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Events, Speeches &
Floor Statements

Klobuchar Calls for Action to Stop Price-Gouging in Specialized Prescription Drugs

July 25, 2008 | Watch

Mr. President, I come to the floor today with outrage over what the pharmaceutical companies have been doing for pricing for important medication affecting the lives of people in this country. I know you, Mr. Presiding Officer, from the state of Rhode Island have been a leader in this health care area and share many of the concerns that I have and are, in fact, working on this issue as well.

Yesterday, Mr. President, I chaired a hearing of the Joint Economic Committee to discuss the phenomenon of the dramatic price increases with the medications. These are drugs that because of aggressive pricing practices have seen dramatic increases in cost. Often times, because of a limited market or other factors, the drugs' price goes up to an astronomical level.

I first became aware of this issue, Mr. President, from Children's Hospital in Minneapolis, one of the leading children's hospitals in the country that the price for a drug called Indocin has increased substantially. It’s a medication used to treat patients, little babies that have P.D.A., a disorder that prevents holes from healing in the hearts of premature infants. This drug has actually been around since the 1970's and it is a commonly used method of treating this condition. It's a great thing because it allows doctors to prescribe medication instead of resorting to surgery.

We had an event in Minnesota a few months ago with the children's hospital and a number of doctors that are specialists and a family named the Bensons, whose little child survived because of the help of this drug. To see this baby and to think what this drug company had done when they jacked up the price of this drug, you cannot even imagine why they would have done such a thing. And I’ll go into the facts.

So this drug has been around since the 1970's. Merck had the drug. Two years ago OVATION pharmaceuticals acquired the rights to the drug from Merck. The company quickly increased the price by more than 18 times from $100 a dose to $1,800 a dose. Was there research? No. Were there more changes to the drug? No. It was the very same drug and they increased the price because they could from $100 to $1,800 a dose for three 1 milligram units of the drug.

And even though it is an American company, and this is what really gets outrageous, the price that OVATION charges for the live-saving drugs for babies is now 44 times higher in the United States than what they sell it for in Canada. 44 times higher in the United States than what they sell the same drug for in Canada. Nothing can justify this kind of price disparity except that this company wants to bring in more money into the coffers.

As it happens, there is only one other drug approved by the FDA for this problem, a formulation of intravenous ibuprofen. OVATION, interestingly enough, the same company that bought the drug from Merck, when Merck sold it at $100, and now it is $1800 and OVATION is the only source of the other drug in the United States. Not surprisingly, the price for this medicine is nearly identical to what it charges for Indocin.

A number of other OVATION products have seen similar drastic increases. Drugs, like Indocin, that have been around for a long time and are the premiere treatments for a number of diseases. In an article in the medical journal "Pediatrics," Dr. Alan H. Jobe of Cincinnati Children's Hospital described OVATION’s pricing of its drugs for the premature baby's heart condition as "quite extraordinary." He didn’t mean extraordinary in a good way. He wrote words such as "unconscionable, unethical and socially irresponsible come to mind."

The issue we have, an upstart company purchases drugs from another company and although the drugs have been on the market for years the upstart company increases the prices drastically. But, OVATION isn't the only company engaged in this disturbing trend. Look at this chart and it shows where this is a timely issue as we approach the major health care debate we're going to go into next year, look why this is such a timely issue. In 1990, these are what we call, using the doctor's language, "extraordinary price increases." What this chart shows is they are becoming more and more common. This measures the number of branded drug products whose prices have more than doubled in a single price increase. We're used to going to the grocery store and see 1% increase, 5% increases going up, but then other markets like the oil market where things are completely volatile. Here you have it in the drug market. Look at these drug products where the prices have more than doubled in one single price increase. Back in 1998 it only happened five times. Back in 1994 it happened zero times. And then a gradual trend upward to where we are now, in the year 2008, and it has happened 64 times. This is a full-year projection based on six months of data. So this is a projection of 64 times and in 2007 it was at 47 times.

Questor Pharmaceutical, for example, was once losing money at the rate of $1 million a month. The company's fortunes turned around after they purchased HP Acthar, which was approved in the 1950's. This drug was approved in the 1950’s, a similar situation-the drug was approved years and years ago, to treat Multiple Sclerosis but it is now the gold standard for treating infantile spasms, a disorder that affects about 2,000 families in the United States. We were privileged to have one of the families from Rhode Island, the home of the Presiding Officer, there with us at the hearing. The mother that testified I will never forget her story about how she, her little baby, was sick in the hospital suddenly having spasms and these could actually affect his brain. His name is Trevor and he’s in the hospital and she tries to get the drug that helps with this, Acthar, and she finds out it is about $2,000 per vial. But then what happened? Once it was sold to Questor and her baby needed this drug the price of the drug skyrocketed to $23,000 per vial, which is a 14-fold increase. So, this mom and the dad are at the hospital with their little baby, Trevor, and the drug has gone up to $23,000 per vial. That is a 14-fold increase. So this mom and dad are in the hospital with their little baby Trevor, and the drug has gone up $23,000. What do you think will happen? Will the insurance company that used to pay for it when it was $2,000 per vial say, oh no problem? They had to negotiate for five days with the insurance company. They had to get their neurologist involved and she had to write a letter that it would affect the baby's life and this baby could be mentally retarded without the drug. It was actually a short-term treatment, and I think baby had the drug for a matter of months and was off the drug. Talk about shortsighted. Eventually, after five days she got the drug approved. These people were missionaries in Africa. They worked in Africa. They didn't have the money. They didn't have the house to mortgage, but they were able to save their little baby's life because, finally, they fought hard enough to get it covered.

