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Skyrocketing costs. Life-threatening shortages. In an era of so much medical promise, how can the pharmaceutical marketplace be so broken? Our experts weigh in.
Illustration by Anna Godeassi
“Families just can’t believe that this could be happening, especially in the U.S. Their jaws drop. Their eyes go wide, and, on occasion, a four-letter word follows.”
— Pediatric hematologist/oncologist
As a pediatric hematologist/oncologist, Yoram Unguru engages in his share of heart-wrenching conversations with families coming to grips with cancer diagnoses and sorting through treatment options. Happily, he often has hopeful news to share, as survival rates for many types of childhood cancer now approach 85 percent.
This progress came about largely through rigorously tested, step-by-step refinements to chemotherapy regimens whose core ingredients are a class of drugs called sterile generic injectables. The compounds (prednisone, methotrexate and vincristine) have been around for decades, but what has improved is the way those drugs are mixed into a carefully calibrated medical cocktail.
Too often, however, Unguru finds himself tempering a hopeful prognosis with a frightening caveat: Some of these lifesaving drugs are often in short supply; at times, they are simply impossible to get hold of.
“Families just can’t believe that this could be happening, especially in the U.S.,” says Unguru, a Johns Hopkins bioethicist who sees patients at The Herman and Walter Samuelson Children’s Hospital at Sinai. “Their jaws drop. Their eyes go wide, and, on occasion, a four-letter word follows.”
When the media raises a ruckus around the pharmaceutical industry, the focus more often than not is on skyrocketing prices that put one drug or another out of reach for the poor or uninsured. These cases cause significant issues, to be sure, but they represent just one piece of a larger picture of dysfunction in a global marketplace. Sometimes, drug prices are too low, driving companies away from unprofitable products. Other times, supply chains are so tight that a bad storm in one corner of the world or a manufacturing mishap in another can cause havoc. In both cases, supply shortages are the result.
The problems are getting worse with each passing year, Unguru notes, with shortages of drugs becoming more acute and lasting for longer stretches. In surveys published in World Journal of Clinical Oncology (2017) and Pediatric Blood and Cancer (2015), two-thirds of pediatric oncologists said they believe shortages had led to compromised care for some patients.
And such supply glitches and pricing problems are not limited to oncology. Earlier this year, a survey by University of Chicago researchers of more than 700 hospital pharmacists found that all of them had dealt with shortages in the past year. Pharmacists, patients’ advocacy organizations and medical ethicists are starting to raise alarm bells as well.
Here are the stories of three Johns Hopkins physicians working on the front lines of an increasingly dysfunctional pharmaceutical marketplace.
Learn More: About how researchers with the Johns Hopkins Drug Access and Affordability Initiative are working to develop bipartisan policy recommendations to address the cost of pharmaceuticals in the United States. Bit.ly/JHDrugSolutions
Shrouded in Mystery
When Johns Hopkins internist Jeremy Greene started hearing several years ago from patients with diabetes that they couldn’t afford insulin, he was surprised. “I didn’t believe it, actually, so I called a couple of pharmacies,” he says. “It was shocking to hear prices of $200 and $300 a vial.”
Insulin has been around for nearly a century. The original patent holder sold his rights to a university for about $1 in hopes of keeping prices affordable. How and why would its price skyrocket now — tripling in the first decade of the 21st century and then doubling again here in the second decade?
This bit of sticker shock has medical as well as financial costs for the 7.4 million people with diabetes in the United States who use insulin. Patients who try to skimp by rationing dose amounts or skipping doses risk loss of limb and life.
Switching to less expensive products is an option for some, but it can be dangerous for others. The patients most obviously affected by these price hikes are the uninsured, who pay for medicine out of pocket. But with high deductibles and complex co-insurance arrangements so common nowadays, insured patients can end up in dire financial straits as well.
“It struck me as jarring, that we weren’t talking about this as a community of physicians,” Greene says. “Why was I only learning about this now — through my patients — when the price hikes had clearly been going on for more than a decade?” In general, Greene notes, physicians practice on a daily basis with little or no information at their fingertips about the financial implications of the treatment recommendations they make for patients. There is, for instance, no way to check on retail prices or copay levels in electronic patient records.
Greene is a medical historian as well as a clinician. At the time this episode unfolded, he was working on a since-published book, Generic: The Unbranding of Modern Medicine, about the development of generics. Yet the fact that generic alternatives to insulin are few and far between (see “Generic Insulin: A Broken Contract?”), or that the prices of those few options are nearly as high as insulin itself, came as news to him.
