How to prevent drug price shenanigans

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[This post originally appeared on Forbes.com on January 21, 2018.]

Last year, Marathon Pharmaceuticals acquired a European muscular dystrophy drug, secured FDA approval, and jacked up the price 60-fold. Now, another biotech appears poised to use the same strategy. What can – or should – be done to stop it?

Superficially, this may look like a no-brainer, with a fairly obvious path forward: close the loopholes that allow this to occur, and punish future perpetrators. But although many drug pricing scandals get lumped together in the lay press, this particular example shows that the differences between them are important if we want to develop effective policies to improve drug access and affordability.

(Disclosure: I’m a biotech consultant, but I have no professional relationships or investments (current or prior) in any of the companies mentioned in this post.)

First, a reminder of the facts of the Marathon case. Deflazacort is a generic steroid available cheaply in other countries, but never submitted for FDA approval. A clinical trial had shown it to be useful in Duchenne’s muscular dystrophy (DMD), and some American patients were obtaining it from abroad under FDA’s personal importation rules. Marathon acquired the rights to the clinical data and, without conducting any further substantive research, gained U.S. approval in early 2017 – at which point the firm announced it planned to set the U.S. price more than 60-fold above the prior price in Europe. Thus, with minimal investment and risk, Marathon turned a once-cheap legacy drug into a pricey rare disease therapy (now called Emflaza) with extended U.S. patent protection under the Orphan Drug Act.

This news broke on the heels of several other drug pricing scandals, including Daraprim, the product that made Martin Shkreli into a now-infamous biotech profiteer. But in fact, this comparison is grossly inaccurate, as my colleague Richa Dixit and I point out in our new article, “How To Prevent The Next Marathon Pharmaceuticals” (open access preprint here):

Although Marathon gained the public’s attention in the wake of several other high-profile cases of alleged drug pricing misconduct, this case is actually unique. Unlike firms that have acquired U.S.-marketed agents and then hiked their prices, Marathon gained FDA approval of a drug that was already commercialized abroad, but not in the U.S., then set a U.S. price far higher than the international one. This distinction does not automatically exonerate Marathon, but it highlights a special challenge for regulators and policy-makers seeking to balance access with affordability. It also suggests that there may not be a “one size fits all” approach to punishing and/or preventing companies that engage in the broad range of improper drug pricing behaviors that have been seen to date.

 The Daraprim case (and several other related scandals, like here, here, and here) involved dramatic price hikes on drugs already available cheaply in the U.S. In contrast, although the proposed launch price of Emflaza was undeniably high, and grossly out of proportion to the cost and risk Marathon incurred, it’s important to remember that until the company stepped in, American physicians could not prescribe deflazacort to their patients. 

That’s why we originally considered titling our article, “How (Or Whether) To Prevent The Next Marathon Pharmaceuticals” – because one could reasonably argue that Emflaza’s approval is a net benefit for American patients compared to the situation they were in before. The appropriate status quo ante for comparison here isn’t unfettered access to a cheap therapy, like it was for Daraprim and other cases cited above. Before Marathon stepped in, only a limited subset of U.S. patients with the practical wherewithal and financial means to import the drug from Europe could obtain it. (To get a sense of how cumbersome this is likely to be for most patients, read the opaque guidance on the FDA’s information page on personal importation. After several readings, I still don’t understand the exact steps to the process.) So it's fair to argue that thanks to Marathon, more patients can now access the drug.

But on balance, this benefit doesn’t outweigh the harm from this strategy, and we should seek ways to prevent other companies from reprising the Emflaza playbook. Personal importation of deflazacort wasn’t ideal, but replacing it with prescription-based access to a high-priced therapy has its own problems. Depending on their insurance coverage, individual DMD patients who used to get the drug from Europe may be worse off as a result of Marathon’s actions. And more broadly, there’s no question that forcing payers to foot the bill for yet another pricey therapy is bad for the U.S. health care system, especially if we could have enabled access at a lower price. Improving the personal importation system is a possible approach that we discuss in our paper, but other options exist as well. Regardless of the exact solution, there must be better ways for Americans to access cheap, old drugs with well-described safety and efficacy from abroad, and patients and the entire pharmaceutical ecosystem will benefit if we can identify and implement them.

Furthermore, this particular problem isn’t going away. In our paper, we identified a potential deflazacort copycat: celiprolol, a generic beta-blocker available abroad that is useful in a rare but life-threatening collagen disorder, vascular Ehlers-Danlos syndrome. A small biotech, Acer Therapeutics, has already acquired the rights to the drug and plans to file for approval later this year, apparently having conducted no further trials, so we are likely to see a replay of the Emflaza brouhaha within the coming months. Although we don’t think these situations are likely to be extremely common in the future – celiprolol was the only Emflaza-like drug we found in a fairly methodical search – they will certainly occur, and if we care about optimizing pharmaceutical price and access, we should try to prevent them.

And finally, cases like Emflaza are a noisy distraction from efforts to discover new drugs and bring them to market. Our system rewards innovative therapies with pricing power and patent protection, and we need to continue to support important R&D without inappropriately incentivizing legal and regulatory shenanigans. Pharma trade groups have already distanced themselves from Marathon and similar firms, but that’s not enough. PhRMA and BIO should also be actively proposing fixes to FDA, legislators, and other key players that would optimize the development of clinically valuable drugs and Americans’ ability to access them at fair and affordable prices, and close the door to companies seeking to emulate Marathon in the future.

Emflaza isn’t a “typical” case of biotech price-gouging, and citing it in the context of price increases on drugs already available in the U.S. is not just inaccurate, but harmful to the quality of the important debate over how to control drug costs. At the same time, it exposes an important weakness of our current regulatory and pricing system that is bad for patients and the entire pharmaceutical industry. This is a unique problem of drug access and pricing that needs to be addressed with specific, bespoke solutions, separate from those being considered to combat other pricing challenges like Daraprim. We can – and should – fix it.