Housing and Economic Recovery Act of 2008
Floor Speech
HOUSING AND ECONOMIC RECOVERY ACT OF 2008 -- (Senate - July 25, 2008)
BREAK IN TRANSCRIPT
AGGRESSIVE DRUG PRICING
Ms. KLOBUCHAR. Mr. President, I come to the floor today with outrage over what some of the pharmaceutical companies have been doing with pricing for important medications affecting the lives of people in this country. I know that you, the Presiding Officer from the State of Rhode Island, have been a leader in this health care area and share many of the concerns I have and in fact are working on this issue as well.
Yesterday I chaired a hearing of the Joint Economic Committee to discuss the phenomenon of dramatic price increases of these medications. These are drugs that, because of aggressive pricing practices, have seen dramatic increases in cost. Oftentimes because of a limited market or other factors, the drug's price goes up to an astronomical level.
I first became aware of this issue when I received word from Children's Hospital in Minneapolis, one of the leading children's hospitals in the country, that the price for a drug called Indocin--it is also known as indomethacin--has increased substantially. It is a medication used to treat little babies with patent ductus arteriosis, PDA, and it is a disorder that prevents holes from healing in the hearts of premature infants. This drug has been around since the 1970s and it is the commonly used method of treating this condition. It is a great drug because it allows doctors to prescribe medication instead of resorting to surgery.
We had an event in Minnesota a few months ago with the head of Children's Hospital and a number of doctors who are specialists in this area and a family named the Bensons, whose little child survived because of the help of this drug. To see this little baby and then to think of what this drug company had done when they jacked up the price of this drug--you cannot even imagine why they would have done such a thing. I will go into the facts.
This drug has been around since the 1970s. Merck had the drug, this drug called Indocin. Two years ago Ovation Pharmaceuticals acquired the rights to the drug from Merck. The company quickly increased the price by more than 18 times--from $100 a dose to $1,800 a dose. Was there research? No. Were there more changes to the drug? No. It was the very same drug and they increased the price, because they could, from $100 to $1,800 a dose, for three 1-milligram units of the drug.
Even though it is an American company, and this is what gets outrageous--even though it is an American company, the price Ovation charges for this lifesaving drug for babies is now 44 times higher in the United States than what they sell it for in Canada. It is 44 times higher in the United States than they sell the same drug for in Canada. Nothing can justify this kind of price disparity except that this company wants to bring in more money to their coffers.
As it happens, there is only one other drug approved by the FDA for this heart problem, a formulation of intravenous ibuprofen. Ovation, interestingly enough, the same company that bought the drug from Merck when the drug was selling at $100 and now it's up to $1,800, is the sole source of the other drug in the United States. Not surprisingly, the price it charges for this medicine is nearly identical to what it charges for Indocin.
A number of other Ovation products have seen similar drastic price increases, drugs that, like Indocin, have been around for a long time and are the premier treatments for a number of diseases.
In a recent article in the medical journal Pediatrics, Dr. Alan H. Jobe of Cincinnati Childrens' Hospital, described Ovation's pricing of its two drugs for the premature babies' heart condition as ``quite extraordinary.'' He didn't mean extraordinary in a good way. He wrote:
Words such as ``unconscionable,'' ``unethical,'' and ``socially irresponsible'' come to mind.
The issue we have is that an upstart company purchases a number of drugs from another company and, even though these drugs have been on the market for years, the upstart company increases the prices drastically.
But Ovation is not the only company engaged in this disturbing trend. Look at this chart. It shows why this is a timely issue as we approach the major health care debate we are going to be going into next year. Look at why this is such a timely issue. These are what we call, using the doctor's language, extraordinary price increases.
