Pharmacy News

Companies Use Value-Based Pricing for Single-Source Off-Patent Drugs

[March 15, 2016, AJHP News]

Cheryl A. Thompson

BETHESDA, MD 25 Feb 2016—The behind-the-scenes decisions on prices for single-source off-patent drugs came center stage on February 4 when two company executives explained business strategies to the House Committee on Oversight and Government Reform.

Valeant Pharmaceuticals International, Inc.'s Howard B. Schiller and Turing Pharmaceuticals' Nancy Retzlaff faced a panel of congressional representatives who took turns questioning the executives on their companies' conduct.

An act of graciousness. "So you're saying that you raised one 212% and one 525%, but you've been so gracious as to drop the price 30%?" Tennessee Representative Scott DesJarlais asked Schiller at one point, referring to price increases Valeant implemented in 2015 for the Nitropress brand of sodium nitroprusside injection concentrate and the Isuprel brand of isoproterenol hydrochloride injection, respectively—and rebates of up to 30% for the two products announced by the company just a few weeks before the hearing.

"Well, we have gone to the hospitals that have the largest users, that have large cardiac departments, who would be the most impacted to make sure that they got a significant discount," Schiller said in response to DesJarlais's question.

Before Schiller could finish his next sentence, DesJarlais assailed the Valeant executive's earlier assertion that patients did not pay for Nitropress and Isuprel.

Nitroprusside and isoproterenol, Schiller said in addressing the committee, "are cardiac drugs used in hospital procedures and [for] which there is a fixed rate of reimbursement by payer. They are not drugs purchased by patients in a pharmacy."

But DesJarlais pointed out that the patients who receive either drug pay for it when they pay their hospital bill.

Determination of value. Valeant, which acquired the two off-patent drug products in February 2015, relied on the advice of the previous owner's pricing consultant, Schiller said.

"They concluded that Nitropress and Isuprel were clinically very valuable to hospitals and patients and that the fixed reimbursement rates allowed for significant price increases without eliminating the hospitals' profit," he said. "Based on these findings we implemented significant price increases."

The price increases have burdened hospitals [see February 15, 2016, AJHP News] and attracted the interest of not only a House committee but also the Senate Special Committee on Aging [see February 1, 2016, AJHP News].

ASHP, which became aware of the price increases through the organization's members, expressed concern to the House committee.

"Products that have been on the market for years and are considered essential to patient care have undergone dramatic price increases," the organization said in a statement for the hearing's record. "ASHP is concerned that this trend may make some medications inaccessible to patients, and could have serious public health consequences."

The day before the hearing, ASHP announced that it officially joined the steering committee of the Campaign for Sustainable Rx Pricing, a project of the nonprofit, nonpartisan National Coalition on Health Care Action Fund.

Supposed 'limited impact' on hospitals. Illinois Representative Tammy Duckworth, apparently disagreeing with Valeant's and its consultant's conclusion, confronted Schiller about the price increases' impact on hospitals.

He conceded that his company's action "certainly would have cut into their budgets."

"It absolutely did," Duckworth said. "In fact, at Johns Hopkins Hospital, their chief pharmacy officer in Baltimore said, 'These expenses deplete important savings and result in less funding for research, programs, and technologies that improve care.' This is Daniel Ashby. And he further says that the high cost threatens patients' access to critical treatments and create[s] financial burdens on low- and middle-income patients."

Ashby made those remarks to AHA News, a publication of the American Hospital Association.

Earlier at the hearing, Pennsylvania Representative Matt Cartwright, a former member of a hospital's board of directors, mentioned the impact on the Cleveland Clinic.

"Last year, the Cleveland Clinic reported that price increases for Isuprel and Nitropress added $8.6 million to its budget," he said.

That figure was reported by news outlets, including The Wall Street Journal and The Plain Dealer, both of which interviewed Cleveland Clinic Chief Pharmacy Officer Scott Knoer.

The House committee's ranking member, Elijah Cummings of Maryland, took issue with Valeant's focus on the largest users of the two products.

