Pharma overpricing is being brought to light. Source: Taxpayers Against Fraud

Lawmakers, outraged by what they call ‘extraordinary drug price increases,’ have asked the Government Accountability Office (GAO) to see if the increases are justified and have directed the Federal Trade Commission (FTC) to investigate a pharmaceutical company’s potential anti-competitive conduct for its product.

At issue is the decades-long practice by large pharmaceutical corporations of manufacturing drugs that are then sold to specialty companies, which in turn increases drug costs by staggering amounts.

Acknowledging that the Orphan Drug Act provides incentives to recoup research and development costs of drugs for niche markets, “at least a handful of drug companies have used this ‘status’ of orphan drugs to keep increasing costs — well beyond the costs of research, development and manufacturing,” said Sen. Amy Klobuchar, D-Minn., in her opening remarks to the Joint Economic Committee on “egregious price increases” in the pharmaceutical drug industry.
   
For example, Ovation Pharmaceuticals of Deerfield, Ill., increased the price of Indocin IV (indomethacin sodium), a drug used to repair a heart problem in some premature infants, from $100 to $1,875, according to Klobuchar. She has asked the FTC to investigate the company’s conduct for the product.

“Yet Indocin is an old drug,” testified Alan Goldbloom, president and CEO of Children’s Hospitals and Clinics of Minnesota, at the Joint Economic Committee hearing, according to FDANews. “It has been on the market for more than three decades, so this dramatic price increase cannot be attributed to the high cost of research and development.”

The price increases for Indocin illustrate how “one company has a monopoly and can use it to price-gouge,” he said. Indocin came on the market in 1965. When Ovation purchased it from Merck in 2005, its price per unit jumped from $108 to $1,500. Last year, Children’s Hospitals said it treated 110 babies with intravenous Indocin and was forced to absorb a $150,000 surge in costs.

“Unjustified pricing decisions are taking advantage of some of the most vulnerable members of our population, and driving health costs up unnecessarily,” said Goldbloom, who testified at the request of Klobuchar.

Similiarly, Questcor bought Aventis’ Acthar Gel--considered the gold standard in treating infantile spasms. After the purchase, the price leapt from $1,650 per vial to $23,269. “Even with good insurance, a 20-percent co-pay on Acthar Gel is more than many people’s mortgage payment, Goldbloom said.

Questcor said that it raised Acthar’s price “to the level required to ensure its availability.” The company added that it “struggled for years to keep the drug financially viable” and is “not aware of any patients who need the drug but have not been able to access it.”

Madeline Carpinelli, a University of Minnesota pharmacy research fellow, who also testified at the hearing, has found that, in the past two decades, one in 20 brand drug products from single sources had price increases of more than 100 percent at a single point in time, according to the Star Tribune. There were six price increases ranging from 1,000 percent to more than 3,400 percent.