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Tag: price gouging

How Congress Encouraged Big Pharma To Blackmail America

Reprinted with permission from DCReport.

The $2.2 trillion coronavirus relief bill that Congress hastily passed and Donald Trump signed into law deliberately creates new price gouging opportunities for drug companies.

Left out of the relief bill was language from a 1980 law that requires drug companies to charge "reasonable" prices for pharmaceuticals developed with government financial help. Companies that charge unreasonable prices, or hold back on making their inventions available, can be stripped of monopoly rights.

Without this language companies that develop coronavirus vaccines or cures using federal funding can jack up prices for any COVID-19 cure or vaccine with no legal limits. Imagine the price gouging possibilities for a life-saving vaccine or cure. All other countries with modern economies have laws to protect against price gouging.

The message to those who can't afford expensive vaccines and cures: Tough luck because if you get sick you may die.

Unless Congress and the Trump administration enact a new law to protect the public from price-gouging expect drug companies to charge the highest monopoly price that they can extract from government, health insurance firms and individuals. The message to those who can't afford expensive vaccines and cures: Tough luck because if you get sick you may die.

'March-In Rights'

The missing language is from the 1980 Bayh-Dole Act, named for two senators. It regulates the monopoly patent rights when inventions are developed with taxpayer funds. A reference to the 1980 law has been routinely included in numerous new laws over the past four decades to protect taxpayers and consumers. But not this time.

This power is known as a "march-in right" because our government can march in, take possession of the intellectual property needed to make a drug and then transfer it to other companies that promise to charge lower prices.

Any company that loses its patent monopoly this way can sue to determine how much money it is owed. What it cannot do is delay the taking of its intellectual property, a crucial power to act swiftly when lives are at stake.

Senator Elizabeth Warren (D-Mass.) is a proponent of using the Bayh-Dole Act to control drug prices, which in America are often multiples of what companies charge in Canada, Europe and Japan.

While seeking the Democratic party nomination Warren said repeatedly that were she to become president "I will use march-in rights." Trump has this power but has not exercised it despite his oft-repeated promise to bring down spiraling drug prices.

Stopping Bayer's Gouging

Just the threat of exercising our government's march-in rights persuaded Bayer, the big German drug and chemical company, to lower the price of a critical, and expensive, antibiotic during the anthrax crisis shortly after 9/11 in 2001.

Our government wanted to stockpile Bayer's Cipro pills after anthrax powder was found in letters sent to Congress and some news organizations. Bayer wanted to charge outrageously high prices.

The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, that Trump signed last month doesn't include Bayh-Dole safeguards.

Instead, it uses a different standard regarding research and development grants from taxpayers, called Other Transaction Authority or OTA.

OTA has just begun popping up in government grants to private industry in recent years, according to the international corporate finance adviser BDO.

That the relief bill applied the Other Transaction Authority rather than the Bayh-Dole language means that someone knew what they were doing. It means someone or some group set out to enable profiteering by drug companies that accept federal grants to develop cures and vaccines for the coronavirus.

Because of the way the bill was rushed through Congress without hearings we don't know which senators, representatives, Trump advisers or most likely Big Pharma lobbyists saw to it that the bill would enable price gouging.

Another Bill With Price Gouging Potential

The OTA language is also in another law bill, the proposed Take Responsibility for Workers and Families Act. That bill, announced by Speaker Nancy Pelosi and sponsored by Rep. Nita Lowey of New York, a Democrat, was sent to the House Appropriations Committee.

The Washington think tank KEI (Knowledge Ecology International) was first to spot the Other Transaction Authority language in a CARES Act draft. KEI Counsel Kathryn Ardizzone wrote, "The House coronavirus stimulus bill contains a troubling provision concerning the use of Other Transaction Authority to fund coronavirus diagnostics. The provision appears to authorize the Department of Homeland Security (DHS) to award $2.2 billion to private sector companies to develop coronavirus screening measures without assurances there will be the public interest protections that currently exist, even if under-utilized, in the Bayh-Dole Act."

