Wednesday, April 22, 2015

The next bend up in the cost curve: Rising prices for old proven drugs?

A anesthesiologist friend sent me the note below. If accurate, as this doctor says, "The expense of the surgical robot will pale in comparison to the coming tsunami of overpriced drugs!"  I'm hoping some full-time health care reporters take a look, as this seems to be a major story that has been neglected.

A short while ago, our office-based OR discovered it could not get neostigmine* from our usual suppliers but could find only an exorbitantly expensive "new" one. I emailed back and forth with the company whose product we used to use and all they could tell me was "per FDA regulations we can no longer market this drug."  The price we had to pay went from a few dollars to over $160/vial.   So I did a little digging and found out the following:

This relates to an FDA initiative to get "unapproved drugs" off the market.  Sounds like a great idea, right?  Well, these unapproved drugs are the ones we've been using safely for decades and were grandfathered in to not needing to go through the FDA approval process that started in the early 1960s.  So . . . some drug companies have realized that they can jump through the hoops to get one of these drugs approved, at which point all other companies' version of the drug is now "unapproved" and cannot be sold.

The same thing has happened with colchicine, which has gone from 5 cents/pill to $5/pill, and all kinds of other drugs are in this pipeline, e.g. epinephrine, and it's only a matter of time before the same will happen to atropine, calcium, bicarb, ephedrine, etc.  This is an unmitigated disaster for healthcare spending.

The initiative is described on (the "new approved" version of neostigmine) (not "new improved") under the "FDA Initiative" tab.
  [And here's the link to the FDA site.]

I did a little sleuthing and found this article on Medscape from last year.  The story set forth there is that the unapproved supplies of neostigmine were becoming scarce:

Bloxiverz is the first FDA-approved version of neostigmine, which has been on the market as unapproved, grandfathered products under the Food, Drug, and Cosmetic Act of 1938. Flamel expects to launch Bloxiverz in July 2013 in 0.5 and 1.0 mg/mL strengths.

The cost difference between the branded and generic version remains to be seen.

"Based on our marketing experience, we believe that hospitals will welcome the addition of Bloxiverz as an FDA-approved version of neostigmine," Mike Anderson, Flamel's chief executive officer, said in statement.

He noted that unapproved versions of neostigmine have been in "short supply for nearly a year, which may add to the need for a reliable source of FDA-approved product."

I'm not sure, but this document appears to be the summary of the drug company's proposal to have its version of neostigmine approved.  (The timing of the report seems just right, but the company's name is deleted from the document.)  Sure enough, the agency mentions that the drug has been in use since the 1930s and that there is no reason to doubt its efficacy. The report seems to be one of "the hoops" mentioned by my friend.

So, the question is why the unapproved version was in short supply. There seems to be a correlation with knowledge by other companies that an approved version is on the way.  Look at this article from an investment analyst:

[The FDA guidelines are such] that it will typically remove unapproved product from the market in approximately one year from the approval date of an NDA (5/31/2013) led many investors to believe that the FDA had notified the companies privately that they had to wind down inventories and prepare to leave the market entirely at some future date. This was cleared up today for me, when I learned that Cardinal Health, a distributor of West-Ward Pharmaceuticals' unapproved formulation of neostigmine, had updated its National Drug Code information to indicate that neostigmine methylsulfate supplied by West-Ward would no longer be available for marketing after September 30, 2014. 

So, while Mr. Anderson correctly noted the shortage, his firm's filing, was in essence, the cause of the shortage.

The investment analyst offers his prognostication of the financial benefit of this change in market conditions:

I believe that this new information is clear public evidence that the neostigmine competitors to Flamel's BLOXIVERZ were told to cease marketing of their products by the end of September. From channel checks, I estimate that there was approximately six weeks of inventory of unapproved product in the channel and as much as six weeks of inventory in-process at the two unapproved manufacturers. As this inventory is wound down, I would expect Flamel's BLOXIVERZ, as the only remaining player, to continuously gain this share, and I conservatively project more than 50% share by September 1 and close to 100% share by the end of that month. 

While I may be off a few weeks on the timing of the inventory drawdown, I am pretty certain that Flamel's BLOXIVERZ will be the only neostigmine product on the market after September 30th and that the product is truly transformational for the company, as the drug should drive annual earnings power of $1.00-$2.00 per share beginning in the fourth quarter and in 2015 and 2016. Based on my discussions with industry experts and a review of drug pricing during periods of market dominance, I believe that BLOXIVERZ could generate revenues of approximately $150 million in 2015 and more than $200 million in 2016, with peak revenues of $250 million later that year.

