COLUMN ONE : Hurting Over High Drug Costs : A leading critic calls pharmaceutical companies ‘the robber barons of the health care system.’ The firms blame development expenses for lofty prices on exotic remedies.

WASHINGTON —  Louise Glickman has spent much of the last two decades lobbying scientists and politicians to put money and energy into finding a treatment for Gaucher’s disease, a debilitating genetic disorder that afflicts her two children. Finally, her efforts paid off in a new drug, Ceredase, which works.

But there’s a catch: Glickman’s children probably will never enjoy the benefits of Ceredase--not unless the family, which has limited medical insurance, can find a way to come up with the $400,000 it will cost each year to treat them.

For the Glickmans, an effective therapy remains as elusive as ever.

“It’s beyond unfair,” says Glickman, a New Orleans public relations executive who earns less than $40,000 a year. “It’s brutal. It’s brutal at least and immoral at best. No one can afford this drug.”

Ceredase, which was approved for use by the Food and Drug Administration this week, is only one example--albeit an extreme one--of the many wonder drugs that have been introduced into the marketplace in recent years at breathtakingly high prices. In many instances, the cost of these drugs has made them inaccessible, even to those with comfortable incomes and ample health insurance.

And the plight of others--the elderly who rely on Medicare, which does not cover prescription drugs; the estimated 30 million Americans without insurance, and those whose plans offer little or no prescription coverage--is even more hopeless.

Drug companies, however, say that the high prices are necessary to recover their research and development investments. While the industry does not divulge the profitability of individual products, it says its research and development costs average about $231 million for every drug produced.

Included in that figure are the costs of fruitless research for medications that never make it to market. For every 4,000 compounds that are explored or studied by companies, only one is approved as a prescription drug, industry officials say.

Moreover, they add, once a drug is developed, patents afford protection from competition for only 17 years, after which its maker is beset by generic alternatives that capitalize on the breakthroughs of the original company’s research at no cost.

So the issue becomes one of balance: how to give companies incentive to gamble on expensive research without producing breakthroughs that are beyond the financial reach of those who need them.

“We should be asking some tough questions about what is going on with respect to these prices,” says medical ethicist Arthur Caplan, director of the Center for Biomedical Ethics at the University of Minnesota. “We have a special moral obligation to take this seriously because lives really hang in the balance.”

Other High-Cost Drugs

Ceredase, one of the most expensive drugs ever produced, is not the only drug whose cost has raised serious questions about the pricing policies of the prescription drug industry. Among the others:

--EPO (for erythropoietin). Made by Amgen Inc., of Thousand Oaks, the drug treats anemia in kidney patients and in people with AIDS. The drug eliminates the need for frequent blood transfusions but costs about $8,000 a year.

--Clozaril, a recently approved schizophrenia treatment. The drug is manufactured by Sandoz Pharmaceuticals Corp. of East Hanover, N.J. Because it can cause a potentially fatal blood disorder in some patients, individuals taking the drug must undergo weekly blood monitoring, which hikes the overall cost. Where the drug and the monitoring initially cost about $9,000 a year, that price has since dropped to about $4,200.

--TPA (for tissue plasminogen activator), a heart drug made by Genentech Inc., of South San Francisco. It is taken once after a heart attack to dissolve blood clots and reduce the risk of further attacks. The cost of the single dose is $2,500 to $3,000.

--Human growth hormone, manufactured by both Indianapolis-based Eli Lilly & Co. and Genentech. The drug stimulates growth in short children and teen-agers and costs between $10,000 and $30,000 a year.

--AZT or zidovudine, made by Burroughs Wellcome Co. of Research Triangle Park, N.C. The only antiviral drug approved to treat AIDS, AZT delays onset of the disease in infected individuals and extends the survival of those with fully developed AIDS. When first introduced, the drug cost $8,000 to $10,000 a year. Since then, the company has cut the price, and studies have shown AZT to be just as effective at half the previous dose, further reducing its cost. A typical AIDS patient now pays about $3,000 a year.

--Aerosol pentamidine, made by Fujisawa USA in Rosemont, Ill., formerly LyphoMed Inc. This drug is used by AIDS patients to prevent pneumocystis carinii pneumonia, a life-threatening respiratory infection. The drug alone costs about $1,800 a year, but administering the drug, which requires a special device, adds $1,700 to the annual cost.