On March 23, KEI sent a letter to Pelosi, warning that Senate's draft version of the coronavirus funding bill would expand the authority of a division of the Health and Human Services Department to enter into "Other Transactions" for R&D funding agreements in the case of public health emergencies without protecting taxpayers' investment in government-funded research and development.

KEI and its founder, James Love, have been asking the government for years to invoke march-in rights to lower pharmaceutical prices for life-saving medicines, including some for HIV/AIDS, prostate cancer and for rare and deadly childhood diseases like Duchenne Muscular Dystrophy. KEI confirmed they are talking with key senators and representatives who support members march-in rights.

Abusing 'Orphan Drug' Status

One big drug company, Gilead Sciences, already tried to profiteer off the CARES Act.

FDA officials authorized a windfall for Gilead Sciences by granting "orphan drug" status for its old anti-viral drug Remdesivir. That status gives the company a seven-year sales monopoly and a basket of tax breaks.

A host of Trump administration officials including the commissioner of the Food and Drug Administration expressed shock that someone had granted this lucrative benefit, insisting they knew nothing about it or who was responsible.

Gilead developed Remdesivir for fighting the Ebola virus, which kills quickly. The company received some $79 million from our federal government.

Orphan drug benefits are supposed to go to companies who agree to develop drugs that treat "rare diseases." Our government's standard for rare disease is that there are fewer than 200,000 diagnosed cases nationally, too few customers to make profitable development of a drug.

The absurdity here is that Gilead won approval for a drug for a pandemic that could reap more than $1 billion for the company in a year according to The Motley Fool.

The gift to Gilead was particularly upsetting because the company has been racking up hundreds of millions of dollars in sales from its high-priced Hepatitis C drugs, which were also developed using millions of taxpayer dollars.

Within 24 hours of that orphan drug surprise making headlines, Gilead announced that it had asked the FDA to rescind the orphan drug status for Remdesivir.

However, it is still unknown whether the Trump administration, which is supporting Gilead's efforts to prove Remdesivir works for COVID-19, will demand Gilead charge an affordable price.

But that's just one example we know about.

Desperate States Pay Huge Markups In Competition For Medical Supplies

Reprinted with permission from ProPublica.

With the coronavirus outbreak creating an unprecedented demand for medical supplies and equipment, New York state has paid 20 cents for gloves that normally cost less than a nickel and as much as $7.50 each for masks, about 15 times the usual price. It's paid up to $2,795 for infusion pumps, more than twice the regular rate. And $248,841 for a portable X-ray machine that typically sells for $30,000 to $80,000.

This payment data, provided by state officials, shows just how much the shortage of key medical equipment is driving up prices. Forced to venture outside their usual vendors and contracts, states and cities are paying exorbitant sums on a spot market ruled by supply and demand. Although New York's attorney general has denounced excessive prices, and ordered merchants to stop overcharging people for hand sanitizers and disinfectant sprays, state laws against price gouging generally don't apply to government purchases.

With little guidance from the Trump administration, competition among states, cities, hospitals and federal agencies is contributing to the staggering bill for fighting the pandemic, which New York has estimated will cost it $15 billion in spending and lost revenue. The bidding wars are also raising concerns that facilities with shallow pockets, like rural health clinics, won't be able to obtain vital supplies.

As the epicenter of the pandemic, with about 40 percent of the nation's coronavirus cases, New York state is especially desperate for medical equipment, no matter what the tab. "We know that New York and other states are in the market at the same time, along with the rest of the world, bidding on these same items, which is clearly driving the fluctuation in costs," budget office spokesman Freeman Klopott said in an email.

The Office of General Services, New York's main procurement agency, declined to say which sellers were inflating prices for essential medical gear. "At this moment in time the New York State team is focused on procuring goods and services based on current market conditions," OGS spokeswoman Heather Groll wrote in an email. "There will be time to look back and pull together info on all this, that time will be when the pandemic is over."