The pricing crisis proved a tough nut to crack. A working group at the American Diabetes Association (ADA) recently interviewed 20-plus stakeholders in the field, only to conclude that the causes of recent hikes are “are not entirely clear due the complexity of drug pricing in general, and of insulin pricing in particular.”
“It shouldn’t be hard to understand the way a drug is priced, right? But we lack basic information about how drugs are priced — all of the relevant discounts are intentionally shrouded in the mystery of being ‘trade secrets.’”
— Internist Jeremy Greene
“It shouldn’t be hard to understand the way a drug is priced, right?” Greene says. “But we lack basic information about how drugs are priced — all of the relevant discounts are intentionally shrouded in the mystery of being ‘trade secrets.’”
Drug companies don’t set insulin prices in a vacuum. Wholesalers get a piece of the pie. Insurance companies employ pharmacy benefit managers (PBMs) to arrange steep, top-secret discounts in exchange for clearing certain brands for use in their patient populations. It’s not clear to anyone outside those negotiations how the process works. In the end, the ADA group issued a call for “additional transparency” so that experts can develop policies that promote “long-term improvement in insulin affordability.”
Spurred by public outrage, insulin prices are now on the radar of three different congressional committees. During one set of hearings this past spring, legislators called in players from every stakeholder sector to testify under oath. They heard from outside experts as well, including Greene, who serves on the Johns Hopkins Drug Access and Affordability Initiative, a multidisciplinary panel devoted to developing new public policy options in this area.
Greene joined in the call for more pricing transparency, whether by making pharmacy benefit manager negotiations open to public scrutiny or at least by opening them to review by an expert oversight panel. He reports that drug company representatives at those hearings expressed willingness to lift the veil of secrecy, but PBM representatives steadfastly refused, arguing that secrecy was an essential business practice.
“They keep insisting that by acting as volume discounters, they are benefiting the general public,” Greene says, “but they have no way to demonstrate whether that’s true because they won’t give up any information.”
Greene expects to be back on Capitol Hill as these discussions move forward this year. He is cautiously optimistic about the prospect of future congressional action. “I think we have a chance here to get beyond political grandstanding and into something more substantial,” he says. “I think some of the right people in Washington recognize that this crisis of insulin accessibility may be a key piece in the Gordian knot of pricing across the whole of the pharmaceutical industry.”
Generic Insulin: A Broken Contract?
Aiming to find out why there are so few generic alternatives to insulin, Jeremy Greene stepped into a complicated approval process thicket.
For a decade now, the Food and Drug Administration has employed a standard called biosimilarity that allows generic medicines onto the market without going through expensive clinical trials if they can demonstrate that they are functionally equivalent to a medicine that has been through those tests.
This process is straightforward for “small-molecule” medicines with a simple biochemical makeup, but it can get cumbersome and costly for the more complex “large-molecule” medicines, like those now coming out of the biotechnology sector.
As a human biologic, insulin lands in a gray area: Technically, it is a “biological” drug, but it’s not really that large of a molecule. It has only 50 amino acids, while other biotech drugs can easily have more than 1,500 — and its biological makeup isn’t really all that complex.
The potential costs associated with the large-molecule approval process scared some drugmakers away from the insulin market. The few that went through the process came out with a product price point only 15 or 20 percent below that of insulin. Pretty much everything is on hold at the moment, with companies waiting on new FDA rules in this area that don’t go into effect until 2020.
Greene puts these details into a much bigger historical picture. Cheaper versions of insulins have been available for the better part of a century. And for at least half a century now, pharmaceutical policy in the United States has sought to strike a balance between the prices consumers pay for medicine and the costs associated with private-sector medical innovation. It’s something akin to a social contract — consumers pay more while a drug is on patent, the government supports medical research and companies spend some of the profits they earn on developing new medicines.
In insulin, that contract seems to have broken down, a prospect that Greene finds quite frightening.
“If we uncouple innovation and access, that’s a very risky process for the entire structure of American biomedicine,” he says. “That’s one of the reasons why I’ve dedicated so much of my own research career to trying to understand how to link these two things back together again.”
