 2017; out of the current top ten best selling drugs in the US, eight are designated as orphan drugs.¹³ As such, the exorbitant prices of prescription drugs have attracted much attention; in fact, it is one the few issues that garners bipartisan support. 

Though there are several factors contributing to these alarming increases, one of the most pronounced are loopholes within the current law that allow pharmaceutical companies to engage in monopolistic market practices. In particular, the Drug Price Competition and Patent Term Restoration Act of 1984, or Hatch-Waxman Act, and the Orphan Drug Act of 1983 are commonly taken advantage of by pharmaceutical companies in order to establish and maintain a monopoly. Part I will provide a description of the Hatch Waxman Act and how it has been exploited; Part II will similarly describe the Orphan Drug Act and its various implications on pharmaceutical drug monopolies.

PART I HATCH WAXMAN ACT AND ITS EXPLOITATION

This section will brief how the Hatch Waxman Act came into fruition and its role in rising drug prices. Part A will describe the content and the history of the Hatch Waxman Act, including its intended purpose. Part B will provide how the Hatch Waxman Act has been manipulated to produce anti-competitive effects, perpetuating monopolistic control over the market.

A. Hatch Waxman Act

Prior to the Hatch-Waxman Act, regulation of the drug market was primarily provided by the Food, Drug, and Cosmetics Act of 1938 and its 1962 Amendment; through these laws, pharmaceutical companies had to submit a New Drug Application (NDA) and, to demonstrate the safety and effectiveness of a drug, had to undergo a lengthy FDA approval process, discouraging companies from innovating new drugs as the testing period significantly decreased the duration of market exclusivity granted by a patent. ¹⁴

As such, the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch Waxman Act, sought to encourage investment in research and development of new drugs and promote generic drug competition for drugs already in the market, which would have helped lower prices for such drugs.¹⁵

In particular, to encourage generic drug entry into the marketplace, the Hatch Waxman Act created a shortcut to the drug approval process for generic drugs known as the Abbreviated New Drug Application (ANDA). Through ANDA, generic drugs were exempt from the extensive and expensive clinical trials associated with NDAs as long as they demonstrated that their drug was bioequivalent to the innovator drug, using the same active ingredients and producing similar effects.¹⁶ The Hatch Waxman Act also granted the first successfully-approved generic drug to 180 days of  market exclusivity, encouraging companies to be the first to successfully introduce generics into the market.¹⁷

Moreover, in order to incentivize the development of new drugs, the Hatch Waxman Act addressed the lengthy, costly approval process for NDAs; if the FDA approval process was deemed to decrease the effective life of a patent, a successfully-approved branded drug was awarded patent extensions equal to the amount of time used by the FDA during the approval process, granting market exclusivity between two to five years.¹⁸

Since its establishment, the Hatch Waxman has generally been considered to be successful in increasing the availability of generics and investment in research and development of new drugs.¹⁹ However, it has also been criticized as it offered loopholes that are now often exploited by both generic and branded pharmaceutical companies, ultimately hindering the reduction of drug prices by introduction of generics and preventing innovative research and development of new branded drugs. ²⁰

B. Exploitation of the Hatch Waxman Act

Authorized generics are brand name drugs that are marketed without the brand name on its label and are sold by the brand at generic drug prices; as such, though they are identical to the branded drug, they are sold as generics.²¹ Despite being similar to generics in terms of sale, they are still able to be marketed during the 180 day market exclusivity granted to the first successful generic by the Hatch Waxman Act as per the verdict given in Mylan Pharmaceuticals, Inc. v. U.S. Food and Drug Administration.²² Unlike generics, authorized generics are able to be marketed before the exclusivity period of the branded drug ends because they are protected by the branded drug’s NDA; authorized generics are able to market before generic competition enters. As such, authorized generics are capable of significantly decreasing the revenues of generic companies; in 2009, the average decrease in revenue was observed to be between 47% and 51%.²³ Thus, authorized generics implement loopholes in the 180-day market exclusivity provision of the Hatch Waxman Act in order to discourage competition by generics, ultimately delaying the reduction of drug prices caused by entry of generics. Out of the 1223 authorized generics in the US, there have been 12 added in 2020. ²⁴

