By Bloomberg
December 6, 2018

The price of a drug given to millions of women in the U.S. every year to help speed up labor or recover from childbirth more than doubled this week, in a sign of deepening market dysfunction that has left some health-care providers scrambling to find critical medicines.

Endo International Plc raised the price of a one milliliter single-dose vial of Pitocin at the start of December to $3.60, according to its wholesale acquisition cost, up from $1.68 previously.

Prices for other common hospital drugs including ketamine, an anesthetic, and adrenaline, used to restart hearts and reverse allergic reactions, have also jumped in the past week, according to a company that tracks prices.

The increases are being driven in part by diminishing supplies of many older, widely used medications that reap little if any profit for manufacturers. The number of drugs that are scarce in the U.S. has recently doubled, rising to 110 as of September from 55 in mid-2017, according to the U.S. Food and Drug Administration.

“It’s so frustrating to not have the basic supplies that you need and to also be charged more for basic supplies that you don’t have enough of,” said Erin Fox, the senior director of pharmacy at University of Utah Health, who monitors drug shortages.

Drugmakers say that a broader trend of declining prices has forced them to look for ways to make producing older generic medications economically viable—including by raising prices. Endo spokeswoman Heather Zoumas Lubeski said that the company has been talking with its customers about how to keep prioritizing “low-value products in a capacity-constrained manufacturing environment.”

“Discontinuing the product would be irresponsible, and given the supply fluctuations that have occurred, customers need options for supply,” she said.

Hospitals and regulators aren’t new to wrangling with drug deficits. Drug shortages almost tripled to 178 in 2010 from 61 in 2005. The situation improved in the ensuing years, but injectable drugs used in hospitals have recently been suffering.

“We certainly don’t have easy solutions, or we would have fixed this problem a long time ago,” FDA Commissioner Scott Gottlieb said in a speech last month. “But it’s gone on too long. The risks have mounted. The frustrations have reached a tipping point. Mine as well. We need to commit to fix things for good.”

Quality problems at some major manufacturers and cutbacks at others have led to shortages of critical products and created added work for hospital administrators. Even when drugs return to the market, hospitals have to spend time and money changing their practices, said Fox.

“The extraordinary amount of labor that hospitals have to do to manage through the shortages and make sure the patients aren’t impacted is unbelievable,” she said.

Drugs like Pitocin have been in and out of short supply in recent years. Endo also raised the price on certain formulations of adrenaline and ketamine, according to Rx Savings Solutions, a drug-price-transparency service. Those increases were less than 10 percent. Fox said those drugs have also experienced shortages.

“We never really fixed the problem. I think we put some band-aids on it and we did some things to help mitigate it,” Gottlieb said in a telephone interview.

“The prices have been driven so low, to some slight margin over the cost of goods, that it hasn’t left enough profit margin to reinvest,” he said. “We need to find a way to allow for enough margin to enable regulation that would allow for manufacturing upgrades.”

Pharmaceutical companies regularly increase the prices of drugs without necessarily doing anything to enhance their formulations. In the wake of public lashings by President Donald Trump on Twitter, a few high-profile drugmakers held off on raising prices earlier this year, though Pfizer Inc. has already said it plans to increase prices on some products at the start of next year.

“We’ve seen drug price increase activity gain momentum the second half of the year — and the injectables market is not immune from these significant hikes,” said Michael Rea, chief executive of Rx Savings Solutions.

While Pfizer is planning to raise prices on 41 of its drugs, a person familiar with the situation said the company isn’t planning to increase the cost of any sterile injectable hospital drugs.

“The injectables market is not immune from these significant hikes.”

Shortages have grown more acute in recent years as companies including Pfizer worked to fix up plants where they make sterile injectables. Pfizer agreed to pay $17 billion to take over Hospira in 2015 in the hope that its biologic drug business would take off, but the company has instead been dogged by problems in its hospital-drug division.

Around thirty Hospira-made drugs were recalled from January 2017 to October of this year, according to an FDA database. Reasons ranged from sterility issues involving human hair to the presence of particulate matter such as stainless steel in saline. Some antibiotics weren’t as strong as they were supposed to be.

“The current supply shortages have been caused by a combination of factors, including manufacturing, distribution, and third-party supplier delays,” Pfizer spokesman Steve Danehy said, adding a number of products fully recovered this year. “Manufacturing sterile injectable medicines is incredibly complex, and requires highly sophisticated manufacturing equipment and processes, highly trained colleagues and major financial investment.”

This year, Pfizer said it would invest as much as $1.4 billion in the plants that make the drugs in order prevent future problems. Separately, the FDA is working on fixes with stakeholders in the health-care industry.

“We need a different policy, regulatory and business model to govern this space. It’s a model that’s going to require broad collaboration and dialogue among the many different parties who play a role,” said FDA chief Gottlieb. “And a model that’ll require new ideas.”

 

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