A Price Hike for Nitrogen Mustard

The New York Times reported on the recent, staggering increase in the price of a very old chemotherapeutic drug, nitrogen mustard. The drug is used topically for the rare patients with cutaneous lymphoma. When it was manufactured and sold by Merck, the typical price, according to the Times, was $77.50 for a two-week supply.

But Merck sold the rights to nitrogen mustard to Ovation Pharmaceuticals. Ovation Pharmaceuticals' web-site states that the company's purpose is " Advancing medicines by developing, manufacturing, and marketing medically necessary branded pharmaceutical products that satisfy unmet medical needs." Another example of the products it supplies is Desoxyn, its brand of methamphetamine, which is indicated for attention deficit disorder with hyperactivity.

Merck still makes nitrogen mustard, but now Ovation markets it. According to the Times, as soon as Ovation took over sales of the drug, it raised its price to $548.01 for a two-week supply.

The Times noted that "the increases have caused doctors to question Ovation's motives...." The price increase was explained by Sean Nolan, Ovation vice president for commercial development, thus, "It's unfortunate that a price adjustment had to occur. Investment had not been made in these products for years." Yet, as per the Times, "he acknowledged that Merck still made Mustargen [nitrogen mustard] .... He said he was not sure when Ovation would begin producing the drugs, and a Merck spokesman said that Merck would continue to provide drugs to Ovation as long as necessary."

The Times noted that "industry executives increasingly point to intrinsic value of their medicine as justification for prices."

Why the intrinsic value of this 60 year old medication might have recently increased ten times is not obvious.

The Times also noted how drugs for cancer have recently become extremely expensive. For example, "most new cancer treatments are priced at $25,000 to $50,000 annually. In some cases, companies are pushing through price increases on already-expensive drugs. Last year, Genentech raised the price of Tarceva, a lung cancer drug, by about 30 percent, to $32,000 for a year's treatment."

The Times also noted "once a drug company sets a price, government agencies, private insurers have little choice but to pay it. The Food and Drug Administration does not regulate prices, and Medicare is banned from considering price in deciding whether to cover a drug. While private insurers can negotiate prices, they have limited leeway to exclude drugs from coverage based on price...."

I have two thoughts.

One is a hope that even if physicians have no direct power to challenge the pricing of this drug, they will remember how Ovation chose to price this drug when thinking about whether to prescribe another Ovation product.

The other is a question. Given that the whole rationale for managed care was controlling the costs of health care, why has it failed so miserably to control the costs of drugs? If, as the Times said, "private insurers can negotiate prices," why don't they? I suppose doing so may be difficult, given that much of pricing may be driven by Medicare, which is governed by an absurd, in my humble opinion, statutory prohibition of drug price negotiation. But why doesn't managed care at least try to negotiate down the most ridiculous drug price increases? Inquiring minds want to know.

Ironic Postscript: Yesterday, the Times also published an article suggesting that the nation's supply of ventilators (artificial respirators) will be woefully short if a bird-flu epidemic occurs. Meanwhile, MedPundit noted several stories about a global shortage of hospital beds. Perhaps if we paid more reasonable prices for drugs, there would be more money left over for basic health care.