331Both the duration of extensions and the sales thresholds should be the subject of study and debate by all stakeholders. I include specific values here as placeholders to help the reader conceptualize how this could work.
332While the FDA must have a large staff to review all approved drugs and thousands of drug candidates at various stages of testing, the Bureau would be primarily focused on the hundreds of already approved branded drugs and otherwise hard- or impossible-to-genericize drugs under contract, so I would expect it to be much smaller than the FDA.
333The intent of the license would be to allow generic companies only to make that particular drug. The license would not allow other companies to use the invention taught in the patent for their own purposes, such as to make their own novel drugs. My aim is to interfere with the patent system as little as is necessary to enable contractual genericization while preserving it to stimulate innovation.
334As part of its mandate to regulate monopolies, the Federal Trade Commission (FTC) already has the legal right to compel technology transfer from a monopoly to a competitor. So what I’m proposing here is a standard tool for ensuring a competitive free market.
335In case the competitive markets someday fail (e.g., generics manufacturers drops out and price competition eases), the Bureau would technically always want a company to hold the genericization contract for a drug. Therefore, if the originator discontinues production, the Bureau would transfer the contract to any other qualified company making the drug. If the price climbs, that company would be obligated to make the drug at no higher than the contract price. It would make sense for there to be a high-quality, fallback company that is always there to take over a contract that no one else wants, though if the contract sets the contract price properly, someone should always want to make a drug since profits should be guaranteed.
336I can even imagine that there may arise a non-profit manufacturer or else a for-profit one based in a low-tax haven (akin to funds that acquire drug royalties) that specializes in low-cost manufacturing and manages to outbid most others to take over many genericization contracts. It’s better for society that drugs like Daraprim end up with such a low-cost manufacturing specialist under a genericization contract than price-jacked in the hands of a Turing.
337The FDA already has experience determining when there is an unmet need and using incentives to encourage companies to develop everything from antibiotics for rare kinds of infections to treatments for pediatric diseases.
14
Productizing Homebrews: Stealing or a Service to Society?
Sometimes creative physicians invent ways of treating patients with techniques and new formulations of old drugs without the help of drug companies. These are often referred to as “homebrew” therapies, and they are usually unpatented. Bone marrow transplant, in vitro fertilization, and any basic surgery are examples of treatments that were invented by physicians and spread through the medical community.
Prescribing progesterone to prevent preterm birth is an example of a homebrew therapy. Progesterone has long been available as a pharmaceutical, used both for birth control and fertility treatment. Some physicians discovered that they could just have a compounding pharmacy make this generic drug into an injectable solution for $20 per dose to prescribe to certain pregnant women at risk of delivering prematurely to help them carry their babies to term. The medical community ran a few of its own studies, the most influential being an academic study published in 2003 that showed that injected progesterone was better than placebo at preventing preterm births.338 For the most part, physicians felt confident that it worked and that they knew how to prescribe it and to which patients.
But the FDA prefers that all medicines be manufactured properly to a standard called Good Manufacturing Practice (GMP) and subjected to one or more rigorous clinical trials. A company called KV Pharma obliged by manufacturing injectable progesterone and submitting it for FDA review with the available clinical data. In 2011, contingent on the company committing to running a confirmatory clinical study, KV Pharma received accelerated FDA approval for a branded version of progesterone they called Makena. As an orphan drug, Makena earned seven years of market exclusivity protection. KV Pharma launched Makena at a high list price, $1,500-per-dose (up to $30,000 per pregnancy), with all of the usual room in that number for negotiation with payers.
KV Pharma’s list price was met with swift public condemnation. The drug was portrayed as an example of profiteering and price-jacking, since the company was perceived to be reaping profits without having risked anything. Amid the backlash, KV tried to assuage critics by lowering Makena’s list price to $690 per dose. It didn’t work.339 The FDA, swayed by public opinion, broke with normal policy and publicly conveyed that it wouldn’t stand in the way of compounders continuing to make progesterone for physicians intent on boycotting Makena.340 After investing resources into bringing it to market and conducting the ongoing confirmatory study, KV Pharma’s seven-year term of exclusivity was suddenly not so exclusive. KV Pharma went bankrupt shortly thereafter and in 2014 was acquired by AMAG Pharmaceuticals, which then relaunched Makena at $550 per dose.341
That price was obviously still much higher than what compounding pharmacies were charging for injectable progesterone, but the playing field had shifted. Regulators had begun to turn against compounding pharmacies due to substandard and contaminated products produced by some of them (see Chapter 9). Sales of Makena grew to more than $300 million per year before generics launched in 2018.342
The real lesson that this case study can impart became clear later. The confirmatory trials for Makena dragged out longer than anticipated, due to slow enrollment, largely because US patients could get the marketed product instead of enrolling in the trial and risking getting a placebo. But in 2019, the results became available, and, surprisingly, it turned out that progesterone is no better at preventing preterm birth than placebo. In addition, some in the healthcare industry had begun to raise concerns that the 2003 study, the one that had sparked the routine use of progesterone for prevention of preterm birth in the first place, was flawed.343 Women in the placebo arm of that study had a much higher rate of preterm birth than would have been ordinarily expected, possibly because the placebo arm, by pure chance, had more women who had experienced two or more prior preterm births. It seemed possible that the long-held belief in progesterone’s efficacy may have rested on a statistical fluke.344 Worse yet, another study suggested that using progesterone might increase a woman’s risk of gestational diabetes.345
Ultimately, the FDA’s insistence on proper clinical evidence shed light on the shortcomings of an old homebrew remedy. It’s not clear whether physicians will stop using Makena, or whether it will be removed from the market altogether.346 But one thing is clear: Makena was never the risk-free, exploitative profit opportunity critics made it out to be. Society needed the proper confirmatory study that would never have come about had it remained a homebrew therapy.347 That KV Pharma was lambasted and run into bankruptcy may dissuade other companies from developing similar kinds of drugs where we have anecdotal but not definitive evidence that they might work. That would be unfortunate: These companies provide a valuable service, and the benefits of productizing homebrews extend well beyond confirming whether or not they really work.
