W5 Investigates: Pills, Patients and Profits
Published Saturday, March 27, 2010 6:55PM EDT
Many Canadians believe that when they become sick the universal health care system will be there to protect them, but, when it comes to getting prescription drugs that might prolong their lives, that might not be the case.
Just over a year ago, Dan Childerhose, of Dorchester, Ont., was diagnosed with multiple myeloma, a rare blood cancer. Childerhose successfully underwent radiation, chemotherapy and a stem-cell transplant treatment. The cancer went into remission but concerned about the possibility of a relapse his doctor prescribed a course of Thalidomide, as a good maintenance drug for those suffering from the life-threatening blood disorder.
Thalidomide is best known as a drug with a notorious past. In the 1950s and 1960s it was given to pregnant women to treat nausea but tragically caused birth defects. Thalidomide was responsible for thousands of children being born without arms or legs. The drug was ultimately banned around the world, but in recent years scientists discovered that it could be used for the treatment of leprosy, childhood leukemia and multiple myeloma.
Only available in Canada through a special access permit, Childerhose met the criteria to obtain the drug, but was told he would have to pay for it himself, as no provincial government was covering the drug's cost. Childerhose soon discovered that paying out of pocket would cost him a fortune, up to $4,000 per month.
"I wouldn't be able to afford that," said Childerhose. "I have some pension money and I would have to cash in my pension."
He applied to Celgene, the drug manufacturer, to obtain Thalidomide on compassionate grounds. Although Celgene told W5 that at least 60 per cent of Canadians who take the drug are given it free of charge, Childerhose didn't meet their criteria of financial need and his application was refused.
Dr. Bart Barlogie runs the Institute for Myeloma Research and Therapy in Little Rock, Arkansas. He discovered Thalidomide's benefits in treating multiple myeloma back in the 1990s, after consulting with a scientist who had been using the drug to treat childhood leukemia. Barlogie's own research showed some patients given Thalidomide had a dramatic reversal in their disease.
"When that happened I knew this was truly miraculous," said Barlogie. His findings were published in the New England Journal of Medicine in 1999.
According to Barlogie, that groundbreaking research, which led to the expanded uses for Thalidomide, was primarily funded through the National Cancer Institute and American government grants.
According to a 2001study by Donald Light, a professor at the University of Medicine and Dentistry of New Jersey, whose specialty is the economics of drugs, that public funding model is very common when new drugs are developed – or in the case of Thalidomide new uses are discovered. Light determined that 84.2 per cent of drug research money around the world comes from public and charitable sources.
While the research that led to Thalidomide being used to treat multiple myeloma was primarily paid for with public funds, the benefits and profits from that discovery were quickly seized by Celgene, the company which has the rights to sell Thalidomide in Canada and the United States. Celgene's reaction to Barlogie's miraculous discovery was to dramatically raise the price of Thalidomide.
When Barlogie's study was published in 1999, the B.C. Cancer Agency was paying about $400 for a month's supply of Thalidomide. Within six years the price had soared to $3,600 per month – a 900 per cent increase.
In an e-mail to W5, Celgene refused to discuss pricing issues: "It is not our policy to participate in interviews around ongoing regulatory and reimbursement reviews."
However during a brief interview with W5's Victor Malarek, Celgene Canada's general manager, Kevin Leshuk, said: "On a compassionate basis 60 per cent of Canadians have been getting it free on a compassionate basis. The value is there within the product. I think that's well established." He also indicated that pricing is set in the United States.
In a second, later e-mail, Leshuk wrote: "Companies such as Celgene assume extraordinary risks and costs to develop promising compounds and future disease-altering therapies for patients with rare diseases, such as multiple myeloma."
Prescription for profit
From the pharmaceutical industry's perspective, high costs are an unavoidable part of doing business. According to Russell Williams, president of Rx&D, the association that represents pharmaceutical companies in Canada, developing new drugs is very expensive.
"It costs our industry to develop one of our products approximately, and these are rounded figures, slightly over a billion dollars to discover that product and make it available," said Williams.
That billion-dollar figure is regularly quoted by the drug industry to support high drug costs and is based on a 2002 study conducted by researchers at Tufts University in Boston. Using data provided by the drug companies, the Tufts study concluded that "total R&D cost per new drug is $802-million (U.S. dollars)." In the intervening eight years that figure has been rounded up to a billion dollars.
"If we want to continue to bring new medicines that will save lives and improve the quality of life, we're going to need an environment in which we can create the revenues to keep reinvesting in research," said Williams.
But critics believe the billion-dollar price tag is fictitious.
"Those figures come from industry supported economists using confidential data submitted in secret by companies to their leading policy research centre at Tufts University that no one else can see except those economists," explained Light. "They essentially take what they claim to be $71 million of direct costs and inflate them up to $1.3 billion."
"They're trying to convince people that they have to pay high prices for prescription drugs to cover the R and D costs. That simply isn't true," said Dr. Marcia Angell. She is the former Editor in Chief of the prestigious New England Journal of Medicine and the author of "The Truth about Drug Companies." "The best charitable guess would be about $100-million per new pill," she said.
Angell believes the reason for high drug costs can be found in the bottom line for all drug companies. "Every year they are in the top couple of companies in terms of most profitable industries in the United States," she said.
According to Forbes magazine's list of 2,000 multinational companies, the average annual profit margin is about eight percent, but for the top pharmaceutical countries the average profit margin is about 20 per cent. Celgene's profit margin rose from 16 per cent in 2007 to 29 per cent in 2009.
Critics of the profit margins believe that patients are being forced to pay the high prices for drugs because they are a captive market. Donald Light recounted an interview with the retired head of a pharmaceutical marketing department who called that "the exploitative marketing model."
"Exploit very sick people with very high prices because they're desperate and don't have a choice," said Light.
Russell Williams, the president of Rx&D, insists the manner that pharmaceutical drugs are priced is entirely reasonable. "We set prices in a way that is considered very fair on international norms," he said. Dan Childerhose disagrees. While he would like to take Thalidomide to ensure his cancer remains in remission, he can't afford the $3,600 a month price tag for what is a repurposed 60-year-old drug. Which leaves him considering an uncertain future.
"It's like Russian roulette," said Childerhose. And, the one holding the gun? "The pharmaceutical company," he said.