“Can we afford a drug-pricing policy whose bottom line is whatever the market will bear?” asks Sen. Albert Gore Jr. (D-Tenn.). “What is saving a life worth?”

Defense of Pricing

The prescription drug industry defends its pricing decisions as the cost of staying on the cutting edge of science.

“Last year our companies invested $8.1 billion in research and development; this year, they will invest $9.2 billion,” says Gerald Mossinghoff, president of the Pharmaceutical Manufacturers Assn. “What pays for that $9.2 billion is sales revenues. The percentage of sales that our companies put into research and development will be about 17% this year--about five times higher than the average industrial investment for research and development for other industries.”

Companies receive tax incentives for their research and development investments but the writeoff “doesn’t come anywhere close to the kind of money” companies spend, Mossinghoff argues.

Besides, he adds, once a patent expires, the law allows generic versions of brand name drugs to enter the marketplace as substantially cheaper alternatives--while generic companies foot none of the bills for research and development.

When generic drug companies enter the competition upon the expiration of drug patents, “they cherry pick,” Mossinghoff says. “They pick the high rollers--the drugs doctors know are successful.”

And, contrary to market logic, the availability of generics has not driven down the prices of brand name drugs. Although some health maintenance organizations and insurance plans have begun requiring the use of generics, many physicians, accustomed to prescribing brand name drugs, continue to do so, even after the generics appear.

“The patient can’t shop around,” says Abbey Meyers, executive director of the National Organization for Rare Disorders. “You don’t go out and choose the product. The doctor writes the prescription and you’re stuck. You don’t know whether he’s giving it to you because it’s a good drug--or because the drug salesman took him out to dinner last week.”

Impact on Elderly

Perhaps the hardest hit are the elderly, who receive no coverage for prescription drugs under Medicare. For three of four elderly Americans, prescription drugs are the largest out-of-pocket expense they have, according to the Senate Special Committee on Aging.

“Most elderly live on fixed incomes and a charge of $100 for a single prescription can pose a terrible economic burden,” says Rep. Henry A. Waxman (D-Los Angeles), chairman of the House Energy and Commerce subcommittee on health and the environment. “Although the elderly constitute 11% of the population, they consume roughly 30% of the drugs prescribed each year.”

Medicaid, the federal-state health insurance program for the poorest Americans, includes prescription drugs but coverage varies among the states. Not all prescription drugs are covered, and some states impose a cap on the number of prescriptions that can be filled.

“Then you’re on your own--and the poorest of the poor have to start making decisions: am I going to buy food this month or the drugs I need?” says Sen. David Pryor (D-Ark.), chairman of the Senate panel on aging and one of Capitol Hill’s most vocal drug industry critics.

But even those with otherwise-ample incomes can find themselves hard-pressed.

One physician, for example, an anesthesiologist who practiced in the New York suburbs for nearly 20 years, retired three years ago because of Parkinson’s disease. While working, his insurance covered the prescription drugs he needed; he was paying $3 for the $500 to $600 worth of drugs he used every month. When he retired, he lost the coverage.

Since that time, a newer and less expensive Parkinson’s drug has entered the marketplace. Still, he must pay for that drug--and the others he must take--on a now limited income, and frequently finds himself strapped.

In another case, Meyers, of the National Organization for Rare Disorders, says that she is trying to find help for an attorney suffering from a hereditary immune deficiency disorder whose medication costs $20,000 to $30,000 a year.

“He practices in a small firm and his employers have told him that he’ll be fired if he submits a bill to their insurance company, because it will raise rates for the rest of the group,” she says.

Some companies have made attempts to help patients in need. A few sponsor drug “giveaway” programs for indigent patients, but they are limited.

Genzyme Corp., the Cambridge, Mass., company that produces Ceredase, has launched an education program for insurance companies and other third-party payers in an attempt to persuade them to cover the cost of the drug, according to Jennifer Pierce, a company spokeswoman. The company also hopes to develop a plan to help the uninsured obtain the drug, she says.

Ceredase replaces an enzyme needed to keep fatty material from accumulating uncontrollably in the body. It is derived from human placental tissue and must undergo “a very rigorous and excruciating” manufacturing process that is extremely expensive, Pierce says.