Gray Markets in Pediatric Oncology
Drug shortages are a fact of day-to-day life in pediatric oncology, and clinicians don’t have much in the way of alternatives, notes Unguru, who has spearheaded efforts at the national level to address the chemotherapy and supportive care agent drug shortages as a member of the Working Group on Chemotherapy Drug Shortages in Pediatric Oncology and the Allocation Taskforce. He explains that the chemotherapy regimens that are so successful at saving the lives of the approximately 15,000 U.S. children who are diagnosed with cancer every year are highly calibrated efforts with little room for substitution or dosage adjustments.
“If a child with an ear infection sees a primary care physician and there’s a shortage of amoxicillin, oftentimes antibiotic B, C or D can be prescribed instead,” says Unguru. “The alternatives may not be perfect, but they’re pretty darn good. In childhood cancer, where the stakes are higher and the margins are slimmer, it’s rare that we have any alternative at all.”
Instead, he explains, pediatric oncologists try various strategies, including “cohorting.” Sterile injectables are packaged in vials of various sizes; sometimes, 50 mg vials can be unavailable, while 100 mg vials are plentiful. The vials are use-it-or-lose-it affairs — once opened, any leftovers need to be discarded. In such cases, to minimize waste, physicians might gather up multiple patients each requiring 15 mg doses to share the larger vial. While this approach assures that patients receive a necessary medication, it necessitates changes to treatment schedules, with some of those patients being treated earlier than planned and others later.
“The thinking is, it’s better to treat a child who is not yet due to get treatment for another two or three weeks than not to treat at all,” Unguru says. “But how does this affect outcomes? Nobody really knows — it hasn’t been studied.”
A third option is to chase supplies in the so-called gray market that arises when small players in the pharmaceutical sector, such as retail pharmacies, buy up supplies of legal drugs at risk of going on shortage far in excess of their business needs. Then they resell them to middlemen, who in turn resell them to hospitals — with markups added to the price at each new step. Those markups can reach 4,000 percent.
The gray market is something that raises ethical red flags in the mind of Unguru, who studies such issues from his seat on the faculty at the Johns Hopkins Berman Institute of Bioethics. It is unfair, he says, that some patients should get access to medicines while others go without, simply because the former patients are in hospital systems with deep pockets that can afford to pay higher prices. Are hospitals that buy in the gray market simply encouraging the spread of that practice? Are they, perhaps, delaying the development of a long-term solution?
The ethical issues get more intricate the deeper you delve into the topic. What happens if and when hospitals only have enough medicine for some patients? Should deep-pocketed hospitals share supplies with smaller competitors, or are their patients just out of luck?
Unguru feels it’s high time hospitals started setting up expert panels to address such questions. He and his colleagues address these and related questions in their work on drug shortages and have published recommendations for an ethical approach to these difficult issues.
“Bedside decision-making by individual physicians is not the way you want to do this,” he says. “I don’t care how smart any individual doctor is — this is an area that’s very highly prone in the heat of the moment to subjective preferences and to making decisions without being aware of the bigger picture. We need to develop a process that is transparent and nuanced.”
The best solution, of course, would be to eliminate the larger problem. Shortages arise for several different reasons, all tied to the complexities of a private-sector market operating on a global stage. The profit margins involved in making sterile generic injectables are quite low, making it a less attractive business line. At times in recent years, just three companies have produced 70 percent of the supply. This overconsolidation, notes Unguru, carries a high risk of supply chain interruptions in the event of things like safety mishaps at a manufacturing facility or natural disasters that affect output.
In Unguru’s view, however, such problems are not insurmountable.
“You don’t see shortages of new blockbuster drugs,” he points out. “Shortages of new, high-profit cellular therapies don’t occur. And those can be a lot harder to make than these sterile injectables. This suggests that the primary driver for drug shortages is economic considerations — ultimately, drug shortages are about money.”
Unguru would like to see the federal government move into action here and start treating supplies of essential drugs as critical national infrastructure on the order of utilities and electricity. One step in that direction would be for the federal government to establish a list of “essential medicines,” as advocated by the World Health Organization. Once priorities are set, policymakers can look at those medicines on a case-by-case basis for issues of supply and affordability. In the case of sterile injectables, one key step may be to offer companies subsidies that ensure a fair level of profit.
“Were we to offer drug manufactures a bit more money to produce some of these old, cheapo drugs, there would be more of an incentive to fix these problems,” Unguru says.
Another potential solution may arise from the nonprofit sector, where the startup Civica Rx is planning to manufacture critical medicines on a membership model in which hospitals make advance purchase commitments that provide a revenue guarantee. Backed by several private philanthropists and a number of major health care organizations, the company plans to produce 14 medicines in an initial phase and expand from there to as many as 100 products.
