(Bloomberg) — Colchicine, a gout remedy so old that the ancient Greeks knew about its effects, used to cost about 25 cents per pill in the United States. Then in 2010 its price suddenly jumped 2,000 percent.
That’s just one of the side effects of a U.S. Food and Drug Administration (FDA) plan to encourage testing of medicines that have been around longer than the modern FDA itself, and so have never gotten formal approval. Companies that do the tests are rewarded with licenses that can temporarily give them monopoly pricing power as most rivals are eased or kicked off the market. The result has been a surge in the cost of drugs used in treatments from anesthesia to heart surgery and eye operations.
It can bring big paydays for the producers. URL Pharma, the small Philadelphia drugmaker granted rights over colchicine, was bought for $800 million by Takeda Pharmaceutical Co. in 2012. Asia’s biggest drugmaker has since brought in $1.2 billion in revenue from the branded drug, Colcrys, which went on the market at a wholesale price of almost $6 a pill. Takeda says testing for FDA approval made the drug safer.
But patients and hospitals are feeling the pinch, and politicians have begun to notice. Hillary Clinton’s recent promise to address the issue sent pharmaceutical stocks plunging. Critics say the FDA plan lets entrepreneurs make windfall profits on drugs where there was never much concern about safety or efficacy.
In many cases, the program “almost had the opposite effect as intended,” said Joseph Biskupiak, a professor at the University of Utah College of Pharmacy. “The only drugs that got studied are the ones that don’t have a problem.”
The FDA’s rationale is that some drugs have never been measured against modern safety standards. The program “has been a success” that has removed dangerous drugs from the market, said Michael Levy, deputy director in the compliance office of the FDA’s drug evaluation unit.
The agency acknowledges that approving branded versions of old generic drugs may make them more expensive when a sole manufacturer remains to make a medication, but says that’s outside its remit. “FDA does not regulate according to economic factors, nor do we have control over drug pricing,” spokesman Christopher Kelly said.
The FDA program, which got under way in 2006, is only one reason why prices of old generic drugs have risen. Others include mergers that reduced competition, and a business strategy by some drugmakers of acquiring niche medicines and raising prices sharply, even without any rebranding.
A price survey of more than 21,000 generic drugs for Bloomberg News by DRX, a unit of Connecture Inc. (Nasdaq:CNXR) that tracks drug prices, found that more than 3,500 have doubled or more since late 2007, ranging from basic chemotherapy medicines to old antibiotics.
John Lewin, director of the critical care and surgical pharmacy at Johns Hopkins Hospital in Baltimore, said in many cases there are no obvious benefits to offset the higher prices.
“We’re not paying for innovation, we’re not paying for fewer side effects, and we’re not paying for better care,” he said. “We’re paying for somebody’s business model to make a profit.”
Glenn Spann, a longtime user of colchicine for his gout, says he never paid more than $10 a prescription — until he was hit with a $300 bill when his insurer stopped covering the treatment after its price spiked. “There is no justification for it,” said Spann, a 55-year-old self-employed artist in Culver City, Calif. “There is nothing different except the marketing,” and the ownership.