Another way that pharmaceutical companies have exploited the Hatch Waxman Act is through patent thicketing. This is a process by which pharmaceutical companies artificially extend the length of their patent of a drug by applying for and acquiring new patents related to the drug, thus extending the protection cliff granted by the original patent.²⁵ New patents are obtained by making slight modifications to a drug, such as changes to a drug’s dosage schedule, or by filing the processes involved in producing and manufacturing a drug as a separate patent.²⁶ These new patents, even if they are of dubious quality, are subsequently added to the Orange Book– the Hatch-Waxman-established record of patents pertaining to a particular branded drug; in turn, generic drug production is discouraged as they must contest each of the patents listed in the Orange Book in order to be approved.²⁷ AbbVie’s Humira is a prime example of this. Though the original patent for Humira was set to expire by December 2016, AbbeVie was able to extend its market exclusivity by winning several patents for the unique manufacturing processes involved with manufacturing biosimilar drugs like Humira; as of 2019, AbbVie had 136 patents for Humira, barring generic competitors from entering the market until 2023.²⁸ The legality of patent thicketing was upheld by courts in In re Humira (Adalimumab) Antitrust Litigation, granting AbbVie the ability to maintain their monopoly with Humira.²⁹

Pay for delay schemes, or reverse payment settlements, are those that entail agreements between generic companies and branded companies to delay the introduction of cheaper generics into the market in exchange for monetary payments. Reverse payments are usually undertaken while generic drug companies are undergoing patent litigation against branded drug companies in order to gain approval of their generic drug; the framework of such litigation is provided by paragraph IV of the Hatch Waxman Act.³⁰ Thus, by settling these lawsuits through reverse payments, branded companies ultimately delay the entry of generics into the market. In 2010, on average, reverse payments delayed the introduction of generics into the market by approximately 17 months, costing Americans about $3.5 billion per year.³¹ In 2013, though, the Supreme Court ruled in FTC v. Actavis that “large and unjustified” cash payments between generic and branded companies violated antitrust laws.³² The verdict, however, came short of prohibiting reverse payments altogether. In particular, it failed to explicitly address and provide a framework for evaluating non cash-based reverse payment settlements, including no-authorized-generic agreements and co-promotion agreements.³³ As such, despite the court rulings, pharmaceutical companies are still able to and have continued to stifle generic competition through reverse payments.

PART II ORPHAN DRUG ACT AND ITS EXPLOITATION

This section will detail the establishment of the Orphan Drug Act and how it allows for pharmaceutical companies to extend their monopolies. Part A will outline its provisions and intended effects in the event of successful implementation. Part B will describe how pharmaceutical companies have taken advantage of the current short-comings of the Orphan Drug Act.

A. Orphan Drug Act

The Orphan Drug Act was enacted in 1983 in order to encourage pharmaceutical companies to develop drugs for rare diseases.³⁴ In the early 1980s, there were between 20 to 25 million patients afflicted by approximately 5000 rare diseases, but due to the small patient populations that characterized such diseases, research and development for drugs that treated rare diseases were not considered profitable.³⁵ As such, the Orphan Drug Act provided financial incentives for pharmaceutical companies to develop “orphan” drugs. Incentives included 7 years of market exclusivity for an approved orphan drug, tax credits up to 50% of research and development costs, and federal grants for clinical testing of orphan drugs.³⁶ In 1984, the Orphan Drug Act was amended to define rare diseases as those affecting less than 200,000 people in the US.³⁷

The Orphan Drug Act has largely been considered successful, granting 5,680 orphan drug designations of which 923 have been FDA approved since its inception in 1983.³⁸ However, in more recent years, the Orphan Drug Act has been hijacked by pharmaceutical companies looking to extend their monopolies, especially through the market exclusivity granted by orphan drug designations.³⁹