“Civica Rx is thinking outside the box, taking a different approach,” Unguru says. “The fact that a large group of hospital systems and other health care organizations support Civica lends a degree of clout and may cause pharmaceutical companies in the traditional marketplace to think twice about how they’re conducting business.”
The Race Against Resistance
When infectious diseases physician Sara Cosgrove reads the headlines, it’s often with a fearful sense for what a small world we live in. A hurricane strikes Puerto Rico? An explosion rocks a factory in China? Distant events like those can leave Cosgrove, the director of the Johns Hopkins Hospital Antimicrobial Stewardship Program, scrambling to provide patients in East Baltimore with access to antibiotics.
“It’s one adventure after another,” Cosgrove says with a wry smile. “You never know what drug is going to show up next on the shortage list.”
She points to benzathine penicillin as an example. Used to treat strep throat and syphilis, it has the advantage of being one-shot-and-done, making it particularly invaluable for pregnant women with syphilis, where speed is of the essence to prevent transmission to a fetus.
“[Shortages] reached a point where we had to say to the Emergency Department and our outpatient clinics that you can’t have benzathine penicillin for anyone other than a pregnant woman,” Cosgrove says. “When that went off the shortage list, oh, that was a happy day.”
Another close call involved IV metronidazole, an antibiotic that kills anaerobes in the human gut. It’s a critical prophylaxis for patients undergoing colorectal surgeries. “There were dicey moments there too, but we always managed to get enough for our surgeries,” Cosgrove says. “I suspect that not every hospital was so lucky.”
The factors that make the antibiotic supply chain so fragile are numerous and complex. Because beta-lactam antibiotics, including penicillin and its derivatives, need to be manufactured in a dedicated facility free of other pharmaceutical products, there is no short-term flexibility in shifting operations from one place to another to ramp up production in response to shortages. In other classes of antibiotics — particularly generics — low prices can limit profitability to the point where companies decide not to make them. And most antibiotics have shelf-life issues that make stockpiling either impossible or an inventory control nightmare.
“So far, we’ve always been able to eke out a solution,” Cosgrove says, “but needless to say, it would be much better if we did not have shortages at all.”
A second issue of concern to Cosgrove is the pipeline that brings new antibiotics to market. As more bacteria have developed resistance to long-standard treatments, so too has the need for new clinical weapons. There is good news and bad news on this front.
“Enormous progress has been made in recent years with antibiotic drug development,” she says. “Not so long ago, there was zero new development going on for these emerging resistant organisms. The fact that we now have some new agents is great: We’re in a better place than we were a decade ago.”
“You never know the good thing that a drug could ultimately lead to down the road until you’re using it. If it disappears early on, you lose all those future possibilities. In my mind, that’s a kind of shortage, too, right?”
— Sara Cosgrove, infectious diseases physician
The bad news arises after those agents come into the marketplace. Many of the companies behind this work are young and small; all but one of the giants in the pharmaceutical sector have exited the antibiotic business. These new companies lack resilience, Cosgrove notes. Stretched to the limit by the expensive rigors of winning FDA approval, they lack the reserves to survive periods of slow business that arrive with lower-than-expected sales or manufacturing mishaps.
“These companies are struggling,” Cosgrove says. “Some have already gone bankrupt. Others are in danger of doing so soon.”
One such case is Achaogen, which filed for bankruptcy in April. The company got approval to market its first antibiotic, plazomicin. But that approval covered only urinary tract infections, not other proposed uses, resulting in lower-than-expected sales.
In Cosgrove’s mind, such outcomes are especially worrisome because the full strength and usefulness of new antibiotics often aren’t apparent until the product has been in use for several years.
“You never know the good thing that a drug could ultimately lead to down the road until you’re using it,” she says. “If it disappears early on, you lose all those future possibilities. In my mind, that’s a kind of shortage, too, right?”
The public policy options Cosgrove would like to see developed and improved fall into two categories of incentives: “push” and “pull.” The former would aim to help young companies get across the product-testing finish line by easing the route to FDA approval, while the latter — and more important, in Cosgrove’s mind — would help pull such companies through the early days of launching and selling a new product by guaranteeing sales minimums or other creative strategies.
“We’ve got to solve this problem of nonfinancial viability in that period right after a drug comes to market,” Cosgrove says. “We need all the weapons we can get here, because these bacteria are smarter than we are.”