'Drug companies do it because they can:' How big pharma is exploiting a 1983 law

Drug companies are using a law meant to encourage the development of medication for rare diseases to turn old and relatively inexpensive drugs into cash cows. What's happening is entirely legal - and could cost some families thousands. 

An old law continues to allow old drugs to turn big profits for drug companies. Congress might say it wants to lower prices, but 9Wants to Know why one of its laws is doing precisely the opposite. None

KUSA - A federal law designed to encourage the development of new drugs for rare diseases has repeatedly allowed drug companies to turn old -- and relatively inexpensive -- drugs into cash cows, 9Wants to Know learned during a three-month investigation.

In at least a dozen instances, the Food and Drug Administration granted its prized exclusivity rights to drugs that required, in some instances, little research or development prior to FDA approval.   Free from competition on the open market and with the indirect blessing of the federal government, the drugs’ manufacturers, one by one, proceeded to raise prices on drugs used by vulnerable patient populations.

The investigation, a byproduct of our showusyourbills@9news.com campaign, suggests drug companies have been able to legally exploit the popular Orphan Drug Act of 1983 in the interest of setting up monopolies for drugs that sometimes predate the law itself. 

As one Colorado mother of a child with a rare disease told us, “Drug companies do it because they can.  Who’s going to tell them that they can’t?”

Chapter 1

'That's not right, Chris. That's not right.'

There was a “fifty-fifty” chance.   That’s what the doctors told him.

Even odds, they said, that either of his two younger sons might have the same genetic disease that their older brother, Dominic, had been diagnosed with just two years prior.

That’s why he was already well aware of the fact that those who have it struggle to live past the age of 30.

The news hit him like a brick.

“They told me I needed to take my children home, love them, and provide them with the best quality of life I could,” Richard Romito said.

Three sons.  Each one.  Duchenne muscular dystrophy.  That was nine years ago.

The Romito family has three sons. Each one has been diagnosed with Duchenne muscular dystrophy - and the rare drug that slows the progression of this disease could get a whole lot more expensive.

“This is now my life,” he told us.

There is no cure for DMD, but one drug does seem to slow the progression of the disease. It’s called deflazacort.

“Dominic walked a little longer because of it,” Richard said.

In 1995, researchers found it effective against DMD, but until last year no drug company had sought FDA approval to market it in the U.S.

It’s why, for years, Richard Romito purchased deflazacort from a pharmacy in the United Kingdom.

Richard Romito Wide

“Roughly $2,400 a year for all three of my kids,” Richard said.

Last year, using the Orphan Drug Act, Marathon Pharmaceuticals sought FDA approval to sell it stateside under the brand name “Emflaza.”  

FDA records reviewed by 9Wants to Know show Marathon’s application for Emflaza relied heavily on the 1995 study of deflazacort.

In February, the FDA formally approved Marathon’s application. In doing so, the FDA granted Marathon exclusivity rights for the next seven years.  The following day, Marathon announced it planned on selling Emflaza for close to $89,000 a year.

That’s more than Richard Romito’s annual salary as a police officer.

“That’s not right, Chris.  That’s not right,” Richard said.

Thanks to FDA exclusivity laws, the Romitos will soon lose the right to import deflazacort into the U.S.   

“It’s asinine. It’s not correct. It’s not right,” Richard said.

And while it might be all of that, it’s also not illegal.

In fact, under the Orphan Drug Act, it’s perfectly acceptable.  Drug companies like Marathon have been doing it for years, according to an analysis of FDA records by 9Wants to Know.

Chapter 2

'Exclusivity is the Diamond'

Developing a drug that lowers cholesterol or blood pressure already has a built-in incentive attached to it.

The potential patient population, and thus the market, is huge. It might cost billions to bring to market, but it could bring in many more billions of revenue if approved.

So what to do with diseases that have much smaller patient populations? 

With that question in mind, in 1983, President Ronald Reagan signed into law the Orphan Drug Act.  The name “orphan” comes from the idea that, without the law, many diseases might simply go ignored by profit-minded drug companies.

A 20-second explainer about orphan drugs. KUSA

Clearly, the incentives worked.

Before 1983, fewer than 40 drugs received FDA approval to fight diseases that impacted less than 200,000 Americans.

Since 1983, the FDA has approved an orphan drug under the law 614 times.

The Orphan Drug Act suddenly made it profitable to develop a drug to treat rare diseases.  In addition to large tax credits, fast-track for approval, and the waiver of a $2 million application fee, the law also provided the applicant with seven years of exclusivity to market the drug for the designated disease. 