New York isn't the only government paying whatever it takes — and keeping quiet about who's overcharging. Houston Mayor Sylvester Turner told reporters last week that he authorized paying $4 per N95 mask and still lost the bid. Turner's spokeswoman Mary Benton said that price was commonplace but declined to provide further details.

"What Mayor Turner mentioned was not an isolated incident but rather the norm for today's extreme demand on masks," Benton told ProPublica. "Given the urgency of the city's COVID-19 response and the focus on doing the work, the need for masks and other supplies, at this time we see no value in publicly calling out other cities or companies by name."

That same price was apparently too much for the U.S. Coast Guard. It ordered 1 million N95 face masks for $5 apiece on March 17, then downgraded the order to 200,000 masks, before canceling altogether, according to federal procurement databases and interviews with the contractor, Clean Harbors.

Chuck Geer, the company's senior vice president of field services, said Clean Harbors doesn't manufacture masks. It simply offered to pass along the supplies from a vendor with access to 200,000 masks, Geer said. The Coast Guard didn't return requests for comment.

In his daily press conferences, New York Gov. Andrew Cuomo has often complained about having to compete with states and the Federal Emergency Management Agency for personal protective equipment, and ventilators for patients in respiratory failure. "It's like being on eBay with 50 other states bidding on a ventilator," Cuomo told reporters on Tuesday. "And then, FEMA gets involved and FEMA starts bidding! And now FEMA is bidding on top of the 50! So FEMA is driving up the price. What sense does this make?"

A FEMA spokesperson said that "if a bidding conflict does arise, we will work closely with the state to resolve it in a way that best serves the needs of their citizens." FEMA has not disclosed the prices it has paid for supplies and equipment during the pandemic.

Typically, New York state buys a wide range of medical supplies from a list of approved distributors, which agree to provide those goods at a set price. Contracts are negotiated in bulk and over the long term, with public solicitations that generate multiple competitive bids.

That changed with the coronavirus outbreak. New York state invited anyone with needed supplies to sell them to the state, which means that prospective vendors can ask whatever prices the market will bear. Now, after running through their inventory, vendors are passing on higher costs from their own suppliers.

Hackensack, New Jersey-based Shield Line LLC, a recently approved New York state vendor, has a price list that includes 3.5 cents per glove and 3 cents for a simple surgical mask. But its CEO, Joe Kastner, says he has mostly sold out. If New York, which hasn't bought from him yet, was to order medical gear now, he might have to raise his prices, he said. He gets some of his products from Chinese companies, which reduced exports at the height of the epidemic there and are now resuming sending supplies to the U.S. — but at a higher price. "In some cases the cost is 15 to 20 times higher," Kastner said.

Neither federal nor state law accounts for a situation in which government agencies at all levels are vying with each other for the same goods. "The government has in normal times a lot of things to protect it, including lengthy contracts and oversight," said Justin Oberman, a former Transportation Security Administration official who now consults with businesses trying to navigate the federal procurement process. "In this case, raised voices may end up carrying the day."

Normally, there's no such crime as price gouging. In most states, it's only illegal during a declared state of emergency. During the current crisis, New York and other states have activated their price gouging statutes. However, most of these laws only apply to the sale of consumer goods and services, not to purchases by states or by private or nonprofit businesses, said Gretchen Jankowski, a commercial litigation attorney with Buchanan Ingersoll & Rooney. In order to go after a company for price gouging the state in Michigan, for instance, prosecutors would have to prove price fixing or fraud — a much higher bar.

Price gouging laws in New York state and New York City do not apply to state and city purchases, such as the $248,881 X-ray machine. While X-rays aren't recommended to diagnose COVID-19 patients, they are often used to assess how much damage the disease has done to a patient's lungs. Portable machines are more desirable than fixed machines because they help reduce the spread of infection. Caregivers don't have to bring patients to an X-ray room; the machine comes to them.

New York is paying bloated prices for another reason: Large national distributors are reluctant to steer more equipment to states with the most coronavirus cases. For fear of being accused of favoritism or even collusion, and in order to prevent stockpiling, they've put all of their customers on the same "allocation," or what a customer purchased in the past. Distributors say the federal government should step in to help them adjust those allocations based on need.