Homebrews and the Biotech Social Contract
Makena’s is a story that begins as a seeming exception to the Biotech Social Contract. The outrage over Makena’s pricing was similar to the public’s anger at Turing for price-jacking Daraprim (Chapter 9). Using the mortgage analogy, it’s as if KV Pharma was a bank trying to collect mortgage payments from society on a house that society had built on its own. Hadn’t society bypassed drug companies to solve its own problem, compounded its own treatment, and run its own studies? So why should a company and investors now get to profit? And yet, this story ends by illustrating
how the biotech industry still has an important role to play when it comes to homebrews.348
There are several reasons why society should want most homebrews to be properly productized. Firstly, as shown by the Makena case study, a treatment that is “easy and proven” is often neither as easy nor as proven as we think. When subjected to proper clinical studies, homebrew therapies, even those that have been used for a long time, can turn out to not work as reliably as we thought. Running rigorous clinical studies is expensive, and without funding from the biopharmaceutical industry—and subsequent, though temporary, high prices for the approved drug—those trials are unlikely to be run for homebrew treatments.
Homebrews have a benefit-risk profile, yet it’s not spelled out in an FDA-approved label. A proper trial generates data that inform the drug’s label so that all physicians can understand how to best use it.
Insurance companies often reject coverage of homebrews, claiming they are experimental. A company would have a department that would help the physician advocate for a patient to get reimbursement, pointing out to the insurance company all the ways that a patient meets the criteria for treatment spelled out in the drug’s label. Patients and physicians appreciate that.
There’s also a misconception about homebrew treatments being inexpensive. Consider that the US spends over $4 billion per year on stem cell transplants to treat approximately 22,000 patients, without much involvement from biotech companies (although biotech products are used to treat side effects of transplants, such as anemia).349 IVF and assisted reproduction generates over $5 billion in revenue per year. Those revenues don’t attract as much attention because they are spread across a hundred transplant centers, hundreds of IVF clinics, and countless physicians. Unlike for a blockbuster drug, there is no single, for-profit entity to focus on if the costs are deemed too high. Yet a product selling $4 billion or more per year in the US falls within the top ten of all drugs.350
The large homebrew industry is largely unregulated, unlabeled, and sometimes inadequately validated. When companies are able to productize a homebrew, they shine a light on assumptions, generate data on the benefit-risk profile of the product that goes into the label, and then help appropriate patients get affordable access as best they can.
But productizing homebrews has other benefits. The initial, homebrew version of most treatments is only the beginning of what’s possible. Next-generation, productized versions of homebrew therapies are often more effective, safer, or much easier for patients to take. Take homebrew fecal transplants, for example.351 This procedure, which is becoming standard-of-care for patients who suffer from recurrent C. difficile infections of their GI tracts, involves transplanting liquefied fecal matter from a healthy donor to the patient via enema. A non-profit helps process stool donations from healthy donors and helps patients find a match.352
Several companies are attempting to identify the exact bacterial species that helps patients with C. difficile and create standardized pills that would deliver the same or better results, which will obviate the transplanting of actual feces from one person to another. That’s a goal worth aiming for, but it requires considerable R&D funding (on the scale of hundreds of millions of dollars) and expertise that is common in industry but less common in academia and the non-profit sector.