“Exclusivity is the diamond when it comes to profit and sales in the drug world,” Dr. Marty Makary told 9Wants to Know. Dr. Makary is a surgeon at Johns Hopkins University and co-author of a 2015 study that looked into the way drug companies are utilizing the 1983 law.

Dr. Makary remains a fan of the law, for the most part, but openly acknowledges the idea that drug companies have used it in a way that defies the law’s original intent.

“Are drug companies using orphan drug status inappropriately?” I asked him.

“They’re following the law, but the law has a loophole,” he said.

Part of that loophole exists in the fact that the law never stated a drug needed to be “new” in order to receive the incentives that come along with orphan drug approval.

New, as far as the FDA is concerned, only means “new” when it comes before the FDA.

Chapter 3

Delfazacort becomes case study in FDA’s Handling of Orphan Drugs

Deflazacort isn’t new.  Canadians have been using it to delay muscle loss in patients with Duchenne for years.

A quick check of online Canadian pharmacies shows a 30mg tablet can run you less than $1.50 (U.S).  

In 2012, a study publishes by the U.S. National Institutes of Health called deflazacort, “the most commonly prescribed corticosteroid for the treatment of Duchenne muscular dystrophy (DMD) in Canada.”

TIMELINE: How a $2,400 drug began to cost $89,000

Lacking FDA approval in the U.S., deflazacort began making its way into the homes of people like Richard Romito years ago simply through the use of online pharmacies.

As long as patients bought what they intended to use, the FDA never raised much of a fuss.

Even still, in 2016, members of the DMD community reacted with excitement when they learned that a company intended to finally sell the drug in the U.S.

What many of them didn’t know, however, was that the company seeking approval had little intention of keeping the price comparable to what patients might pay in Canada, for example.

They also likely didn’t know Marathon would largely rely on other people’s work in order to try to prove its medical value for DMD.

In the company’s application for FDA approval, it become apparent that they did not invest in their own studies, but instead relied on decades-old data.

“This application contains data from two clinical trials conducted in the 1990s that investigated the use of deflazacort for the treatment of DMD,” FDA records state.

The first study included 196 boys ages 5-15 in the U.S. and Canada and was completed in 1995. The second, also completed in the 1990s, included 29 boys from 6-12 years old in Italy.

Their application did not include any more recent studies related to the drug’s ability to treat Duchenne muscular dystrophy. The company was widely criticized for their proposed price. After days of backlash from patients, media and legislators, on February 13, 2017 Marathon released a letter to the DMD community stating: “We are pausing our commercialization efforts in order to meet with Duchenne community leaders and explain our commercialization plans, review their concerns, discuss all options, and move forward with commercialization based on the resulting plan of action.”

By March, PTC Therapeutics announced their agreement to acquire Emflaza. PTC has not yet released their planned price for the drug.

Chapter 4

Old Drug, New Use, High Price

In 1978, a French neurologist named Henri Gastaut found a drug known as clobazam to be effective against seizures.

Decades later, Lundbeck Pharmaceuticals decided to seek orphan drug approval to market clobazam to patients with Lennox-Gastaut Sydrome. 

Under the name Onfi, the drug jumped in price 160.5 percent between 2012 and 2017, according to data maintained by the Centers for Medicare and Medicaid Services.   Onfi will only lose its exclusivity for Lennox-Gastaut next year.

Does this make any sense?

“No, not at all,” Betsey Kirkemo told me.

Kirkemo’s daughter Valerie has periodically used Onfi for the treatment of seizures.  

“At its worst part, she was in the hospital every three months,” Betsey said.

Exclusivity is the key to the drug’s profit.   

"You’re guaranteeing profit for 7 years,” she said.

“I understand the need to get money back, but there’s a difference between reasonable and unreasonable,” she added.

9Wants to Know has identified a dozen drugs that received FDA’s prized orphan drug status despite the fact that none was considered a new drug at the time of approval.

INTERACTIVE: Orphan Drugs: High Prices 

One drug, colchicine, was used to treat gout in the 1880s, according to a 1949 article published in Science Magazine.

It received orphan drug status to treat Familial Mediterranean Fever in 2009.   

H.P. Acthar Gel, also known as corticotropin, loses exclusivity for infantile spasms in October.  Prior to having orphan drug status, it cost close to $1,600 a vial.

Today, Mallinckrodt Pharmaceuticals sells it for nearly $36,000 a vial.

Federal approval of the drug began less than a decade after the end of World War II.

