The opioid crisis has grown exponentially - ravaging
communities and taking an estimated 64,000 lives each year – escalating into a
public health epidemic. In response to the increased availability of synthetic
opioids like oxycodone and fentanyl, the Surgeon General called
for expanded access to the opioid overdose antidote, naloxone, by using the
slogan: Be Prepared. Get Naloxone. Save
a life.
Naloxone is a compound which can literally cheat death, however
due to price increases of up to 600%, public agencies are unable to afford to supply
their first responders despite a federal mandate to do so. According to data collected by the FDA, the
price of generic naloxone—made by Hospira -- jumped
by 50% in January 2014. Amphastar, the
producer of a product that can be used intranasally, doubled
their price recently. And Kaleo, which developed
an ingenious “talking” naloxone auto-injector, known as Evzio, increased
their price from $575 at market entry to $4500 for a two-pack.
While the government could use existing legal authority to
slash prices for the lifesaving naloxone, there is more to reducing drug costs
than meets the eye. Medicare is legally prohibited
from negotiating prices with drug companies. By employing a sales force to
encourage doctors to sign off on paperwork that Evzio was “medically necessary”,
Kaleo forced insurers and the federal government to foot the bill–Medicare
shelled out $142 million for Evzio over the last 4 years—due to exorbitant
price increases.
Secretary Alex Azar is contemplating
removing the “safe harbor” provision, which was added to the anti-kickback
statute of the Social Security Act by Congress in 1987. The provision was designed to support group
purchasing organizations, or GPOs, which got their start at the turn of 20th
century as hospital cooperatives. GPOs, it was thought, could score better
deals by buying medications in bulk, bringing down health care costs by
negotiating discounts with drug manufacturers.
But that’s not what happened.
Instead, the safe harbor provision led to an
institutionalized system of “pay-to-play” corruption that would be illegal in
any other industry. With only four GPOs supplying virtually all U.S. hospitals,
the competition to secure the exclusive right to supply each of those hospitals
with any given drug is fierce – and, thanks to the safe harbor provision –
dirty. Under the provision, pharmaceutical companies are forced to pay what
amounts to kickbacks to GPOs to win coveted supply contracts.
Drug shortages result because there’s little incentive for drug
companies to continue producing a particular drug after their competitor wins
the lucrative GPO supply contract. Relying on the lone contracted manufacturer then
increases the chance of experiencing a dangerous drug shortage.
In 2005, a bipartisan bill to repeal this obscure provision
was drafted by Senators Herb Kohl (D-WI) and Mike DeWine (R-OH), but the
legislation died in Subcommittee and has not been resurrected. Congress is well aware of the risk the safe
harbor provision poses to the American people, yet have proven loathe to
act. Why?
The answer lies in the power of the pharmaceutical lobby,
which spent $171.5
million in 2017 and boasts two lobbyists for every member of
Congress. Nine out of 10 members in the House and 97 of 100 U.S. senators accepted
campaign contributions from pharmaceutical companies seeking to impact
legislation, including both senators from Washington State. (As the ranking
member on the Senate’s committee on Health, Education, Labor and Pensions, Sen.
Patty Murray has yet to formally weigh in on the issue safe harbor repeal).
Return on investment for big pharma lobbying efforts has resulted
in nothing short of a windfall. By
ramping up lobbying
in 2008, Mylan –of Epi-Pen autoinjector fame—garnered legislation mandating the
placement of epinephrine autoinjectors in every school in America. By the
time President Obama signed the “EpiPen Law” in 2013, known as the School
Access to Emergency Epinephrine Act, Mylan secured themselves a market monopoly.
Initially, Kaleo created an Epi-Pen alternative to compete
with Mylan, but soon set their sights on a more lucrative, not-yet-exploited niche:
the opioid crisis. Company documents demonstrate
the Kaleo business model was restructured to “capitalize on the opportunity” of
“opioid overdose at epidemic levels.” Naloxone
--the lone antidote -- costs less than ten cents to produce, yet has become
cost-prohibitive to public agencies.
Using the Mylan roadmap, Kaleo successfully lobbied
the FDA for approval of their device for consumer use, then increased the price substantially. By the time fifty
states enacted laws mandating law enforcement and first responders to
carry naloxone to treat opioid overdoses, Kaleo secured
a market monopoly of their own. The drug supply landscape is more of a
coercive monopoly: the fees “kicked-back” to the GPOs are based on a percentage
of the charges; higher prices are in the best interest of the pharmaceutical
companies and the GPOs alike.
The bottom line is opioids are costing too many American
lives. Congress has the power to alter the course of the worst public health
crisis facing Americans by reigning in the pharmaceutical industry through
legislative intervention. Removing “safe
harbor” provision of the Social Security Act could save up to $30
billion annually and save 47 Americans from opioid overdose deaths
per day. We must push lawmakers to close
the pharmaceutical industry loophole before it is too late.