Big Pharma’s Ultimatum
How pharmaceutical companies increase prices on orphan drugs, and what we can do to stop it
In 1962, the average Canadian could expect to live to 71.37 years old, according to Statistics Canada.
Over 50 years later, average life expectancy in Canada has increased almost 10 years, to 81.4 years, according to the World Bank.
Canadians are living longer than ever, and a large part of it stems from our technological advances in medicine. In exchange for living longer on average, Canadians are becoming increasingly dependent on pharmaceuticals.
In Canada, the healthcare industry is a mixture of public and private; the private section, namely privately-owned pharmaceutical companies, set their own prices for the drugs they sell.
Recently, a few companies have made the news for deliberately raising prices on “orphan drugs,” or drugs that are designed for diseases and illnesses that do not affect enough Canadians to warrant a generic drug.
It’s shocking when the price of a drug like Isuprel, used to treat heart problems, is raised 525 per cent the moment the patent changes hands.
The company behind that price increase is Valeant; a Quebec-based company that had seen its stocks rise 85 per cent in the first half of 2015, but have since dropped significantly.
The pharmaceutical company could not be reached for comment.
Valeant has purchased the rights to various drugs only to increase the price drastically, citing its need to turn profits on drugs that are proven to work in order to have sufficient funds to research new ones.
It could be easy to sympathize, considering these companies need to be able to turn a profit. But many feel they are turning profits unfairly off of Canadians.
This includes Raimar Loebenberg, a professor in the University of Alberta’s pharmacology wing. “The investment community has found that some old drugs might be worth more than they are sold for,” he said, via email.
“Companies like Valeant have bought such drugs and raised prices like crazy. It’s a strict business model, as far as I see it. These companies have no research and development, and are not interested in research and development. They just buy and sell drug portfolios and squeeze money out of them.”
These price increases have drawn many types of reaction from both the Canadian and American public; from public outrage, to Democratic candidates arranging meetings and unveiling plans to combat it, to even other pharmaceutical companies creating $1 alternatives to the drugs with inflated price tags.
Turing Pharmaceuticals, the company that recently purchased the rights to Daraprim, a drug used to treat toxoplasmosis, subsequently raised the price from $13.50 per pill to $750 USD per pill. That is over a 5,500 per cent increase.
Imprimis Pharmaceuticals posed a $1 alternative to the drug that, though not yet approved by the FDA, could still be administered as an alternative treatment.
As a direct result, Imprimis stocks increased immediately, though they have since fallen back down to year-lows.
Pharmaceutical companies are perhaps more unpredictable than the average company in the stock exchange. Valeant, a Canadian-based company, operates in the Toronto Stock Exchange (TSX), despite having only seven per cent of their staff stationed in Canada. The large fluctuation in stock prices for pharmaceutical companies can be detrimental to the Canadian stock exchange.
After the company saw stocks rising exponentially (almost 80 per cent in the first half of this year, according to the Globe and Mail), the Canadian index gained with it. This meant that Canadians that invested in mutual funds, which is money controlled by banks on behalf of investors to invest in Canada’s strongest surging companies, would lose significant amounts of money due to this company.
Simply put, in trickle-down fashion, a fluctuating price on stock not only hurts the TSX, but it also hurts Canadian investors.
According to Morningstar, 73 different mutual funds in Canada had over four per cent their money invested in Valeant. Since Valeant’s stock has dramatically decreased over the past three months, these mutual funds were at a loss.
The unprecedented unpredictability of pharmaceutical companies on the stock market and its resulted effects on the average investor means the newly-Liberal Government of Canada may look to alternatives to keep prices low for its citizens.
It’s not all bad
There’s been plenty of news on companies taking liberties with orphan drugs, but often lost in the discourse are the companies that have steered clear of the controversy.
Apotex is a generic drug maker that takes advantage of expiring patents; they produce large quantities of drugs that they have the rights to, which ultimately allows them to sell at much cheaper prices. Think of the company as a bit of a Costco for the pharmaceutical business.
The company isn’t perfect (it’s used loopholes in the past to produce drugs that were still patented) but it has largely stayed out of the price gouging controversy that so many other companies are caught up in.
On the other side of extremes, however, there’s Alexion, a Canadian company most famous for charging $700,000 for a single vial of Soliris, a drug that treats blood disorders that affect around 200 people in Canada. It’s potentially life-saving, but some people cannot afford it, as some provinces refuse to cover the cost of the drug.
Some companies seem to be worse than others, but all of them can’t seem to stay out of controversy. All this controversy could be avoided if we took a little advice from a country south of us.
Cuba – an alternative
Cuba is one of four communist countries remaining in the world. As a developing country, its GDP per capita sits at $6789.85 USD.
For comparison, the average Canadian makes $50,271 USD.
However, Cuba is second only to Italy in doctor to patient ratio, according to the World Health Organization.
John M. Kirk, a professor at Dalhousie University and author of the book Healthcare Without Borders: Understanding Cuban Medical Nationalism, has been studying Cuba significantly.
“Cuba’s medical system is the greatest story never told,” Kirk says. He says Cuba produces 70 per cent of their own medicine. Things like Benadryl, EpiPens and pain medication are very cheap, costing the equivalent of 40-50 Canadian cents per dose.
Cuba also focuses on prevention much more than cure, so much so that “Cubans are light years ahead of [Canada] in terms of prevention,” Kirk says.