Tetrabenzine dates back to the early 70s.   Under the brand name Xenazine, it received orphan drug status in 2008.

Before it obtained exclusivity, Americans could import it from the UK for $43 per month.

Importation stopped in 2008.   It now costs, on average, $6,500 for a month’s supply of 25mg tablets in the U.S.

Chapter 5

Drug companies respond

9Wants to Know reached out to each drug company currently selling the 12 products we focused on during this investigation. Knight Therapeutics and Arbor Pharmaceuticals did not respond to our repeated requests for comment, but the other 10 companies did.

READStatements from pharmaceutical companies on orphan drugs

Humira, one of the world’s best-selling drugs, will have market exclusivity for the treatment of pan-uveitis or anterior uveitis  - inflammation of the middle layer of the eye – until 2023. That’s just one of four different orphan drug approvals for Humira.

The drug increased by 116 percent in price over the last 5 years, and now sells for more than $2,000 per pen.

Like many companies that market orphan drugs, AbbVie told 9Wants to Know that it will continue to invest in development of new indications for patients with unmet medical needs.

“AbbVie’s research and development efforts are focused on areas with significant unmet medical need,” the company said in a statement.

Innovation, research and development are at the crux of the responses from most pharmaceutical companies marketing older, orphan drugs.

“Our revenues must cover expenses related to the R&D of products that make it to the market, as well as those that fail to make it to the market,” Lundbeck, maker of Onfi wrote in an email.

In the case of the drug Colcrys, which required relatively little innovation as it’s at least 130 years old, a Takeda spokesperson pointed out that obtaining FDA approval still requires some important work.

“The clinical and development program undertaken for Colcrys by URL Pharma, clarified important dosing, safety, efficacy and usage information compared to prior oral colchicine formulations,” Takeda said in a statement. Takeda acquired URL Pharma in 2012.

Horizon, the makers of Procysbi also highlighted the fact that their formulation of cysteamine, a drug that began development in 1976, was significantly different than the current version already on the market.

Their statement said, in part: “PROCYSBI was granted orphan drug exclusivity because its bioavailability and 12 hour dosing schedule is a significant advance over immediate-release cysteamine, which required strict, every 6 hour, around the clock dosing that forced patients and caregivers to interrupt sleep in order to take their medicine – these challenges can lead to lack of compliance, failure to thrive, and serious, long-term, irreversible damage to organs and tissue.”

Procysbi currently costs about $5,000 for 60 pills – or 2 pills daily for a month, according to GoodRX. Cystagon, which must be taken every 6 hours or 4 times daily, costs about $45 for 120 pills, or the equivalent monthly dose.

Horizon also reiterated that most of their patients do not pay the full amount for Procysbi.

“Most importantly, Horizon Pharma invests its resources to ensure patients have access to its innovative medicines – the vast majority of PROCYSBI patients pay $0 per month,” the company said in a statement.

Several of the companies that responded to 9Wants to Know also stated that they too offer patient programs to reduce or eliminate out-of-pocket costs for high priced drugs.

Chapter 6

“Gaming the system”

Earlier this year, Sen Chuck Grassley (R-Iowa) directed the General Accounting Office to investigate problems with how the FDA is handling the Orphan Drug Act.  

In March, 9Wants to Know interviewed Sen. Grassley inside his Capitol Hill office.

“It’s gaming the system,” Sen. Grassley answered when asked to comment on the results of our investigation.

“This is what we think is a big factor in driving up pharmaceutical prices,” he said.

“I hope I’m very clear that I wouldn’t be looking at this if I thought everything was right,” he added.   He expects an answer from the GAO by the end of the year.

Richard Romito might not have that long to wait.

The father of three sons with Duchenne muscular dystrophy still can’t say what he might have to pay for deflazacort (Emflaza) .

A month after Marathon announced its price for Emflaza, Democratic Senators Bernie Sanders and Elijah Cummings authored a letter criticizing the FDA’s approval process of the drug.

“The high price was especially troubling in light of the incredibly lucrative benefits FDA has granted to Marathon and the limited amount of innovative research the company appears to have conducted to develop Emflaza,” read their statement.

A day after the letter was sent to the FDA, Marathon announced it was selling the rights to Emflaza to PTC Therapeutics for $140 million in cash and common stock.

A spokesperson for PTC has not responded to 9Wants to Know’s request to know how much it might charge for Emflaza once the deal is finalized.

Richard Romito doesn’t expect the amount will be anywhere near the amount he’s had to pay to import it from overseas, however.

“I can’t just lay still and watch my children go through this disease and suffer,” he said. 

 

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