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Putting the Spotlight on High Drug Prices


A protest against the pricing of Merck's AIDS drug highlights the problem.

The JPMorgan Healthcare Conference (JPM) is expected to have a bit more than its usual level of excitement Tuesday (most industry insiders find the conference to regularly be a thrill-ride), when members of the AIDS Healthcare Foundation ban together to protest drug manufacturing giant Merck (MRK).

(See, Stocks to Watch at Biotech's Bellwether Conference)

The group plans to amass at the Westin St. Francis Hotel in San Francisco to show Big Pharma that its exorbitant pricing for its HIV/AIDS drug Isentress will not be tolerated.

Isentress was originally approved in October 2007 as a last resort treatment for HIV/AIDS patients who hadn't responded to other anti-viral treatments. Due to its status as a last-ditch effort, Merck was able to be a bit more flexible with its pricing (it had to make a profit on the drug somehow). Isentress pulled in $361.1 million in the full-year 2008.

In July 2009, the drug garnered further approval from the FDA to be a first-course treatment for patients who hadn't been previously treated with other medications, creating a much broader market (more than 33 million are infected by the disease worldwide).

(See, AIDS: Still a Problem, Still Big Business for Pharma)

The AHF plans to carry signs and banners that say "Shame on Merck" for the company's overpricing of Isentress, which costs $12,868 per patient per year. The price of Isentress for many government-assisted and AIDS Drug Assistance Programs is $8,088 per patient per year (AHF says this is three times more expensive than most commonly prescribed first-line treatments).

"Now that it has been approved for first-line treatment, there is no justification for Merck to price Isentress three times higher than other first-line AIDS drugs. It is pure greed," said Michael Weinstein, AIDS Healthcare Foundation President. "The unwarranted price of this drug is putting an unbearable strain on taxpayer-funded State AIDS Drug Assistance Programs (ADAP) and the thousands of people who rely on them. The limited funding available for these programs is being exhausted by the high cost of Isentress and other newer AIDS drugs. Several states are now unable to provide treatment to additional people who need it, and existing ADAP clients are at risk of losing access to their meds."

Yet, Merck isn't the only Big Pharma that's guilty of hiking up drug prices. A report released recently by the US Government Accountability Office showed that drug prices increased an average of 10% annually in recent years. In 2000, national spending for retail prescription drugs was $120.6 billion, compared to $227.5 billion in 2007.

The report also showed that "extraordinary price increases for brand-name drugs" contributed to the overall spending on drugs in the US, with almost 420 brand-name drugs jumping in price from 2000 to 2008. The GAO attributes these dramatic price jumps for some drugs to market exclusivity, patent protection, the limited availability of generics, and the size of the market for a given drug. Three therapeutic areas had the most price abuses amongst its drugs: cardiovascular, central nervous system, and anti-infective.

According to a report by the AARP done in 2007, Celgene's (CELG) leprosy treatment Thalomid had a price jump of 46% in 2007, while Genzyme's (GENZ) Renegal jumped 20.9% that year, and Biogen Idec's (BIIB) MS treatment Avonex increased 13%.

The protest by the AHF on Tuesday is part of an ongoing campaign against the pricing of Merck's Isentress. The foundation has testified in California and across the nation, prompting an inquiry into the company's pricing.
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