What this chart shows is they are becoming more and more common. What this measures is the number of branded drug products whose prices have more than doubled in a single price increase. We are used to going to the drugstore, sadly, these days, and seeing a 1-percent increase or 5 percent increases going up. Then we see other markets, such as the oil market, where things are completely volatile. Here you have it in the drug market. Look at these drug products where the prices have more than doubled in one single price increase. Back in 1988 it only happened five times. Back in 1994 it happened zero times. Then you see this gradual trend up where to we are now, in the year 2008: It has happened 64 times. This is a full-year projection, based on 6 months of data. This is a projection of 64 times. Then, in 2007 you see it was at 47 times.
Questcor Pharmaceuticals--this is an example--was once losing money at the rate of $1 million a month. The company's fortunes turned around after they purchased HP Acthar from Aventis. This drug was approved in the 1970s, similar situation, a drug approved years and years ago to treat multiple sclerosis, but it is now primarily the gold standard for treating infantile spasms, a disorder that affects about 2000 families in the United States.
We were privileged to have one of the families from Rhode Island, the home of the Presiding Officer, there with us at the hearing. Danielle Foltz was the mother who testified--I will never forget her story
about how her little baby is sick in the hospital, suddenly having spasms. These could actually have affected his brain. His name is Trevor. He is in the hospital and she tries to get the drug that helps with this, this Acthar. She found out it is about $1,700 per vial at the initial stages. That is what they thought it was going to be. Then what happens? Once it was sold to Questcor, when her little baby needed this drug, the price of the drug skyrocketed to $23,000 per vial--that is a 14-fold increase. This mom and dad are in the hospital with their little baby Trevor and this drug has gone up to $23,000 per vial. What do you think is going to happen? Do you think the insurance company, when they used to pay for it when it was $1,700, was going to say: Oh, no problem. They had to negotiate for 5 days with the insurance companies, they had to get their neurologist involved, and she had to write a letter saying that this is going to affect this baby's life, the baby could be mentally retarded if he doesn't get the drug. It is actually a short-term treatment. I think the baby had the drug for a matter of months and then went off the drug--talk about short-sighted. Eventually, after 5 days, she was able to get the drug approved.
These people were missionaries in Africa. They had worked in Africa. They didn't have the money, they didn't have the house to mortgage, but they were able to save their little baby's life because finally they fought hard enough to get it covered.
From the data we heard yesterday we are hitting only the tip of the iceberg because the problem is not isolated to drugs that benefit a small number of patients. Abbott Pharmaceuticals increased the price of Norvir, a drug used to treat AIDS. The drug was often used as an ingredient in their drug therapies. In 2003, Abbott jacked up the price for Norvir by 500 percent. This was done at the same time they began marketing their new product, Kaletra, another AIDS product that included Norvir, and served as a replacement for the competition's drug therapy. The result forced patients and providers to turn to Abbott's Kaletra instead of the formerly cost-effective alternative that used Norvir and competitors' drugs. Previously undisclosed documents and e-mails reviewed by the Wall Street Journal in 2007 show that Abbott's leadership actively considered ways to promote Kaletra over Norvir.
As you can see from this bar graph of the price increase of Norvir, you see before the change was made, $257.18 and then up to $1,285.89. This is an egregious increase.
Another example. The next chart shows only a few examples of enormous price increases that we have seen. Mustargen, which is used to treat rare cancers, had a 1,000-percent increase. You see Cosmegen, which treats kidney disease--that had a 3,500-percent increase. You can see the names of the companies here: Abbott, Questcor, Ovation, Sigma-Tau. You can see what the prices were before. Here is Cosmegen, $16.79. It goes up after the sale to $593.75, a 3,436-percent increase in the drug price.
Look at what we have seen with Matulane. Matulane goes nearly off the charts. Look at this. This is used to treat rare Hodgkin's lymphoma and you see an increase of 7,999 percent. That is an 8,00-percent increase. What is this?
I am not an economist. To me this looks like simple price gouging. It not only hurts the hospitals that have to purchase these expensive drugs, but also the patients who rely on them.