Whenever there are crises in the world, mainly natural disasters or epidemics, Cuba is the first country to send doctors and medical staff to the area. The country’s doctors were the first sent to fight Ebola and have been instrumental in preventing the spread the virus.
“They are always the first to arrive and the last to leave. They remain in place after the crises. Cuba can be proud of its healthcare system, a model for many countries,” said UN Security General Ban Ki-Moon.
It’s puzzling to many that a communist country of 11 million could muster up so many medical professionals to assist other countries in their times of need, especially with the embargo the United States has had on the country for over 50 years.
In other words, as Kirk bluntly puts it, “how has this small nation of 11.3 million people managed to save more lives in the developing world than all of the G-8 countries together?”
But it’s that exact embargo that helped force Cuba to become leaders in the medical field.
Cuba, forced to work with countries other than the United States on the medical front, fell behind the research of many illnesses. That, along with the Castro government prioritizing healthcare in the Latin American country, was a recipe for a strong healthcare system.
By investing a significant amount of money in their public healthcare and training abilities, the country rose to the top, and has developed vaccines for diseases like meningitis B and cholera.
The best part is that any treatments approved by the government are available to the public.
It’s this type of system that many look to as a way to model other countries after. Despite still being considered a developing country, the life expectancy of Cubans is around 79 years, tied with the United States.
In Cuba, there are no big pharmaceutical companies like Valeant or Turing, because all healthcare is nationalized and controlled by the government. As a communist country, all Cuban experts work toward the greater good, both for Cuba and the world.
Of course, the nationalized industry isn’t without its downfalls. The average Cuban doctor is paid $64 USD per month. Other times, the doctors aren’t paid at all. Kirk says often bellhops at tourist-infested hotels will make more than brain surgeons, depending on the tipping of those they serve.
But doctors that work in foreign countries make more money, which is one of the many draws of working abroad. Kirk says 25 per cent of Cuba’s doctors are working abroad, in 67 different countries.
It’s also beneficial for Cuba, bringing in over triple the amount of money tourism does, not to mention it’s a bit of a rite of passage for Cuban doctors, according to Kirk.
Unlike the United States, Canada has access to Cuban drugs, often much cheaper than other alternatives. Kirk says the issue is that the multinational drug companies often make buying said drugs difficult.
It also has to do with Canadian attitudes.
“We’ve been conditioned to believe our approach to medicine is superior,” Kirk says.
“There’s a superiority complex that we need to overcome.”
It’s one that clearly exists. Loebenberg isn’t sure why Canada hasn’t worked with Cuba as of yet, but guesses that “Canadian standards are probably much higher than Cuba’s.”
It’s clear the Cuban system isn’t without flaws. However, in terms of their medical system, perhaps Canada, with many of the same attributes in public healthcare, could learn a thing or two.
How the U.S. are handling it
Once presidential candidates Hillary Clinton and Bernie Sanders caught wind of Turing Pharmaceuticals’ purchase and subsequent rise of price for Daraprim, they went right to work to develop a plan to combat it.
Unfortunately for them (and fortunately for Canada), the United States’ situation is a lot worse.
Clinton’s plan included eliminating tax breaks for such companies, with hopes that the companies push more money toward research and development, not just marketing.
She also said she would allow Americans to look to other countries to import drugs at cheaper costs.
With recent happenings in the world, President Barack Obama has other things to worry about, and therefore hasn’t taken much of a stand against pharmaceutical companies. But potential successors (at least on one side of the spectrum) have expressed interest in fixing the issues.
But it’s unclear whether those propositions will solve the issues they face. In an article in the Wall Street Journal, Jeanne Whalen writes how the publication compared drug costs with England, Norway and Ontario, Canada, trying to pinpoint why prescription drugs cost more in the United States than anywhere else.
The Journal found that Americans paid more for 93 per cent of the top 40 branded drugs available in both countries. Further, by analyzing the top drugs by expenditure in the United States, Americans pay more for 97 per cent of those drugs than England.
According to the article, Americans pay more because Medicare, the company meant to subsidize the cost, has virtually no negotiating power with these companies. Reversely, in Norway, the country bargains to try to get a cheaper price, and will often not even approve drugs if they feel the price is too steep.
America’s problems may be more difficult to overcome than Canada’s, but both countries are facing huge hurdles in a time where creating affordable healthcare seems to be a primary concern.
As Canada transitions into its latest form of Liberal government, it remains to be seen what Prime Minister Justin Trudeau has in store for big pharmaceutical companies. His stance on legalizing marijuana is a detriment to these organizations, as marijuana has been scientifically proven to administer relief for many illnesses that these companies have drugs specifically designed for.
But the PM has not addressed pharmaceutical companies two months into the job, and perhaps it’s a symptom of getting accustomed to his new work, or the recent tragedies that have plagued Lebanon, Mali, France and the United States.
“We need to get Justin Trudeau over to Cuba to check out the possibility of cooperation,” Kirk says.
In the Liberal platform, Trudeau promised only to “join with provincial and territorial governments to buy drugs in bulk, reducing the cost Canadian governments pay for these drugs.”
Until Trudeau makes a commitment to combat the price gouging performed by the various pharmaceutical companies, they may continue to increase prices on necessary drugs, putting more strains on the government, insurance companies, and most importantly, Canadians.