“There is not a huge markup,” she says. “We are primarily recouping our manufacturing costs. We are not trying to gouge patients.”

She and others point out that the cost of not treating a disease is far more expensive than the cost of a drug that treats it.

“If you look at the overall health care dollar, as much as our critics would like to deny it, drugs amount to less than a nickel,” Mossinghoff, of the Pharmaceutical Manufacturers Assn., says. “It’s the most cost-effective form of therapy there is. You’re really lucky as a patient if there is a pharmaceutical that goes right to your problem and cures it. Otherwise, you’d be spending a lot more money in hospitals.”

He cites Clozaril, the schizophrenia drug. “Its price is very cheap when you consider that it could keep you out of an institution,” he says. “You’ve saved $90,000 to $100,000 in mental hospital fees.”

He adds: “Alzheimer’s disease costs the United States $80 billion a year, which is double the sales of the drug industry. There are 16 drugs now in the (research) pipeline for Alzheimer’s. One of those is going to be an effective treatment or cure. In terms of cold economic dollars, if one of those drugs will cut into the $80 billion, we will have earned our keep--just on that one disease.”

Many companies specialize in treatments for certain diseases. Not surprisingly, the most lucrative markets are the biggest ones--such as those for arthritis and hypertension--and these diseases draw a great deal of attention from drug makers.

But rarer illnesses offer less profit--and, therefore, are not the subjects of as much research. As a result, Congress passed a law in 1983 to encourage companies to devote more of their resources to so-called “orphan diseases.”

But critics of the industry insist that the companies are unnecessarily greedy. Revenues, they say, far exceed the companies’ research and development costs. Further, they argue, many of the same drugs that cost so much in the United States are sold far more cheaply overseas--where many countries control their prices. Critics charge that the multinational drug companies set their U.S. prices artificially high to compensate for the difference.

A 1987 study of 130 drugs by the Waxman subcommittee indicated that U.S. drug prices were higher than foreign prices in 79% of the comparisons.

Critics on Capitol Hill and elsewhere say that the industry could easily cut its prices if it didn’t spend so much on marketing and promotions and if it weren’t so intent on ensuring a high return for its stockholders.

“Drug companies spend a lot of money on advertising, promotional activities, junkets and assorted other activities,” says medical ethicist Caplan. “They subsidize every prize given to every medical student. They give away stethoscopes, note pads--you name it. They find out who their markets are early--in medical school--and they stay with them until they retire.”

Leery of Controls

Lawmakers are leery of imposing price controls as an answer to the dilemma. “We don’t want to hurt the chances for new advances that these companies do provide in progress and new drugs,” Waxman says. “On the other hand, these price increases are intolerable. We’re powerless.”

Pryor, the chairman of the Senate panel on aging, became angry after learning that drug companies were charging veterans and military hospitals, health maintenance organizations and certain other facilities as much as 40% less than they were charging Medicaid. He sponsored legislation--since signed into law--that now requires companies to give Medicaid their “best” price.

But Pryor says he now has evidence that many companies, in response, have eliminated their discounts and are “charging everyone the same high price.”

“They are so greedy,” Pryor adds. “They are the robber barons of the health care system.”

Ethicist Caplan says that insurance companies and other payers, instead of responding to high prices with “efforts to cut back coverage or restrict what can be prescribed,” should be asking drug companies “hard questions” about prices. He cites the case of AZT, whose manufacturer, Burroughs Wellcome Co., reduced its price after pressure from Congress and others. Radical AIDS activists staged numerous demonstrations at Burroughs headquarters and federal health agencies, even taking their disruptive protests to the floor of the New York Stock Exchange.

“They can cut the price and still make a profit,” he says. “They said it cost X--and then people threw blood on the stock exchange--and all of a sudden it cost X minus Y. There is no reason to presume that the price you see is the gold standard for what the price should be.”

Caplan has his own proposal--improbable as it is.

“I keep fantasizing we can slap a health excise tax” on certain prescription “frill” items, such as hair loss or wrinkle products, he says. “Then we can use that money to subsidize other drugs that are necessary.”

Staff writer Joel Havemann in Brussels contributed to this story.