Abusing the orphan drug law to rip off customers

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 of Infantile Spasms– 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.

16 thoughts on “Abusing the orphan drug law to rip off customers

  1. Jen Smith

    THANK YOU, THANK YOU, THANK YOU! Glad to know that someone in the medical/pharma field is just as outraged as the parents of kids with Infantile Spasms. My son has never used the ACTH for his IS, but I KNOW how important of a med option it is for kids with IS. To make it’s pricing $23000 a vial is VILE!

    We in the Infantile Spasms community are doing all we can to get this information out to the public. As well, we are trying to make the parents aware of other options including Vigabatrin and Synacthen. Though they are not FDA approved, they can be ordered for personal use from Canada and overseas, since they are not available in the US. If you check out my blog and scroll to the ACTH stories you can find a study on the synacthen stating it’s efficacy. As well, my son has been on Vigabatrin for over 3 years and I can tout it’s efficacy in controlling his IS and his myoclonics. Another medication for parents to be aware of is current trials for Ganaloxone.

    Thanks again for your blog on this topic!

    Reply
  2. Felix Kasza

    What I do not get is this: Assuming the press release is truthful (easily verified through SEC filings, if the mfg is a publicly-traded company), the company was losing money on that drug. To me that says that the choice is either to pay more, or to do without; expecting Questcor to keep eating losses is unrealistic.

    What am I missing?

    Cheers,
    Felix.

    Reply
  3. David E. Williams of the Health business blog Post author

    Felix,

    What you’re missing is the magnitude of the price increase. The company would have us believe that they are raising the drug price by a factor of 20 in order to help patients by keeping the drug on the market.

    From what I can see it’s just an attempt to maximize profits by counting on the inelasticity of demand among patients who don’t have alternatives.

    Calling it an orphan drug makes it sound like they’ve developed some great new thing out of the goodness of their hearts. The product has been on the market for decades. It’s a little odd for the company to discover all of a sudden that it’s been severely underpricing for so long.

    This is a case of management being a little too clever and greedy for their own good.

    David

    Reply
  4. Felix Kasza

    A-ha — thanks for explaining. I had misread the price increase; $1k to $20k+ seems somewhat excessive, indeed.

    There are moments — only brief ones — when I regret the discovery of penicillin (and salvarsan before it); it deprives me of the satisfaction of seeing some people die from tertiary syphilis.

    Thanks again,
    Felix.

    Reply
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  6. Stephen Davis

    David,

    Thanks for posting this information. I am shocked.

    My wife, after 15 years with MS and now getting worse, was prescribed ACTH last month for accute attacks. Needless to say, we wouldn’t pay $23k to these theives even if it was with the insurance company’s money. Another Sicko story.

    I feel sorry for other MS patients using ACTH that are getting slapped around by these houligans. I am going to do all I can to spread the word. This is absolutely disgusting. Thanks again for making this public.

    Reply
  7. Steve Wood

    The price increase in Acthar took place on 8/27/07, and Questcor, the company producing Acthar, announced their financial results for the third quarter (covering the period 7/1/07 to 9/31/07) earlier this week. Because of the price increase, their revenue and earnings have soared. Now admittedly, companies are in business to make a profit. However, Questcor had a profit of $8.4M on revenues of $14.8M, which is an incredibly high profit margin! This type of excessive profit indicates that the price increase in Acthar is exorbitant.

    Reply
  8. Lisa Emrich

    Steve, you are absolutely correct in stating that ‘the price increase in Acthar is exorbitant.’ I’ve blogged about this a number of times including this Monday – Questcor announces Q3 earnings.

    What I don’t get is that investors will throw even MORE MONEY at a company which is ripping off customers (insurance companies and those insured) and parents of ill children. Their outrageous and dishonest business moves are reaping huge rewards. I just don’t get it.

    Reply
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