The $3 generic and the $1,000 pill: pharma outsiders just don't get it
Sander A. Flaum
What do you call the people who treat medical breakthroughs as if they were bank heists? Malicious? Uninformed? Not with it?
Here's an example, in a recent article in the NY Times by Elizabeth Rosenthal, “For Drugs that Save Lives, a Steep Cost,” Rosenthal debates the recent FDA approval of a really cool new device—Evzio, a self-injector indicated to reverse an opioid overdose. Instead of waiting for help to come from emergency healthcare workers, an overdose can be treated by patients, family members, or caregivers on the spot. Evzio walks the administrator through the procedure with voice instructions and has practice modules. Given 16,000 deaths due to opioid overdose occur annually, this device is a lifesaver.
Rosenthal agrees, but here's the catch. The manufacturer, Kaléo, was caught flat-footed by very rapid FDA approval and isn't yet ready to go to market. Ms. Rosenthal is worried—"We approve drugs and devices without…even having a clue about the price. We don't ask for estimates and then are surprised when the nation is stuck with a $2.7 trillion annual health care bill.”
Huh? Where did she get the idea drug prices are breaking the healthcare bank? According to government statistics, in 2012 the total cost of Rx drugs was $263 billion, not even 10% of that $2.7 trillion bill. In 2011-2012, drug prices rose a whopping 0.4%—probably less than the interest you're getting from your bank. And because drugs regularly go off patent, there's often no increase.
Ms. Rosenthal quotes unnamed “experts” saying that Evzio could cost $500. She thinks that's disgraceful, since its active agent is naloxone, an off-patent drug that retails for about $3 per dose. But sadly, it turns out that companies can actually set prices with no censor.
She argues the FDA should not approve drugs or devices without knowing and agreeing to the projected price. Can you think of anything more lethal to innovation? And to the right of sick people to have remedies available to them?
Anyone who visits the Evzio website will see at once that a ton of development money went into making this product user-friendly enough to be safely placed in the hands of a non-professional audience. What are the chances this idea would have been pursued if the manufacturer knew the FDA would dictate the product's price?
And that brings us to the next item on Ms. Rosenthal's enemies' list: Sovaldi—“the $1000 pill.”
Here's a medical breakthrough that accomplished a holy grail in medical research—a cure for HCV, up until now treated by months of unpleasant interferon therapy. But instead of celebrating this accomplishment, Rosenthal enlists the sportswriter's ploy for bashing a highly paid ballplayer. Divide the guy's salary by some trivial unit and you get, “So and so—is he really worth $10,000 a strikeout?”
Ms. Rosenthal divides cost of treatment by the number of pills in a course of therapy. $86,000 divided by 6 weeks of BID therapy—84 pills. Whoa! That‘s $1,000!
I say good for Gilead and Kaléo. They both deserve a payday. A few years ago, Gilead developed Truvada, the breakthrough which not only allows people to live with HIV but is also effectively preventing people from being infected. With Solvadi, Gilead appears to have bested yet another deadly viral disease. Why not give them a hand instead of a hard time?
Kaléo looked at the thousands of people dying every year from opioid overdoses and pondered if there wasn't a way to put nalaxone into the hands of those who might be able to deliver it faster. Evzio may deploy a $3 generic, but its sophisticated design and flawless execution and life-restoring results, what is their value?
We should remember Oscar Wilde's definition of a cynic: Someone who knows the price of everything and the value of nothing. Too often, that's a fitting description of our critics.
Sander A. Flaum, MBA, is Principal, Flaum Navigators, and Executive-In-Residence and Chairman, Fordham Leadership Forum, Fordham University Graduate School of Business Administration