March 12, 2006
A Cancer Drug's Big Price Rise Disturbs Doctors and Patients
By ALEX BERENSON
On Feb. 3, Joyce Elkins filled a prescription for a two-week supply of
nitrogen mustard, a decades-old cancer drug used to treat a rare form
of lymphoma. The cost was $77.50.
On Feb. 17, Ms. Elkins, a 64-year-old retiree who lives in Georgetown,
Tex., returned to her pharmacy for a refill. This time, following a
huge increase in the wholesale price of the drug, the cost was $548.01.
Ms. Elkins's insurance does not cover nitrogen mustard, which she must
take for at least the next six months at a cost that will now total
nearly $7,000. She and her husband, who works for the Texas Department
of Transportation, are paying for the medicine by spending less on
utilities and food, she said.
The medicine, also known as Mustargen, was developed more than 60
years ago and is among the oldest chemotherapy drugs. For decades, it
has been blended into an ointment by pharmacists and used as a topical
treatment for a cancer called cutaneous T-cell lymphoma, a form of
cancer that mainly affects the skin.
Last August, Merck, which makes Mustargen, sold the rights to
manufacture and market it and Cosmegen, another cancer drug, to
Ovation Pharmaceuticals, a six-year-old company in Deerfield, Ill.,
that buys slow-selling medicines from big pharmaceutical companies.
The two drugs are used by fewer than 5,000 patients a year and had
combined sales of about $1 million in 2004.
Now Ovation has raised the wholesale price of Mustargen roughly
tenfold and that of Cosmegen even more, according to several
pharmacists and patients.
Sean Nolan, vice president of commercial development for Ovation, said
that the price increases were needed to invest in manufacturing
facilities for the drugs. He said the company was petitioning insurers
to obtain coverage for patients.
The increase has stunned doctors, who say it starkly illustrates two
trends in the pharmaceutical industry: The soaring price of cancer
medicines and the tendency for those prices to have little relation to
the cost of developing or making the drugs.
Genentech, for example, has indicated it will effectively double the
price of its colon cancer drug Avastin, to about $100,000, when
Avastin's use is expanded to breast and lung cancer patients. As with
Avastin, nothing about nitrogen mustard is changing but the price.
The increases have caused doctors to question Ovation's motive and
left lymphoma patients wondering how they will afford Mustargen, which
is sometimes not covered by insurance, because the drug's label does
not indicate that it can be used as an ointment. When given
intravenously to treat Hodgkin's disease, its other primary use, the
drug is generally covered by insurance.
"Nitrogen mustard has been around forever," said Dr. Len Lichtenfeld,
the deputy chief medical officer of the American Cancer Society.
"There's nothing that I am aware of in the treatment environment that
would explain an increase in the cost of the drug."
Dr. David H. Johnson, a Vanderbilt University oncologist who is a
former president of the American Society of Clinical Oncology, said he
had contacted Ovation to ask its reasons for raising Mustargen's price.
"I'd like to have some evidence from them that it actually costs them
X amount, so that the pricing makes sense," Dr. Johnson said.
"It's unfortunate that a price adjustment had to occur," Mr. Nolan
said. "Investment had not been made in these products for years."
Ovation, a privately held company, also needs the money to conduct
research on several new drugs for rare diseases, Mr. Nolan said.
He acknowledged that Merck still made Mustargen and Cosmegen, an
antibiotic that is used to treat a rare childhood kidney cancer, for
Ovation. He said he was not sure when Ovation would begin producing
the drugs, and a Merck spokesman said that Merck would continue to
provide the drugs to Ovation as long as necessary.
But people who analyze drug pricing say they see the Mustargen
situation as emblematic of an industry trend of basing drug prices on
something other than the underlying costs. After years of defending
high prices as necessary to cover the cost of research or production,
industry executives increasingly point to the intrinsic value of their
medicines as justification for prices.
Last year, in his book "A Call to Action," Henry A. McKinnell, the
chairman of Pfizer, the world's largest drug company, wrote that drug
prices were not driven by research spending or production costs.
"A number of factors go into the mix" of pricing, he wrote. "Those
factors consider cost of business, competition, patent status,
anticipated volume, and, most important, our estimation of the income
generated by sales of the product."