An elderly woman from Park Rapids, MN, who suffers from cutaneous T-cell lymphoma was forced to pay over $8,000 in out-of-pocket expenses for Mustargen, the drug I discussed which was sold by Ovation, whose single dose price increased from around $50 to nearly $550 after the company acquired the rights to the drug.
What is the solution? In America, we have a serious problem with health care inflation and runaway costs. That is not a surprise to anyone. It is no wonder, when we have pharmaceutical companies such as Ovation or Questcor increasing prices to astronomical price levels because of the lack of competition in the market. Their actions are able to exploit an extremely vulnerable and captive market. It is not as though the pharmaceutical industry is withering on the vine. You can see pharmaceutical companies earn higher profits than other Fortune 500 companies. Here you have the profits for other Fortune 500 companies. These are huge companies. Then you look at pharmaceutical profits. What have we seen over time? They are always significantly ahead of other Fortune 500 companies.
I want to mention the Orphan Drug Act because this is timely for what we are talking about, the treatment of these rare diseases. The Orphan Drug Act was passed in 1983 to provide incentives to drug companies to develop innovative drugs for rare diseases because, without incentives, drug companies may never be able to recoup research and development costs in niche markets. What we have seen, however, is that at least a handful of drug companies have used the status of orphan drugs to keep increasing costs well beyond the cost of research, development, and manufacturing. These staggeringly high prices in turn threaten the financial security of middle-class families relying on these drugs.
Where generic drugs have helped lower the cost of many prescription drugs on the market, generic competition is also less likely to occur for orphan drugs. According to a study published in the RAND Journal of Economics, the market size for a drug has to be about $32 million--that is 2007 dollars adjusted for inflation--to justify the entry of a generic into the market.
When we are talking about indomethacin to treat populations of only a few thousand, there is often not enough of an incentive for the generic drug to enter the market.
Beyond hospitals and patients, a dramatic, unforeseeable increase in price for one of these drugs has a significant impact on the Federal Government--Medicare, Medicaid. Look at what is going on. I know Representative Waxman in the House held a hearing showing what is going on with the pricing of these pharmaceuticals across the board.
I have asked the Federal Trade Commission to initiate an investigation into any potential anticompetitive conduct or consequences arising out of Ovation's market actions and dominance in the area of nonsurgical treatment for PDA.
We need to ensure that the FTC continues to conduct these crucial investigations to guarantee competition; keeping costs low for consumers and encouraging innovation. That is one drug that is coming out of my State, the State of Minnesota, because some doctors had the foresight to see that this was outrageous and figured out that one company owned both of the drugs that were competing with each other. It is disturbing that our providers, hospitals, and patients are being blindsided by these exorbitant price increases. Our Federal Government should be able to track these trends in pharmaceutical pricing. If we start to monitor the data, there is more of a paper trail, giving us enhanced ability to do something about these companies' practices.
You know, I am a supporter of reimportation of drugs from Canada; I favor negotiating under Medicare Part D to save our seniors some money. All these things must be on the table as we approach health care reform in the next year.
When provided with the right information on drug prices, especially in smaller markets, doctors can be alerted of big price increases, potentially spurring generic alternatives to expensive drugs and giving the Centers for Medicare and Medicaid the tools and the information to better track pricing in this market. To start looking at this information, I am in the process of working with the GAO to look into the issue of drug pricing and these enormous increases.
Finally, I intend to investigate whether the FDA can fast-track approval for generic drugs, that that would be just as safe and effective but much less expensive, creating competition in markets with dramatic price increases.
I understand we have a market-based economy. It is fine for companies to make money on the products they sell. They should. But when we are dealing with the well-being of sick patients, babies and the elderly and everyone in between, we know something is wrong.
These companies cannot be allowed to make money off the backs of little babies who have holes in their hearts. I hope yesterday's hearing was a starting point for addressing problems that accompany such enormous price increases, problems that have been plaguing our doctors, our insurance companies, our Medicare and Medicaid Programs, and most importantly, our patients for far too long.
I yield the floor.
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