A similar effort to upgrade stem cell transplants is now ongoing. Over many decades, physicians in the US have performed several hundred thousand stem cell transplants (mostly bone marrow transplants) to treat cancer and genetic disorders. The procedure involves transferring cells from a healthy donor to a sick patient. Patients must be carefully matched to donors with similar genetics, which is often done through the use of a non-profit-run registry. Perfect matches are rare, and even close-but-not-perfect matches can require extensive, life-long immune-suppression to prevent the donor’s cells from attacking the recipient’s tissues, which can expose the patient to high infection risk and other problems. At the start of the procedure, the transplant recipient must undergo bone marrow “conditioning” to make room in the bone marrow for the new stem cells to engraft. This involves putting patients through aggressive chemotherapy treatment that wipes out their immune systems and leaves them severely anemic, requiring a long hospital stay. Many biopharmaceutical companies are working on ways to mitigate the severity of the conditioning process and modify the transplanted cells and treatment protocol so that little or no immune suppression is needed. If successful, these advances would revolutionize this often-curative procedure, making it both safer and available to many thousands more patients each year. The benefits are clear and, as with other homebrews-turned-branded-therapies, the resultant price would initially be higher than the homebrew. But provided the insurance industry does its job, patients would be able to afford it. And paying this mortgage would end up forever lowering transplant-associated rent.
Thirdly, once previously homebrew-only therapies are manufactured to precise GMP standards and FDA approved, it becomes possible to think about someday genericizing them in the traditional sense or through contractual genericization (see Chapter 8). In the long run, society would receive an upgrade at a relatively lower cost. Consider how inefficient it is to have a thousand different compounding pharmacies making injectable progesterone for individual patients compared to the economies of scale of centralized manufacturing by several generics manufacturers. On the other hand, if a first-generation homebrew technology like stem cell transplant or fecal transplant remains the purview of a scattered community of physicians and/or modestly funded non-profits, no one will make the heavy investments needed to transform those technologies into something that might end up having an even lower cost once it is standardized, optimized, and genericized.
Homebrew Solutions
There are actually not many examples of productized homebrews and they don’t make up much of America’s drug budget. For all the headlines it sparked, Makena generated relatively modest sales, $322 million in 2018, which represented <0.1% of drug spending in the US. But for argument’s sake, if society wanted to upgrade many more homebrews, might there be another way of doing it without leaving it up to the private sector to take the initiative? Maybe there is an alternative approach that would save society money. We could, for example, have the government do it. I think this tempting solution would currently be bureaucratic overkill, but let’s game it out.
Say we expanded the FDA’s mandate (and budget, of course) to include the gathering of data on the safety and effectiveness of homebrew therapies (like a commonly compounded drug or an off-patent drug being used in a novel way). The agency could, essentially, ask itself to approve the drug and assign it a label, standardizing it for society. If trials are necessary, the FDA could contract with research organizations to carry them out, particularly if they are low-risk trials meant to confirm what was already conventionally believed. The FDA could put GMP manufacturing out for bid and grant the right to market the drug to whichever company commits to doing so competently at the lowest branded price. Having the government take on these tasks, which are normally carried out by the private sector, might sound like a radical idea, but it mimics how the Defense Department bids out biodefense projects, such as the development and manufacturing of pandemic flu vaccines.
Let’s look at how this strategy might have played out, were it applied to Emflaza (generic name deflazacort), a steroid that has been on the market outside of the US since 1985. It’s not exactly a case of productizing a homebrew, but it’s similar in that US patients could get deflazacort if they smuggled it in from abroad, where it is already generic. In 2017, a biotech called Marathon sped Emflaza through FDA approval for the treatment of Duchenne Muscular Dystrophy (DMD). The company based its application on existing data, did not run a new clinical trial, and then launched Emflaza at a high price. Media coverage and public reaction to what was perceived as Marathon attempting to wrest a profit from an existing drug without undertaking any risk led
to what may look like the company’s downfall, though in truth it was acquired for a handsome price by PTC Therapeutics, which re-launched the drug at a lower (but still high) price.353 PTC sold $92 million of Emflaza in 2018.
Arguably the FDA could have offered any one of the generic manufacturers of deflazacort a deal: In exchange for agreeing to sell deflazacort at a modest price in the US, the FDA would do the work of packaging their existing data for review and granting approval for its use in treating DMD. No profit-seeking middleman needed! Of course, a generic company wouldn’t then invest in physician and patient education. A better strategy would be for the FDA to put a contract out for bid to companies like PTC to get the right to sell the drug; whichever company offered to credibly market the drug for the lowest cost would win the chance to do so.
Emflaza and Makena represent comparatively straightforward cases of productizing homebrews that the FDA might be able to coordinate on its own if society really thought it was worth the trouble. But more advanced upgrades such as those involving next-generation fecal transplant and stem cell transplant technologies require a level of innovation that’s best left to the private sector.
In any case, once these drugs are properly manufactured, tested, and FDA-approved, regardless of how much or little risk is involved, they will eventually go generic and remain a part of our treatment armamentarium—instead of never having been FDA-approved at all.
* * *
338Paul J. Meis et al., “Prevention of Recurrent Preterm Delivery by 17 Aplha-Hydroxyprogesterone Caproate,” New England Journal of Medicine 348 (2003): 2379-85, accessed Nov. 24, 2019. doi: 10.1056/NEJMoa035140, https://www.nejm.org/doi/full/10.1056/NEJMoa035140, accessed November 24, 2019.
The Great American Drug Deal Page 27