"Only the federal government has the data and the authority to provide this strategic direction to the supply chain and the healthcare system," Health Industry Distributors Association President Matthew Rowan wrote to FEMA administrator Peter Gaynor last weekend.

Dozens of cities have signed on to a letter coordinated by the nonprofit Public Interest Research Group asking the federal government to designate a "medical equipment czar" who would buy all the supply and fulfill requests from local jurisdictions. A bill sponsored by Sen. Chris Murphy, a Connecticut Democrat, would do the same.

WIthout federal intervention, states and hospitals may only become more vulnerable to the demands of brokers and speculators outside the normal supply chain, said Chaun Powell, vice president for strategic supplier engagement at the national health care consultant Premier Inc., which helps negotiate contracts for hospitals and health systems.

"The more COVID patients they get, the more masks they're going to burn," Powell said. "They're getting desperate because they're running out faster, so they're willing to pay."

How Can A CEO Feel Good About Being Vile?

Corporate price gouging is never nice. But gouging people on the price of medicines they rely on to stay alive is worse than not nice — it’s predaceously evil.

And if you think corporate morality can’t go lower than that, how about gouging people on the price of a life-saving medicine in order to jack up the personal pay of a drug maker’s CEO? That’s the bottom level of grotesque immorality where Heather Bresch dwells. She is chief executive of Mylan, a pharmaceutical profiteer that markets the EpiPen medical device, which literally is a lifesaver for people who suffer deadly anaphylaxis allergy attacks.

These allergy attacks kill nearly 200 people a year in the U.S. alone. Within seconds, something as common as peanuts or a bee sting can cause sever rash, swelling of the airways, drops in blood pressure, shock, and if not treated right away, death. So, naturally, we would want to increase access to the life-saving medicine that prevents these attacks, right?

Increasing that access is hard to do at today’s price. For years, a two-shot packet of EpiPens cost under $100, but Mylan bought the rights to the injectable drug in 2007, gained monopoly control of the market, and in 2012 suddenly began sticking dependent patients again and again with drastic price hikes. Now, the two-pack averages more than $600, with some paying above $900!

Drug makers routinely claim they must charge high prices to recoup their cost of developing their products — but Mylan didn’t develop the EpiPen, taxpayers did. The original research was initiated by the Pentagon back in 1973. Today, the device and the medicine in it cost Mylan only a few dollars to produce, and the product itself is essentially unchanged from when Mylan bought it. So the company’s only real contribution to the EpiPen has been to raise its price by more than 600 percent — a shameful act of sheer profiteering that rips off hundreds of thousands of users and endangers the lives of those families who simply can’t afford it.

Mylan’s CEO, the one responsible for this price gouge, regards herself as a self-made corporate success story — a woman who came out of hard-scrabble West Virginia and scrambled to the top of the food chain at Mylan. “There is a work ethic and grit about [West Virginia] that allows me to help make a difference,” Bresch told the New York Times.

Well, yes, grit, hard work — and having the advantage of being the daughter of the state’s former governor and current US Senator, Joe Manchin III. Take the MBA degree she got from West Virginia University, an academic credential bestowed on her 10 years after she left the school, having completed only about half of the coursework required to get a degree. The state university later conceded that Bresch was awarded this business degree… well, because her father was governor at the time, overseeing the school’s budget. It’s this sort of ethical “grit” that Mylan’s chief exec has employed to pick the pockets of thousands of vulnerable customers who rely on EpiPen.

Heather’s greed has sparked a furious public backlash, leading to congressional investigations. But, again, her “grit” might pay off, for she has bought off several top allergy-patient advocacy groups who are not backing the people. Why? Because she’s been dispensing millions of dollars to them in PR grants, making them “allies” in her blatant price-gouging scheme.

