What Constitutes Reasonable Return?

Orphan diseases are perhaps the most cruel of illnesses. Frequently life threatening, they afflict only a very small percentage of the world's populations, thereby discouraging research and making any drugs that are developed prohibitively expensive. Are pharmaceutical companies that do develop treatments merely getting fair return on their investment, or are they in fact extorting governments through manipulative emotional pressures as they assist families in publicizing their plight in bids to get government approval?

These questions and others are raised in a documentary shown on The National the other night. The drug in question, Solaris, costs over $600 thousand per year to save the life of one person.

As you will see, parents and other loved ones are put into untenable positions, making them easy pawns for what some would say are unfair pharmaceutical practices. That being said, I would do exactly what they are doing to save someone close to me.

You decide the ethics here:

An Extreme Of Capitalism?

Anyone who reads my blog regularly and has drawn the conclusion that I am anti-capitalism would be completely wrong. I have nothing against business, entrepreneurship, nor corporations, per se. And I do believe that those who take risks should be appropriately rewarded.

What I am against, however, is extreme imbalance. I have nothing but withering contempt for the winner-take-all attitude that sees life as a zero-sum game. Such thinking betrays an unschooled mind and a woefully underdeveloped character, in my view. And that is exactly the mentality pervasive in so many realms today, be they political, economic, social, business, etc. Capitalism, yes. unfettered capitalism, no.

During the weekend I read a story in The Star about the development of drugs to treat what are known as orphan diseases, those maladies that afflict a relatively low number of people. Traditionally avoided due to high development costs and low market potential, pharmaceutical firms are now turning increasingly to them as a potential source of new profits.

Patents expire on drugs that have become standard treatments for afflictions such as heart disease, diabetes, etc., and drugs to replace tried and true therapies are not needed. The revenues arising from treating those standard diseases, while still substantial, have limited growth potential, something that is anathema in a fiscal culture that demands continual corporate profit growth.

The beauty of orphan diseases, from a profit perspective, is that the majority of them are genetically-caused, which means that those for whom the drugs are developed will be life-long customers. It is this fact that makes the development of such drug treatments not only a literal life saver for some, but also an everlasting curse for the governments that will be called upon to fund them.

“There is a big crunch coming in terms of the new (orphan) products being developed and in terms of cost,” says Dr. Michael Rieder, who holds a research chair in pediatric pharmacology at Western University’s Schulich School of Medicine and Dentistry.

“We’ve only seen the tip of the iceberg and it’s not going to go away.”

The issue came to the forefront again last week when young Madi Vanstone and her mother, Beth, visited Ontario Premier Kathleen Wynne to seek assistance in getting Madi's drug, Kalydeco, listed so that her costly treatments would be covered under the province's drug plan. It was approved by Health Canada in late 2012, but costs $300,000 a year per person and works only for a certain genetic variant of cystic fibrosis. It’s estimated about 20 people in Ontario need it but do not have private coverage.

Fifteen countries cover the medication, but so far Ontario’s drug-purchasing consortium has failed to negotiate what it sees as a “fair” price with manufacturer Vertex Pharmaceuticals.

Consequently, Madi's family currently must rely on fund-raising for the treatment which has left her symptom-free.

The problem, as you can see, lies in the extreme pricing that big pharma attaches to what can be sometime regarded as miracle drugs. These exorbitant rates are justified by what they claim are the high development costs of the therapies, coupled with their limited market.

Jared Rhines, vice-president of scientific and strategic affairs for the group Rx&D, which represents Canada’s research-based pharmaceutical companies, says,

“The development process from discovery to development to clinical research is the same, whether it’s a drug that treats a high number of patients or a drug that treats a rare population,” Rhines says. “And when you get to orphan drugs, it’s all those same requirements and development costs and profits spread over hundreds of patients versus what is a traditional drug that treats tens of thousands of patients.”

By the way, the industry claims, but refuses to offer any supporting documentation for 'competitive reasons,' that the average cost of drug is $1.3 billion.

This is a figure hotly contested by some:

Some experts, however, say drug companies grossly inflate their R&D costs, with the oft-cited $1.3 billion-per-drug figure out of whack with reality.

Trudo Lemmens, chair of health law and policy at the University of Toronto law school, says industry uses these claims to justify “unconscionable prices.”

He says that a credible New Jersey study claims that average drug development costs could actually be in the $45 million to $55 million range.

“The claim of $1.3 billion or higher costs of drug development is industry mantra,” he says. “But it’s based on things that the industry keeps close to its (chest) and it’s very hard to critically analyze.”

As well, such claims are misleading, if not downright untruthful, for other reasons:

Jillian Kohler, director of global health at the U of T’s Leslie Dan Faculty of Pharmacy, has this to say about the issue:

... these numbers, for people who are actually in the field, are highly controversial and industry doesn’t like to be honest about what goes into their R&D.”

Kohler says drug companies may routinely pack marketing costs into their estimates as well as lost investment returns — opportunity costs — from the money they actually do sink into research.

“They (also) don’t talk about the public funding that contributes to some of the development of these (drugs),” she says.

And so to conclude, I repeat what I said at the outset: I am not opposed to capitalism, only the unfettered kind which, it would seem, the charges attached to the treatment of orphan diseases are but egregious examples.