From the data we heard yesterday we are hitting just the tip of the iceberg because the problem isn't isolated to drugs that benefit small numbers of patients. Avid Pharmaceuticals increased the price of Norvir, a drug used to treat for AIDS. The drug was often used by other companies as an ingredient in the drug therapies. In 2003, Avid jacked up the price by 500%. This was done at the same time that Avid marketed their new product, Kaletra, another aids pharmaceutical drug that included Norvir and served as a replacement for the competition’s drug therapy. The result forced patients and providers to turn to Avid's Kaletra, instead of the formerly cost effective alternative that used Norvir and competitors' drugs. Previously undisclosed documents reviewed by the Wall Street Journal showed they actively considered ways to promote Kaletra over Norvir and  as you can see by this bar graph shows the price increase of Norvir before the change was made at $257.18 and then up to $1,285.89. This is an egregious increase. 
 
Another example: the next chart shows a few examples of enormous price increases that we’ve seen. Mustargen, which is used to treat rare cancers, had a 1,000% increase. You see Cosmogen, which treats kidney disease, that has a 3,500% increase. The names of the companies here: Avid, OVATION, OVATION, Questor, OVATION, and you can see the prices before. Cosmogen is $16.79 and it goes up after the sale to $593.75, a 3,436% increase in a drug price.

Look at what we have seen with Madeleine that goes nearly off the chart. This is used to treat rare Hodgkins Lymphoma that had an increase of 7,999%. That's an 8,000% increase. What is this? To me, I'm not an economist, but to me this looks like simple price and it not only hurts the hospitals but also the patients who rely on them. An elderly woman from Park Rapids, Minnesota who suffers from Cutaneous T Cell Lymphoma had to pay over $8,000 in out-of-pocket expenses for Mustargen, a drug I just recently discussed, which is sold by OVATION whose single-dose price increased from around $50 to nearly $550 after the company acquired the rights to the drug.

What is the solution? In America, we have a serious problem with health care inflation and runaway costs. That's not a surprise to anyone. It is no wonder, when we have pharmaceutical companies like OVATION or Questor increasing prices to astronomical price levels because of the lack of competition in the market, their actions are able to exploit an extremely vulnerable and captive market.

And it is not like the pharmaceutical industry is withering at the vine. You can see pharmaceutical companies are earning higher profits than other Fortune 500 companies. Here are profits of other Fortune 500 companies, these are huge companies, and then you look at the pharmaceutical profits and they are always significantly ahead of other Fortune 500 companies.

I wanted to mention the Orphan Drug Act, because this is timely for what we're talking about with the treatment of rare diseases. The Orphan Drug Act was passed in 1983 to provide incentive to drug companies to develop innovative drugs for rare diseases because without incentives, drug companies may never be able to recoup research and development costs in niche markets. What we have seen, however, is at least a handful of drug companies have used this status of orphan drugs to keep increasing costs well beyond the cost of research, development, and manufacturing. These staggeringly high prices had, in turn, threatened the financial security of middle-class families relying on these drugs.

Where generic drugs have helped lower the cost of many prescription drugs on the market, generic competition is also less likely to occur for orphan drugs. According to a study published in the Rand Journal of Economics, the market size for a drug has to be about $32 million, that’s 2007 dollars adjusted for inflation, to ensure entry of a generic into the market. For drugs around for decades, like Indocin, to treat patient populations of only a few thousand, there is often just not enough of an incentive for the generic drug to enter the market. Beyond hospitals and patients, a dramatic unforeseeable increase in price for one of these drugs has a significant impact on the federal government. I know Representative Waxman in the House held a hearing showing what’s going on with the pricing of these pharmaceuticals across the board. I have asked, Mr. President, the Federal Trade Commission to initiate an investigation into any potential anti-competitive conduct consequence arising out of OVATIONS's market actions and dominance in the area of non-surgical for PDA.  We need to ensure that the FTC continues to conduct these crucial investigations to guarantee competition, keeping costs low for consumers and encouraging innovation. That is one drug coming out of my state, the state of Minnesota, because doctors had the foresight to see this was outrageous and figure one company owned both of the drugs competing with each other.

But it is disturbing that our providers, hospitals, and patients are being blind-sighted by these exorbitant price increases. Our federal government should be able to track these trends of pharmaceutical pricing. If we start to monitor this data, there will be more of a paper trail, giving us enhanced abilities to do something about these companies’ practices. I favor re-importation of drugs from Canada. I favor renegotiating under Medicare Part B to save our seniors some money. All of these things must be on the table as we approach healthcare reform in the next year. But when provided with the right information on drug prices, especially in smaller markets, doctors can be alerted of big price increases, potentially spurring generic alternatives to expensive drugs and giving the centers for Medicare and Medicaid the tools and information to better track pricing in this market. To start looking at this information, I am in the process of working with the GAO to look into the issue of drug pricing and these enormous increases. Finally, I intend to investigate whether the FDA can fast track approval for generic drugs that would be just as safe and effective but much less expensive, creating competition in markets with dramatic price increases.

I understand, Mr. President, that we have a market-based economy. It's fine for companies to make money on the products they sell. They should. But, when we're dealing with the well-being of sick patients, babies, and the elderly and everyone in between, we know that something's wrong here. These companies can't be allowed to make money off the backs of little babies that have holes in their hearts.

I hope yesterday's hearing is a starting point for addressing the problems that accompany such enormous price increases. Problems that have been plaguing our doctors, our insurance companies, our Medicare and Medicaid programs, and most importantly, our patients, for far too long. Thank you, Mr. President, and I yield the floor.