“We are all seeing skyrocketing pharmaceutical costs these days. This article highlights one of the many culprits in this tainted industry. Clearly, much reform is needed. If you haven’t reached your deductible yet OR are paying cash for your prescriptions, make sure you ask my staff to help you find our best cash price and/or physician-approved alternatives. It’s a jungle out there, but we’ll do everything in our power to advocate for your health care needs.”
There is a new price surge in the pharmaceutical industry—not for medications, instead for a limited number of government-issued vouchers that drug makers, including AbbVie Inc. ABBV -0.61 % and SanofiSA, SNY -1.49 % are buying to speed products to market.
Legal provisions enacted in 2007 and 2012 require the U.S. Food and Drug Administration to issue “priority review vouchers” as rewards to developers of drugs for rare pediatric conditions or tropical diseases, such as malaria. Congress intended the vouchers to encourage more research into underfunded diseases. Companies receive them when the FDA approves their drug for sale and can redeem them to speed FDA consideration of a subsequent drug for any disease.
The vouchers require the FDA to shorten its decision deadline to six months from the standard 10 months—potentially giving companies an extra four months’ worth of sales. The voucher doesn’t guarantee the FDA will approve the drug.
Because companies can also sell the vouchers, a lucrative secondary market has emerged. AbbVie agreed in August to pay $350 million for a voucher from United Therapeutics Corp. UTHR 0.44 % , which received it for developing a pediatric cancer treatment. That was $105 million higher than the previous voucher sale, and five times the first in July 2014, for $67.5 million.
An AbbVie spokeswoman called the voucher a “rare and valuable asset.” The company hasn’t disclosed how it plans to use it.
As the prices climb, the voucher program is attracting some criticism—including from the FDA. “These programs allow sponsors to ‘purchase’ a priority review at the expense of other important public health work in FDA’s portfolio,” such as reviewing applications for drugs that treat more serious conditions, an agency spokeswoman wrote in an email.
She added that the vouchers are typically redeemed to shorten reviews for drugs that wouldn’t otherwise be eligible for expedited consideration, a perk the agency grants for particularly cutting-edge medicines. And she noted that so far, the vouchers have been issued for drugs that were already under development—or approved for sale outside the U.S.—before the legislation was enacted.
Aaron Kesselheim, associate professor of medicine at Harvard Medical School, said the vouchers are windfalls for companies but may not be having their intended effect on research. Some companies receiving them weren’t heavily involved in the drugs’ development, he said.
“We don’t see any evidence that these vouchers have incentivized any needed research in this area,” said Dr. Kesselheim, lead author of an analysis of the voucher program published online Sept. 28 by the Journal of the American Medical Association.
He said it would be better for the government to increase its funding of early-stage research for tropical diseases and rare pediatric disorders. Or, he said companies should be required to demonstrate some degree of research investment in order to receive the vouchers.
Unituxin, the new treatment for neuroblastoma that won United Therapeutics a voucher in March, was initially developed by the U.S. National Cancer Institute, a federal agency, working with the Children’s Oncology Group, a research network. United Therapeutics signed a deal with NCI in 2010 to conduct late-stage clinical testing, and to manufacture and market the drug.
Andrew Fisher, deputy general counsel and chief strategy officer at United Therapeutics, said the company’s decision to co-develop Unituxin preceded the voucher program. United plans to use the proceeds from its voucher sale to fund additional research into rare diseases, he said.
Adding to the escalating prices: the vouchers have a scarcity value because only eight have been issued, and the pediatric-rare disease vouchers may not continue past 2016 unless Congress renews the program. Legislation was introduced earlier this year to make the program permanent but it hasn’t been passed into law.
The vouchers also can allow companies to leapfrog rivals to be first to market in a competitive new drug category, setting a price and beginning marketing before competitors do. A voucher recently helped Sanofi and partner Regeneron Pharmaceuticals Inc. REGN -0.66 % get to market first with a powerful new type of cholesterol drug known as a PCSK9 inhibitor. The companies agreed to pay BioMarin Pharmaceutical $67.5 million for the voucher in July 2014.
Sanofi and Regeneron beat Amgen Inc. AMGN 0.38 % to market with their drug, Praluent, even though Amgen applied for approval of its own PCSK9 drug first. The FDA approved Amgen’s Repatha in August. Both drugs cost at least $14,000 per patient annually and are expected to have multibillion-dollar sales.
In May, Sanofi agreed to buy another voucher from Retrophin Inc. RTRX 2.30 % for $245 million. The company hasn’t disclosed what it plans to do with it. A spokeswoman says the company has 13 drugs in late-stage development.
By Peter Loftus