Oh, the Prices We Pay, Reloaded - Celgene Balks at Explaining High Price of Thalidomide

A brief article on Bloomberg.com implied that Celgene has been fighting efforts by the Canadian Patented Medicine Prices Review Board to get pricing data about the drug Thalidomid (thalidomide):

Celgene Corp., the biotechnology company specializing in blood-cancer medicines, will get a hearing before Canada’s highest court over the country’s demands to provide pricing information for the drug Thalomid.

The Supreme Court of Canada today agreed to hear Celgene’s appeal of a Federal Court of Appeal ruling that said Canada’s Patented Medicine Prices Review Board was entitled to information about the pricing of the drug. The high court gave no reason for its decision.

Celgene’s two top-selling drugs are Revlimid and Thalomid, for a form of blood-cancer called multiple myeloma. They brought in more than 80 percent of the company’s total $2.25 billion in 2008 revenue.

It should be no surprise that Celgene may be sensitive about the price of Thalidomid. We posted back in 2005 about the stratospheric prices of new drugs that seemed disproportionate to manufacturing and development costs on one hand, and the value of the drugs for patients on the other. We noted that thalidomide, a very old drug that notoriously was found to cause birth defects when it was given to pregnant women, but that then showed promise as an anti-cancer drug, was being marketed in the US for $29 per capsule (approximately $25,000 a year), while a generic form sold in Brazil for $0.07 per capsule.
 
The amount Celgene manages to make from this very old (and demonstrably cheap to produce) molecule is vivid, albeit anecdotal evidence about what has gone wrong with health care prices in the US.  Despite health care insurance companies' protestations that their goal is to provide reasonably priced health care, they seem utterly incapable of negotiating down the prices of even the most obviously over-priced drugs.  And the US government Medicare program so far is prohibited by law from negotiating prices.  How our supposed free market health care system has tilted so far in favor of pharmaceuticals is a reason to wonder, but ought to be reason to investigate. 
 
Meanwhile, Celgene's 2010 annual report shows that the company has sold more than $400 million worth of Thalidomid yearly since 2007. The company's total sales in 2009 were $2.567 billion, while it spent $795 million on research and development, and $754 million on general, sales, and administrative expenses. According to the company's 2009 proxy statement, in 2008 its CEO received over $8.5 million, its COO over $5.1 million, its CFO over $2.1 million in compensation, and a senior vice president over $3.0 million. The total compensation of its five highest-paid hired managers (compare to a total of 2813 full-time employees in 2009), approximately $20.5 million 2008, was was approximately 2.6% of the company's net income in 2009, and just under 1% of its total sales.
 
As we have said previously, so the health care bubble continues to inflate.  One cause is"compensation madness," including "insiders hijacking established institutions for their personal benefit."  Another is the amazing acquiescence of those who pay bills at all levels, from the individuals who ultimately fund health care through salary dollars not earned, health insurance premiums, co-pays and the like, and tax payments, through the health care insurers and government agencies who did not balk at paying $25,000 a year for thalidomide in 2005.  If we really want to provide accessible health care of good quality and a reasonable cost, we will need to develop mechanisms to pay more reasonable amounts for health care goods and services. This will require some courage facing down the corporate and organizational insiders who have made themselves very rich from the current craziness.

Another Echo of the Case of the Deadly Heparin - A Report on the Perils of Out-Sourcing Drug Production

In 2008, we published multiple posts on how heparin made as an "active pharmaceutical ingredient" in China under apparently primitive conditions, contaminated accidentally or deliberately, was sold in the US bearing the label of a large American pharmaceutical company.  Ultimately, many patients were sickened, or died.  A summary of our posts on the topic, in smaller type, is below.

Case Summary

- We have posted several times, recently here and here, about the tragic case of suddenly allergenic heparin. Although heparin, an intravenous biologic anti-coagulant, has been in use for over 70 years, serious allergic reactions to it had heretofore been rare. Starting late last year, hundreds of such reactions, and now 21 deaths were reported in the US after intravenous heparin infusions.All the heparin related to these events in the US was made by Baxter International.

- We then learned that although the heparin carried the Baxter label, it was not really made by Baxter. The company had outsourced production of the active ingredient to a long, and ultimately mysterious supply chain. Baxter got the active ingredient from a US company, Scientific Protein Laboratories LLC, which in turn obtained it from a factory in China operated by Changzhou SPL, which in turn was owned by Scientific Protein Laboratories and by Changzhou Techpool Pharmaceutical Co. Changzhou SPL, in turn, got it from several consolidators or wholesalers, who in turn got it from numerous small, unidentified "workshops," which seemed to produce the product in often primitive and unsanitary conditions. None of the stops in the Chinese supply chain had apparently been inspected by the US Food and Drug Administration nor its Chinese counterpart.

- Most recently, we found out that the Baxter International labelled heparin was contaminated with over-sulfated chondroitin sulfate, a substance not found in nature, but which mimics heparin according to the simple laboratory tests used in the Chinese facilities to check incoming heparin. (See post here.) Further testing revealed that the contamination seemed to have taken place in China prior to the provision of the heparin to Changzhou SPL. (See post here.) It is not clear whether Baxter International or Scientific Protein Laboratories had inspected most of the steps in the supply chain, or even knew what went on there.

- The Baxter and Scientific Protein Laboratories CEOs did not seem aware of where they got the heparin on which the Baxter International label was eventually affixed. But one report in the New York Times alleged that Scientific Protein Laboratories would not pay enough for heparin to satisfy any sources other than the small "workshops."

- Leaders of all organizations involved, Baxter International, Scientific Protein Laboratories, Changzhou SPL, the Chinese government, and the US Food and Drug Administration, and the US Congress assigned blame to each other, but none took individual or organizational responsibility. (See post here.)

- Researchers (who turned out to have financial ties to a company which is developing an anti-coagulant drug that could compete with the heparin made by Baxter International) investigated the biological mechanisms by which the contamination of the heparin lead to adverse effects, but no one investigated further how the contamination occurred, or who was responsible.  (See post here.)

- Hundreds of lawsuits against Baxter have now been filed, so far without resolution.  (See post here.)

Now, as reported to date only on the PostScript blog, a US government report on problems with active pharmaceutical ingredients made in China has appeared.

A new report (pdf) by the U.S. China Economic and Security Review Commission stresses the safety risks to Americans posed by pharmaceutical ingredients made in China.

According to the report, issued by a group that advises Congress on the economic and trade implications of U.S.-China relations, found that the U.S. is the number one destination for Chinese pharmaceutical raw material exports – a $2.2 billion business each year. The U.S. relies heavily on Chinese products not only for over-the-counter drugs but for active pharmaceutical ingredients (API) found in prescription drugs.

And the report makes clear that China has neither the will nor the systems in place to monitor its exports.

This begs the question that most of the coverage of the deadly heparin also begged.  Are American pharmaceutical companies so besotted with the need for cost-savings that they are willing to buy active pharmaceutical ingredients with unknown provenance overseas as if they were a pig in a poke?  If so, why do we allow company leadership to potentially sacrifice quality, and sell adulterated drugs just to enrich their bottom lines (and their executives' salaries)?