One thing that has risen higher than EpiPen’s price: CEO Heather Bresch’s paycheck. It’s up by 671 percent since 2007, and last year alone she pocketed $18.9 million! But I wonder — is that enough to make her feel good about being so vile? Of Course, Congress and the courts will do nothing to deter her and the other Big Pharma gougers — but surely the lowest level of Dante’s Inferno has rooms reserved for all of them.

Story Not Over In EpiPen Scandal

So the seller of the EpiPen is now going to offer a generic alternative costing 50 percent less. The Mylan drug company has been drowning in public outrage for jacking up the list price of an EpiPen two-pack from about $100 to as high as $600 over nine years. The EpiPen is a lifesaving injection device for people suffering a severe allergy.

Story not over, as much as Mylan would like it to be. Story not over by a long shot.

Why did the Mylan execs raise the price of an old treatment sixfold? Because they could get away with it.

Why could they get away with it? Because the United States Congress let them. The U.S. is the only advanced country that doesn’t routinely negotiate drug prices with the makers. (The Department of Veterans Affairs and Medicaid are exceptions.)

Mylan surely didn’t want this scandal leading to serious efforts in Washington to start regulating what drug companies may charge the American people. Better to stage this semi-retreat and change the subject.

Note that this is not an ordinary take-it-or-leave-it consumer product. For people severely allergic to spider bites, bee stings, nuts, eggs or shellfish, it’s take it or possibly die.

Our elected representatives have tied the American consumer down, belly up, to accept corporate abuse that other countries would not tolerate. Mylan showed its “thanks” by incorporating in the Netherlands to avoid U.S. taxes.

When the EpiPen price backlash hit full force in the U.S., the Canadian government simply reassured its citizens: Don’t worry. An EpiPen still costs only about $100 in Canada.

Mylan’s initial response to public anger was a program offering to help some patients with out-of-pocket costs. These patient-assistance deals are basically PR stunts, charitable gestures for which Americans are supposed to feel grateful.

Mylan CEO Heather Bresch tried to distinguish herself from the soulless drug industry vampires who infamously bled desperate patients, taxpayers and buyers of insurance. That would be Martin Shkreli, who hiked the price of a 62-year-old HIV drug by 5,455 percent, and J. Michael Pearson, whose Valeant Pharmaceuticals raised the price of a lifesaving heart drug 525 percent in one day. Bresch is not different, only smoother.

In an interview on CNBC about the EpiPen price hike, Bresch said, “Look, no one’s more frustrated than me.”

“But you’re the one raising the price,” the interviewer gasped. Perhaps she isn’t smoother.

Defenders of the status quo argue that competition is the ticket to lower drug prices, not a more assertive government. They blame the federal Food and Drug Administration bureaucracy for hindering would-be rivals. Some criticize the excessive monopoly rights the U.S. government grants drug companies.

They are not entirely wrong. More competition would help. But the fact remains that an EpiPen two-pack costs only about $85 in France, a fraction of the new $300 wholesale list price “deal” Mylan is now offering Americans — and it’s not because drugmakers are tripping over one another to offer competing products.

The real villain of the piece is a Congress that lets these companies prey on Americans. Congress actually forbade the government to negotiate drug prices on behalf of Medicare patients. (For the record, Bresch is the daughter of Sen. Joe Manchin.)

The injuries to American drug consumers continue piling up. Over the past 15 years, the average price of new cancer drugs in the United States has risen five- to tenfold. Cancer drugs now cost about twice as much in this country as they do in Canada.

Americans should be asking candidates for Congress whether they support government intervention against obscene drug prices. Until that happens, this disgraceful story will not be over.

Follow Froma Harrop on Twitter @FromaHarrop. She can be reached atfharrop@gmail.com. To find out more about Froma Harrop and read features by other Creators writers and cartoonists, visit the Creators webpage at www.creators.com.

Photo: EpiPen auto-injection epinephrine pens manufactured by Mylan NV pharmaceutical company for use by severe allergy sufferers are seen in Washington, U.S. August 24, 2016.  REUTERS/Jim Bourg

Why Mylan’s Alleged Solution To Its EpiPen Price-Gouging Scandal Is A Scam

Published with permission from AlterNet.

