[Ip-health] Drug Price Hikes Draw Scrutiny from Lawmakers

Wed Aug 13 17:59:01 2008

http://www.forbes.com/feeds/ap/2008/08/08/ap5305326.html
Associated Press
Drug price hikes draw scrutiny from lawmakers
By MATTHEW PERRONE 08.08.08, 2:49 PM ET
WASHINGTON -

Pharmaceutical companies are increasingly hiking the prices of specialty
medications by 100 percent or more - sometimes much more - attracting
scrutiny from lawmakers who have pledged to lower health care costs.

Drug prices have historically outpaced those of other consumer goods,
with the average price of medicines most-often prescribed to seniors
rising 7.4 percent last year, according to the advocacy group AARP.

But several hundred medications have seen prices jump much, much higher
- and their numbers appear to be growing.

Prices on 64 drugs are expected to more than double this year, up from
just 22 in 2004, according to researchers at the University of Minnesota.

Many of the drugs are used to treat rare ailments, such as Ovation
Pharmaceuticals' Cosmogen, which is prescribed exclusively to children
with rare kidney cancer. The company raised the drugs' price more than
3,400 percent in 2006 to $593.75 from just $16.79.

A company spokeswoman explained that Cosmogen and other Ovation drugs
are used by just a few hundred patients each year. After acquiring the
products from Merck (nyse: MRK - news - people ) in 2002, she said
Ovation could not afford to keep them on the market without raising prices.

"These are not the big cancers that are going to yield huge profits,"
said Ovation spokeswoman Sally Benjamin Young. "If this drug were to go
away, what's left for these children?"

She pointed out that drugs like Cosmogen, which are no longer
patent-protected, are still much cheaper than newer cancer therapies
like Avastin, which can cost upwards of $100,000 for a year's supply.

"Our products are relatively inexpensive and save lives," Young said.

But other drugs with rising price tags are used to treat more
high-profile ailments, such as Abbott Laboratories (nyse: ABT - news -
people )' HIV drug Norvir. The company has raised that drug's price by
400 percent to over $1,200.

According to company spokesman Scott Stoffel, Abbott's scientists
"discovered new uses for this drug and we repriced it to capture its
true value."

The University of Minnesota researchers said the fact that many
medications are seldom prescribed makes it easier for drug companies to
unexpectedly hike prices.

"When you get past the top 500 drugs or so, most employers and payers
just don't have time to monitor this information, and that creates an
opportunity for extraordinary price increases," said Professor Stephen
Schondelmeyer, a researcher at the university's PRIME Institute.

Last week the group's research prompted Sen. Charles Schumer, D-N.Y., to
ask the Government Accountability Office to investigate rising drug
prices. Schumer chairs Congress' Joint Economic Committee.

The new scrutiny of drug costs comes as spending on medications begins
to rise again, after declining for six years when many medications began
competing with cheaper, generic versions. Spending on drugs grew 8.5
percent in 2006, the most recent year that data is available, when the
government began paying for seniors' prescriptions under the Medicare
drug benefit.

While drug costs still make up only a small portion of overall health
care spending, both presumptive presidential nominees have highlighted
the issue on the campaign trail. Sens. John McCain, R-Ariz., and Barack
Obama, D-Ill., would allow Americans to import cheaper medications from
foreign countries, among other proposals.

And McCain has specifically said pharmaceutical companies should reveal
more information on drug costs to consumers and health care payers. The
industry has long argued that those numbers are proprietary.

Researchers at the University of Minnesota said requiring price
disclosure would encourage competition among specialty drugs, and help
bring prices down.

"Most of those conditions necessary for an effective economic market
aren't present in pharmaceuticals," Schondelmeyer said. "Markets don't
work well when there's no information available."

--
Sarah Rimmington
Attorney
Essential Action, Access to Medicines Project
Washington, DC
Tel: (202) 387-8030
Cell: (202) 422-2687
www.essentialaction.org/access/