The Joy Of Monopolies: Orphan Drug Price Increasing By Nearly 40% Each Year

from the no-surprise-there dept

A couple of years ago, Techdirt carried an article by Andy Kessler about the difference between entrepreneurs who create value, and those who lock it up. The former tend to drive prices down constantly, innovating all the while in order to make a profit; the latter, by contrast, typically enjoy monopolies that allow them to push up prices without offering anything more in return.

Here's another great example of the latter from The New York Times, which concerns so-called "orphan drugs" -- that is, those intended to treat more uncommon diseases, which are often overlooked by Big Pharma only interested in Big Markets and Big Profits. Here's what happened with a company called Jazz:

To get drug developers to focus on these relatively small pools of patients, the federal government offers inducements like a 50 percent research-and-development tax credit as well as a longer period of market exclusivity (seven years after Food and Drug Administration approval, rather than the typical five). These long monopolies often give orphan drug makers a free hand to raise prices.

That's precisely what Jazz has done, often multiple times each year, at an average annual rate of nearly 40 percent. Today, Xyrem costs more than $65,000 per year for the typical user.
Of course, the standard justification for such incredibly expensive drugs is that they are incredibly expensive to develop. Techdirt has debunked that notion in general, and The New York Times article does so again for this particular case:
Xyrem, which is a modification of a long-available compound, was inexpensive to develop, as new drugs go. Indeed, Jazz paid only $146 million for Orphan Medical [the company that did the original work on Xyrem and other orphan drugs], just a fraction of what it now earns each year from Xyrem alone. (The company contends that it has spent considerably on its development.)
So however laudable the aim of the 1983 Orphan Drug Act might have been, its effect can turn out to be just what you would expect from granting yet more government-backed monopolies: ever-higher prices for no additional benefit -- the very definition of a company locking up value, rather than creating it.

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Reader Comments (rss)

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    identicon
    Anonymous Coward, Aug 29th, 2013 @ 4:13am

    (The company contends that it has spent considerably on its development.)

    Developing dwellings, private jets and yachts to suite the executive tastes is expensive.

     

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      art guerrilla (profile), Aug 29th, 2013 @ 7:31am

      Re:

      do NOT let Big Pharma's lies sway you:
      they spend MORE on 'marketing' than R&D, let me repeat that for the reading impaired: they spend MORE on marketing than R&D...

      *THAT* factoid alone should cause any regulator, kongresskritter, or interested party to laugh in their faces when they trot out the old 'we spent zillions on development of drug ______'...

      not to mention, they hide a LOT Of marketing research under their R&D budgets that has NOTHING to do with the efficacy or safety of the drugs: will the patient take more if this is a caplet or a pill, pink or blue, this color packaging or that... all bullshit marketing hidden as 'drug research'...

      they are slime...

      art guerrilla
      aka ann archy
      eof

       

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    identicon
    Anonymous Coward, Aug 29th, 2013 @ 4:33am

    Just say no to drugs

     

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    Shon Gale, Aug 29th, 2013 @ 5:24am

    That was Reagan for you! Same old Republican bull created that!

     

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    Anonymous Coward, Aug 29th, 2013 @ 5:34am

    Just to add an insult to injury, a simple search reveals that Xyrem is nothing else but the renown GHB (yep, a date rape drug). I guess you can get a lot of dates for 65K a year...

     

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    Anonymous Coward, Aug 29th, 2013 @ 6:10am

    any wonder why the drug cartels want to destroy companies making 'look alikes' at a fraction of the price or why the USG is doing whatever it takes to keep the monopolies alive (as long as the drug companies concerned are American, that it!)

     

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      identicon
      Wolfy, Aug 29th, 2013 @ 2:43pm

      Re:

      Not totally correct... our congresspeople have shown a perfect willingness to take foreign bribes... they get tons from the israelis. (money that the israelis conned or guilt tripped out of us to begin with)

      They also seem delighted to take bribes from foreign corporations as well.

       

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    Monkey with Attitude, Aug 29th, 2013 @ 6:22am

    What pisses me off with this

    These assholes are making it harder for everyone else do to business, plain and simple.
    Think about this for a minute:
    146 million to develope the drug and get to FDA Approval.
    50% tax credit (for the sake of making this simple) we are now at 73 Million for developement.
    Now i have a 7 year lock.
    Simple math means I have to recieve 10.4 Million above and beyond manufacturing costs.
    if you have 100,000 patients a year (0.03% of US population much less the world) i need to make 104.28 dollars PER year PER patient. PLus a decent profit (not 500% like these assholes).
    At 1 pill per month thats 8.69 per patient.
    Its easy to do this, Make a profit and NOT have everyone HATE you and by and large every business man on the plant...

    Simple and easy... 8.69 per month (1 pill per month) + cost of the pill (say lets say 50.00) and a decent profit (8.69 per pill, that means i double the money i put it right, which is a good return on anything)... your talking a price of 67.38 per month per patient, 808.56 per year... I make mine they get what they need...

    Sorry for the long winded but at 65K per year..FFS I know its what the "market will bear" but thats taking the piss in a way thats not even @ 10K customers thats 650 Million per year 8 times the 4.5 times PER YEAR the 143 million investment... and all it does is piss everyone off, and make it that harder for the everyone else to do business right...

     

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    Anonymous Coward, Aug 29th, 2013 @ 6:27am

    I have Xyrem prescription

    I take Xyrem to treat narcolepsy, the price goes up yearly and it is insanely expensive.

    You know what is more disgusting? This drug was first created in 1874. How the Fluck do they have exclusivity on something invented over 100 years ago?
    http://en.wikipedia.org/wiki/Gamma-Hydroxybutyric_acid#History

    The only good thing I can say is that Xyrem does improve my condition.

    Now you know why healthcare cost so much, patents and lawyers.

     

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    Anonymous Coward, Aug 29th, 2013 @ 4:16pm

    this was originally to treat symptoms of narcolepsy now they have put in an app with the fda to try this drug on fibromyalgia and according to Wikipedia "There are also ongoing tests to see if sodium oxybate could prove helpful with other medical conditions, such as Parkinson's disease, chronic fatigue syndrome (ME), schizophrenia,[11] binge eating,[12] essential tremor and other non-Parkinson's movement disorders,[13] and chronic cluster headache.[14]"

    WTH, this takes milking it for all its worth to the next level I believe for each new illness the drug is rated to treat it gets a patent extension. this is not science. science is: here is the problem let us look for a solution. this is we have a product and a marketing team in need of a problem. I guess if it works it works but it seems like I see this a lot and the effort could be better spent on researching cures for diseases instead of diseases for cures.

     

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    Digger, Aug 29th, 2013 @ 4:32pm

    Non-orphan drugs are just as bad...

    Gleevec (Imatinib) has risen by over 2 grand a month in one year.

    Used to be a little of 4 grand for a 30 day supply, now it's over 6 grand for a 30 day supply. A 50% price increase in 12 months time. Seriously?

    Used to treat multiple forms of cancer, it's a life-saving drug - that many who cannot afford it, end up dying painful deaths.

    The pharma that developed Gleevec has already recouped it's investment 3 times over, and still raises the price *because they can, and because it's necessary to keep people alive*...

    Greed, pure and simple greed. Every person that dies because they cannot afford this medication should be a murder charge for the entire Board of Directors, and all investors of the pharma.

     

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