Neostigmine methylsulfate is used to reverse the muscular blocking agents following surgical procedures that require anesthesia. It is a critical drug that must be used, and therefore does not require much of a selling effort, and Flamel is able to sell the drug with just two employees, who are mainly responsible for order entry and supply management. As such, margins are quite high in the 65-70% range, after manufacturing costs and royalties tied to previous owners of a Flamel subsidiary of 20%.

I imagine there is some good reason for the FDA's unapproved drug regulations, but it is hard to imagine that no one in the federal government understood the potential cost impacts of this policy direction.

* Per Wikipedia: Neostigmine is used to improve muscle tone in people with myasthenia gravis and routinely in anesthesia to reverse the effects of non-depolarizing muscle relaxants such as rocuronium and vecuronium at the end of an operation, usually in a dose of 25 to 50 μg per kilogram.


Ryan E said...

There are several more drugs like this. Talk to a hospital pharmacist. They can speak to all the problems the FDA causes.

Anonymous said...

The story re Colchicine is on the FDA web site: It dates back to September 2010.

Anonymous said...

And here is a list of drugs they have acted on so far:

Anonymous said...

Call this what it is: Regulatorially enabled rape.

Can we import neostigmine from Canada?

Rita said...

JAMA Internal Medicine told the colchicine story in 2013 in The Colchicine Debacle.
JAMA Intern Med. 2013; 173(3):184-185. doi: 10.1001/jamainternmed.2013.1405
Neostigmine is not the only other "unapproved drug" with a large price increase.
We have more stories coming soon about increased prices for older generic drugs .

Ray Collins said...

The issue you raise regarding neostigmine is a regular feature of my own blog posts (link below). Glad to have some of the additional information and links from your viewpoint, thanks.

Gary Fox said...

Betamethasone valerate and (non-augmented) betamethasone dipropionate used to be on Walmart's $4 drug list. "Suddenly" jumped to ~$60 for val and ~$80 diprop (45 gm). Unreal. Prices totally unhinged from cost of production, and something anti-competitive has to be going on.

Jerry Ackerman said...

From Facebook:

Quinine sulfate,used by millions including me to ward off nocturnal leg cramps, went from under 5 cents per 325mg capsule to $3.30 when a single mfgr played the FDA rule to its advantage and rebranded it as Qualaquin. Oddly, the dosageas w also changed, to 324mg. Further, my mailorder supplier, Caremark, now refused to fill scrips, so I'm now ordering from Canada at ~90 cents per.

Norma Sandrock said...

From Facebook:

I think their revenue estimates are way too conservative. There are over 100 million surgeries in the US every year; if neostigmine is used in roughly half (an educated guess on my part) that will be about $8 billion in revenue (cough, cough) I mean health care dollars, and this drug is only the tip of the iceberg. Someone in government is responsible for this and his or her stock holdings need to be examined.

Sean Murphy said...

From Facebook:

I'd like to think that someone at the FDA would see how transparent this money grabbing play is, apparently I'm too naive!

beverly said...

I believe that the FDA, like CMS, is not allowed to consider $$ while making these decisions. Such is the essential insanity of the medical policy brought to us by our esteemed Congress. Also witness the 'doc fix' recently passed which will cost billions, all because Congress couldn't stick to its own rules on the original bill it passed years ago.
We have met the enemy and he is us.

Thomas Pane said...

This is an important story and not confined to neostigmine. However, FDA can take action if they wish. They did so last year, allowing a foreign product to address the (ongoing) saline shortage.

OldfoolRN said...

There is another way for big pharma to jack up the cost of drugs. Take a dirt cheap drug like epinephrine and package it with a fancy drug delivery system like the Epi-Pen. It's priced at over $100 a pop and has many problems that could be avoided just by using an ampule and syringe. People have injected their thumbs with the Epi-Pen because the orange needle covering is mistaken for the activation button. Additionally, it's impossible to aspirate and confirm placement in the muscle with an Epi-Pen and you do not have a choice of route as with a syringe. For all these compromises you are paying big money.

Anonymous said...

Just paid $57 for a week's worth of atropine post op eye surgery for glaucoma. These crooks couldn't put enough in the bottle for two eyes so I had to pay again when the second eye was done. $114 for a generic drug and the government didn't allow a COLA for seniors because they said there was no inflation.

I agree, this isn't inflation; this is criminal and the government is a co-conspirator.