B. Exploitation of the Orphan Drug Act

Salami slicing refers to the practice in which pharmaceutical companies intentionally identify a smaller subset of a disease in order to gain orphan drug designation for a drug designed to treat a large population in actuality.⁴⁰ By deliberately listing only the particular uses of a drug that qualify for orphan drug designations rather than the broad population it actually treats in the NDA, pharmaceutical companies are able to reap the benefits of orphan drug designation while marketing to a large patient population.⁴¹ Pharmaceutical companies marketing cancer drugs commonly implement salami slicing; drugs are listed to treat specific organs or tissues rather than the mutated genome that it treats, significantly narrowing the patient population and thus allowing the drugs to meet the 200,000 patient requirement.⁴² This is exemplified by the rituximab, which gained orphan drug designation for its treatment of follicular B-cell non-Hodgkin’s lymphoma that affects about 14,000 people; rituximab is also used to treat several other diseases like rheumatoid arthritis, which affects about 1.3 million Americans.⁴³ In 2019, Rituxuan, a branded form of rituximab, generated $6.54 billion for Roche.⁴⁴ In turn, profitable drugs are able to additionally benefit from orphan drug designation, undermining the intention of the Orphan Drug Act of providing financial incentives for nonprofitable drugs. Moreover, because of the market exclusivity granted by the orphan drug designation, salami slicing prevents newer and more precise drugs created specifically to target the small subpopulation from entering the market.⁴⁵ Thus, the Orphan Drug Act inadvertently generates anti-competitive effects by encouraging pharmaceutical companies to pursue orphan drug designations through disingenuous means. 

The designation of buprenorphine, which is a drug that treats opioid addictions, as an orphan drug revealed another loophole in the Orphan Drug Act. Within the Orphan Drug Act, there is a provision that allows for orphan drug designations even if the patient population is greater than 200,000 as long as the drug manufacturer is able to demonstrate that its drug will not be profitable.⁴⁶ In turn, this provision allowed for Indivior to obtain orphan drug designation in 1994 for Subutex and Suboxone, its branded drugs of buprenorphine, despite the pervasiveness of opioid addiction.⁴⁷ Indivior profited immensely, earning a net revenue of $2.3 billion between 2003 and 2007. ⁴⁸The loophole was revealed when Indivior attempted to regain orphan drug designation for Sublocade in 2019.⁴⁹ In particular, the Orphan Drug Act allows for subsequent versions of an orphan drug that treats the same rare disease to regain orphan designation as long as it can prove that it is clinically superior than the first drug; it does not require such subsequent drugs to demonstrate unprofitability again when attempting to regain orphan drug designation.⁵⁰ As such, Sublocade was initially granted orphan drug designation by the FDA in 2019, gaining market exclusivity until 2024, despite Indivior’s large profit in previous years (A citizen’s petition led to the retraction of the orphan drug designation for buprenorphine, but the loophole still remains.).⁵¹ As such, buprenorphine exemplifies how pharmaceutical companies take advantage of loopholes within the Orphan Drug Act in order to extend their monopoly over drug markets.

CONCLUSION

Amending both the Hatch Waxman Act and the Orphan Drug Act to address their shortcomings remains critical, especially amid an ongoing pandemic in which an affordable vaccine and treatment are imperative. Already, pharmaceutical companies associated with COVID-19 treatments are manifesting their abuse of monopolies through drug prices, with drugs used in treating COVID-19 in hospitals, such as morphine, chlorpromazine, and vassocript, substantially increasing in prices.⁵² Most notably, Gilead’s remdesivir, the only FDA approved COVID-19 treatment as of now, and its price of $520 a vial, which is about 50 times the cost to manufacture, has led to attorney generals from 34 states and territories to accuse Gilead of abusing its monopoly.⁵³ In a similar light, in March 2020, Gilead obtained orphan drug designation for remdesivir as COVID-19 had yet to affect 200,000 people in the U.S; this would have granted Gilead a 7 year market exclusivity for remdesivir as well as the other benefits associated with orphan drug designation had it not been withdrawn by Gilead due to negative media coverage and public outrage.⁵⁴ Likewise, the abuse of monopolies by pharmaceutical companies is observed in the pricing for COVID-19 vaccines with Moderna’s attempt to price its vaccine between $50 and $60 in July 2020. ⁵⁵

The current laws regulating pharmaceutical conduct are inadequate in preventing monopolistic behavior. There are several loopholes regularly exploited to extend market exclusivity, gain undeserved tax credits, and generate anti-competitive effects. The exorbitant cost of drugs is sustained, leading to ramifications that extend beyond monetary boundaries. In the end, the highest price of drugs is defined not through monetary means, but through a death toll. 

References