He said the price increases may hurt small hospitals—"community hospitals . . . doing the best they can with what they've got"—more than large hospitals.

The rebates of up to 30% had been announced by Valeant as "discounts" on January 20, the week before the committee originally planned to hold its hearing. A snowstorm over the intervening weekend prompted the committee to postpone its hearing to February 4.

According to Schiller's written testimony, Valeant figured that its prices would have "a limited impact" on most hospitals because most hospitals "use only a limited number of Nitropress and Isuprel doses."

"A few institutions that specialize in cardiac care, however, use a larger share of the volume," Schiller's written testimony states. "For this reason, and in response to the concerns that Congress and others raised, Valeant has created a volume-based price rebate program for Nitropress and Isuprel through arrangements with the leading hospital group purchasing organizations in the United States."

The company, Schiller's testimony states, "recently concluded agreements with two major national group purchasing organizations—one representing approximately 3,600 U.S. hospitals, the other representing about 4,500 U.S. hospitals."

Valeant's maximum rebate rate, the testimony states, applies to "500 units or more of Nitropress and 20 units or more of Isuprel."

Costly leftover tablets. According to Retzlaff's written testimony, Turing acquired the Daraprim brand of pyrimethamine in August 2015 and "assessed the market for similarly situated pharmaceuticals."

The medication, first marketed in 1953, remains the only FDA-approved drug for the treatment of toxoplasmosis (when used with a sulfonamide), Turing stated.

Pyrimethamine also remains the Centers for Disease Control and Prevention's (CDC's) first choice for treating toxoplasmic encephalitis in HIV-infected adults and adolescents (when used with sulfadiazine and leucovorin).

As such, the previous owner's price of $17.63 per tablet, Retzlaff's testimony states, "was well below . . . market value" for the "life-saving" drug.

Thus, after considering the U.S. toxoplasmosis population of about 3000 patients per year, the 340B Drug Pricing Program's statutory discount, the Medicaid program's statutory rebate, and the costs to make and distribute Daraprim, Turing decided to increase the product's wholesale acquisition cost to $750 per tablet, Retzlaff's testimony states.

CDC's preferred regimen for treating toxoplasmic encephalitis entails at least six weeks of acute therapy followed by long-term maintenance therapy.

About 80% of patients with toxoplasmosis encephalitis receive their first treatment in a hospital, Retzlaff said at the hearing.

Research by CDC more than a decade ago found that hospital stays associated with toxoplasmic encephalitis averaged about 19 days.

The first 19 days of CDC-recommended acute therapy involves 44 or 62 25-mg pyrimethamine tablets, depending on the patient's weight.

Pyrimethamine tablets traditionally have been marketed only in 100-count bottles.

"Isn't it true that some doctors treating patients in hospital settings were forced to switch to secondary, alternative therapies because they could not access Daraprim?" Duckworth asked Retzlaff.

"I suppose that's true," Retzlaff said. "But in response to that we have discounted Daraprim by 50% and introduced the smaller bottle to better meet their needs, and that seems to have resolved the issue."

This past November, Turing announced that it would reduce the product's "list price" by up to 50% for hospitals and make 30-count bottles available to hospitals in addition to the customary 100-count bottles.

Market dynamics. None of the three drug products discussed at the hearing have an unexpired patent, according to FDA's Orange Book Database.

And none have generic competition.

Add those two conditions to the lack of an abbreviated new drug application (ANDA) under review, and the resultant combination describes 10% of the drug products on the U.S. market, FDA's Janet Woodcock told the House committee.

Woodcock, who heads the Center for Drug Evaluation and Research, said her group expedites the review of ANDAs for potential "first generics."

FDA had approved ANDAs for sodium nitroprusside injection concentrate and isoproterenol hydrochloride injection in the 1970s and 1980s, but those applications are not in use now to market a drug, according to agency databases.

The agency later confirmed that it would expedite the review of a nitroprusside or isoproterenol ANDA if one were submitted.


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