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Abusing the orphan drug law to rip off customers

by David Williams

Questcor Pharmaceuticals has announced “a new strategy and business model for H.P. Acthar Gel(R).”Translation: the company has obtained orphan drug status for a product that has been used for decades –including for the orphan indication– and is raising the price 20-fold, from about $1000 per vial to $20,000 per vial (according to my source).

The Orphan drug law has benefits. It encourages companies to pursue treatments for diseases afflicting small numbers of patients. In my opinion it shouldn’t be used in situations like this for an existing drug with a widespread existing use.

The press release is very defensive, as it should be. It cites the fact that the company has been losing money and is incurring costs for the new indication and for manufacturing upgrades. It mentions a program to make the drug available for those who can’t afford it, and talks about Questcor’s participation with patient advocacy groups.

If insurance companies are smart they’ll read this paragraph and react accordingly:

Questcor’s implementation of this new pricing model creates risks and uncertainties for Questcor, including risks associated with the possibility of lower unit sales, the refusal of third-party payors to provide reimbursement for purchases of Acthar, and the financial impact of the return to Questcor or sale to third parties of previously sold product. Questcor could receive negative publicity as a result of its adoption of this new strategy, and responding to inquiries from the press or patient advocacy groups, or dealing with litigation against Questcor, could divert the attention of key employees from operating Questcor’s business.


4 Comments »

  Robert Paarlberg wrote @ August 31st, 2007 at 12:19 pm

I’m not well versed on orphaned drug status and whether Questcor’s actions are appropriate or not, but the paragraph you reference is a bit misleading. You imply that this is specific to this company and this drug, while it really is the standard paragraph on ‘forward looking statements’ required by the SEC to make sure investors know the risks. If Bayer raised the price of Asprin by 10% they would most likely have the same paragraph.

  Mike Bartenhagen wrote @ August 31st, 2007 at 1:28 pm

Thanks you for helping to spread the word. It appears to me that Questcor made some poor decisions in the past and are desperate to make up for those mistakes. I am the father of a 5 year old that was diagnosed with IS in 2002 and although this has no direct effect on us myself and others in the IS community want to make sure those that come after us are taken care of. The new price of Acthar is $23,265.00 per vial as of August 27th. In my opinion Questcor made a major miscalculation with it’s assumption that they were no other treatments available. Vigabatrin is a viable option, I believe Synacthen, a synthetic form of ACTH at a fraction of the cost may be a good option, and new drugs in the pipeline such as Ganaxolone show promise. I am just a dad, not a doctor, but this is an important issue, here is my letter to the owners of Questcor: http://www.infantilespasms.com/questcor.htm

Mike

  Isabelle wrote @ September 1st, 2007 at 2:32 pm

A 20X increase? Surely they would have been better off with a series of stepped increases. But I agree, this is an abuse of the law.

  Christina wrote @ September 4th, 2007 at 12:48 pm

My son Tyler, 10 ms, has been diagnosed with Infantile Spasms. For the past 2 weeks I’ve been in the hospital with him and am expected to be here for another 4 weeks because of the price increase of ACTH. I’m a business major and am well aware of the company Questor’s negative comps. However, I don’t believe it justifies them increasing the price of the drug by 12 fold. I also know that the original cost to pharmacies was $800/vile and then retail was about $1600/vile–a 50% margin. To increase the price to $23000/vile and I’m assuming they kept at least a 50% margin which means an 11,500/vile cost. I’m interested in knowing the costs of production? Especially since they claim they have laid off 50% of their work force.

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