The pharmaceutical giant Mylan has a public uproar on its hands over its 500 percent price increase for a life-saving device known as EpiPen, which delivers emergency shots of the hormone epinephrine to treat potentially deadly anaphylaxis.

In response to the Martin Shkreli-style PR disaster, the company announced Thursday it has devised a supposed solution to the prohibitively high costs of the essential medicine. According to a statement from the corporation, the company plans to “further enhance access to EpiPen” by establishing a discount card and patient assistant system. Here’s how it’s described:

The company is reducing the patient cost of EpiPen® Auto-Injector through the use of a savings card which will cover up to $300 for their EpiPen 2-Pak®. For patients who were previously paying the full amount of the company’s list price for EpiPen®, this effectively reduces their out-of-pocket cost exposure by 50%. Mylan also is doubling the eligibility for its patient assistance program, which will eliminate out-of-pocket costs for uninsured and under-insured patients and families as well.

However, there is a key problem. The reform will not change the base-level cost of EpiPen for consumers. Since Mylan acquired EpiPen from Merck KGaA in 2007, it has hiked the price from $93.88 to $608.61. Under the company’s new plan, the dramatic price increase will not be reversed.

The high price is exacerbated by the fact that EpiPens generally have to be replaced annually, due to expiration.

Robert Weissman, the president of the corporate watchdog organization Public Citizen, was not impressed by the company’s supposed solution. “If the company wants to calm public outrage over its contemptible and unconscionable price spikes for EpiPens, there’s only one course of action: actually lower the price,” he said in a statement released Thursday.

“Coupons, discount cards and patient assistance programs are a false solution for consumers hit with gigantic out-of-pocket costs,” Weissman continued. “First, many consumers will not use the coupons or the programs. Second, many consumers with high deductibles or no insurance will still need to pay far too much for EpiPens—$300 for a set of two—a problem made worse by the facts that many families purchase multiple sets of EpiPens and that EpiPens must be replaced every year.”

Ida Hellander, director of health policy and programs at Physicians for a National Health Program, told AlterNet that she agrees.

“This is not a solution at all,” said Hellander. “Pharmaceutical companies do this for a lot of products. They say that if anyone needs help, we will provide assistance. But they make the guidelines about who can be helped and under what circumstances. And there are so many hoops to jump through that it is a totally inadequate, false solution.”

“The real solution,” said Hellander, “is that they need to drop the price dramatically, but of course they are not going to do that because they are having record profits, and that is their goal. Voluntarily they are not going to do anything. This is another reason we need a single-payer health system where we can negotiate prices with drug companies.”

In Canada, where pharmaceutical prices are subject to regulation by the Patent Medicine Prices Review Board, EpiPen sells for just over $100 per device, distributed by Pfizer Canada via a license from Mylan. According to Weissman, even $100 per pen is “an excessively high price, but at least within the bounds of reasonability.”

EpiPens are commonly used by people with life-threatening allergies, with nearly 4 million prescriptions written last year alone. The spike in prices is forcing people living with allergies, as well as EMTs and other first responders, to resort to more affordable manual syringes—a development that doctors warn presents public health dangers, including an increased risk of the wrong dosage.

Meanwhile, according to Hellander, “you see people hanging on to old EpiPens, not getting new ones when they expire or not having them at all.”

While the price of EpiPen has climbed dramatically, this spike has been outpaced by the salaries of top executives. Heather Bresch, the CEO of Mylan, saw her compensation jump 671 percent from 2007 to 2015.

Sarah Lazare is a staff writer for AlterNet. A former staff writer for Common Dreams, she coedited the book About Face: Military Resisters Turn Against War. Follow her on Twitter at @sarahlazare.

Photo: EpiPen auto-injection epinephrine pens manufactured by Mylan NV pharmaceutical company for use by severe allergy sufferers are seen in Washington, U.S. August 24, 2016.  REUTERS/Jim Bourg