In some drug categories, such as cholesterol-lowering treatments, many
drugs compete, keeping prices relatively low. But when a medicine does
not have a good substitute, its maker can charge almost any price. In
2003, Abbott Laboratories raised the price of Norvir, an AIDS drug
introduced in 1996, from $54 to $265 a month. AIDS groups protested,
but Abbott refused to rescind the increase.
And once a company sets a price, government agencies, private
insurers, and patients have little choice but to pay it. The Food &
Drug Administration does not regulate prices, and Medicare is banned
from considering price in deciding whether to cover treatments.
While private insurers can negotiate prices, they have limited leeway
to exclude drugs from coverage based on price, said C. Lee Blansett, a
partner at DaVinci Healthcare Partners, which works with drug makers
on pricing and marketing.
"Price is simply not included in whether or not to cover a drug," Mr.
Blansett said.
The result has been soaring prices for some drug classes, notably
cancer treatments. In 1992, Bristol-Myers Squibb faced protests for
its plans to charge $4,000 a year for Taxol, a breast cancer
treatment. Now, most new cancer treatments are priced at $25,000 to
$50,000 annually. In some cases, companies are pushing through
substantial price increases on already-expensive drugs.
Last year, Genentech raised the price of Tarceva, a lung-cancer drug,
by about 30 percent, to $32,000 for a year's treatment. In an
interview last month, Dr. Susan Desmond-Hellmann, the president of
product development for Genentech, said that the company had raised
Tarceva's price because the drug works better than Genentech had
anticipated.
"Tarceva was a more powerful and more active agent than what we
understood at the time of launch, and so more valuable," she said. In
an environment of soaring cancer drug costs, Mustargen's previous
price was a comparative bargain, giving Ovation the opportunity to
raise it substantially, said Dr. Richard Hoppe, a professor of
radiation oncology at Stanford University and an expert in treating
cutaneous lymphoma.
Mustargen's patent protection expired many years ago, so any company
can make it. But because its sales are tiny, no drug maker has
invested in a generic version.
"There's only one company that makes the drug, and they can decide
what it's worth," Dr. Hoppe said.
Nitrogen mustard was initially tested as a chemical weapon. Its
properties as an anti-cancer agent were discovered more than 60 years
ago; today, it has been superseded by newer, less toxic medicines, and
it is a niche product, with sales of only $546,000 in 2004, according
to IMS Health, a market research firm.
Still, Dr. Hoppe and other oncologists call nitrogen mustard an
effective treatment for cutaneous lymphoma, which initially appears as
a rash but can turn deadly if it spreads inside the body. Some
patients need only tiny amounts of the ointment, but others must apply
it every day across large areas of their bodies.
Mr. Nolan of Ovation said that his company intended to work to improve
access to insurance coverage for Mustargen. But Ovation has just begun
to petition insurers to cover the drug. Meanwhile, patients are paying
Mustargen's new, higher price out of pocket.
This is not the first time that Ovation has sharply raised the price
of a drug it owns. In 2003,the company bought Panhematin, a treatment
for a rare enzymatic disease called porphyria, from Abbott
Laboratories. While Abbott still produces Panhematin, Ovation raised
Panhematin's price, which had been $230 a dose, to $1,900, according
to Desiree Lyon, executive director of the American Porphyria Foundation.
"It was a major increase," Ms. Lyon said. But she said that Ovation
had worked to improve insurance coverage for Panhematin and find ways
for patients to get the drug even if they could not afford it.
Ovation also financially supports the porphyria foundation in its
efforts to increase awareness of the disease and of Panhematin as a
treatment, she said.
But many patients who rely on expensive drugs are stuck in a bind. Don
Schare of Saratoga, Calif., said he paid $1,260 last month for 200
grams of nitrogen mustard cream, about 10 times what he paid for his
prior prescription. Mr. Schare, 69, said he was covered by the new
Medicare Part D drug program as well as supplemental insurance from
AARP, but that neither of his plans covered Mustargen.
Jeffrey Malavasic, 58, a retired railroad worker in Florence, Ore.,
said he had decided to fill only half of his Mustargen prescription
when he learned of the price increase. He used the drug sparingly in
the past and will be even more frugal, he said.
But Ms. Elkins has a severe case of lymphoma and must cover much of
her body with Mustargen each day. She said that the ointment was
working, so she and her husband would find a way to pay for it.