When American David Armstrong was diagnosed with myeloma cancer, he set out to understand why a single pill of Revlimid cost the same as a new iPhone. He had covered high drug prices as a reporter for years, but what he discovered shocked even him, he revealed in his investigation, published in ProPublica.
He writes:
A doctor at the hospital first told me I would probably take a thalidomide drug as part of my treatment. That couldn’t be possible, I said.
I knew the story of thalidomide, or thought I did. It represented one of the darkest chapters in the history of modern medicine, having caused thousands of severe birth defects after it was given to pregnant women in the 1950s and 1960s. The drug was banned in most of the world, and the scandal gave rise to the modern-day US Food and Drug Administration.
But it turns out the drug once relegated to a pharmaceutical graveyard had new life as a cancer fighter.
That drug I take is called Revlimid – a derivative of thalidomide, a slightly tweaked version of the parent compound.
Revlimid is now one of the bestselling pharmaceutical products of all time, with total sales of more than $100bn. It has extended tens of thousands of lives, including my own.
But Revlimid is also extraordinarily expensive, costing nearly $1 000 for each daily pill. (Although, I later discovered, a capsule costs just 25 cents to make.)
That steep tab has put the drug’s lifesaving potential out of reach for some cancer patients, who have been forced into debt or simply stopped taking the drug. The price also helps fuel our ballooning insurance premiums.
For decades, I’ve reported on outrageous healthcare costs in America and the burden they place on patients. I’ve revealed the tactics used by drug companies to drive sales and keep the price of their products high.
Even with my experience, the cost of Revlimid stood out. When I started taking it, I’d look at the capsule and consider the fact I was about to swallow something costing about the same as a new iPhone. The price has been hiked 26 times since it launched.
But no one has pieced together the full account of what the drugmaker Celgene did, how federal regulators failed to rein it in and what the story reveals about unrestrained drug pricing in America.
Dying
My journey started with a New York City lawyer Beth Wolmer on a quest to give her dying husband Ira a chance.
They found Dr Bart Barlogie in Arkansas who been recruited to the University of Arkansas for Medical Sciences from the MD Anderson Cancer Centre in Houston, who had been having some success with a novel approach that put patients through two stem cell transplants a few months apart, which he called a tandem stem cell transplant. With a transplant, a patient is bombarded with high-dose chemotherapy to kill the cancerous plasma cells. The patient is then infused with healthy stem cells that travel to the bone marrow.
The intense chemotherapy can be gruelling and poses a small risk of death.
Ira underwent three transplants. Each time, he relapsed. By 1997, after two years of treatment, Ira’s thick black hair was gone. He lost weight. Then he had a stroke. His kidneys failed and required dialysis. He developed pneumonia and had to be intubated.
Beth was determined to keep him alive long enough for their toddler daughter to remember him, and applied her lawyer’s tenacity to the case. She pored over medical journals and peppered oncologists with questions about why what they were trying wasn’t working or quizzing them about a promising study. When doctors told her there was nothing more they could do for her husband, she refused to accept it.
By late 1997, Ira was dying and Beth was desperate.
A researcher told her about the work of Dr Judah Folkman, a surgeon and researcher at Boston Children’s Hospital. Folkman believed the growth of cancerous tumours could be stunted by starving them of a supply of new blood vessels.
Folkman was a workaholic who, when he wasn’t in the operating room or the research lab, was travelling the world to promote his novel theory of how to attack cancer. Peers had ridiculed his idea since he first proposed it in the 1970s. The prevailing belief at the time was that tumours didn’t need a new blood supply to grow.
A young researcher in his lab, an ophthalmologist named Robert D’Amato, was at work on the top question Folkman had posed. Could they come up with a drug, in pill form, that blocks the growth of new blood vessels?
Folkman has since died, but D’Amato still works at Boston Children’s Hospital, where he has his own lab and holds the Judah Folkman Chair in Surgery. Now in his early 60s, D’Amato told me he had set out to find existing drugs that block blood vessel growth.
He came up with a list of 10 drugs, topped by one with a devastating history: thalidomide.
Deadly
Beginning in the 1950s, pregnant women in Europe, Australia and other countries were frequently prescribed thalidomide as a treatment for morning sickness and to help them sleep. The drug was thought to be harmless but was eventually linked to birth defects in more than 10 000 babies, who were born without limbs or with shortened limbs, malformed hands, disfigured faces and damage to internal organs. Nearly half died within months of being born.
By the early 1960s, the drug was widely banned, considered a shameful chapter in the history of pharmaceuticals. It was never sold in the US, thanks to the unwavering objections of a resolute reviewer at the FDA named Frances Oldham Kelsey.
The close call, however, prompted Congress to require more rigorous safety and efficacy data from drug manufacturers and empower the FDA to monitor the industry more closely.
D’Amato theorised that the thalidomide birth defects were the result of the drug stopping the growth of new blood vessels which the foetus needs to develop. D’Amato did more research and realised thalidomide needs to first be broken down in the body to have an effect on humans. He kept experimenting and in 1994 published a paper finding that thalidomide had “clear implications” for treating tumours.
Barlogie agreed to test it on Ira and two other patients who were out of treatment options in early December. The drug did not work for Ira. He died on 10 March 1998, aged 38.
It is unclear what happened with the second patient. The third patient, however, started to get better.
His name was Jimmy. Little more is known about him except that he was a patient of another oncologist at the hospital, Dr Seema Singhal, and near death before he started the drug.
‘Violent arguments’
Word of Jimmy’s stunning recovery in Arkansas quickly made its way to the offices of Celgene Corp, which had acquired the rights to thalidomide patents held by researchers at Rockefeller University in 1992. The company, which was new to pharmaceuticals, planned to use the experience of obtaining FDA approval for thalidomide to develop other drugs.
“It wasn’t meant to be a blockbuster,” said Sol Barer, who started at the company in 1987 and later became CEO.
When Celgene announced plans to develop the disgraced drug for new uses, the only analyst following the company on Wall Street dropped coverage and told Celgene officials they didn’t know what they were doing.
The company thought the largest market would be as a treatment for Aids patients experiencing dangerous weight loss. To win approval of the drug, however, Celgene selected a use that was already in practice in parts of the world for a small group of patients.
In July 1998, the FDA approved thalidomide for the treatment of a painful complication of leprosy. It was a momentous decision, coming just a few decades after the drug caused so much harm.
The market for leprosy was tiny, but what happened with Jimmy in Arkansas changed everything for the company.
Gathering
The Arkansas doctors quickly got approval to conduct a larger experiment funded by a grant from the US National Institutes of Health.
Now, in December 1998, they were ready to share their initial findings at the annual meeting of the American Society of Haematology.
It had been three decades since a new therapy for multiple myeloma had been approved, and there was a buzz among the oncologists gathered for the conference.
The 89 patients in the study were high-risk cases who had undergone prior treatment. They were patients who, like Ira, had run out of options. Now, after thalidomide treatment, one-third had declines in myeloma activity.
Those were stunning numbers, unlike anything seen before in the treatment of multiple myeloma.
Treatment works
Some patients wait months for care. I was lucky enough to meet my oncologist within weeks. He had a script for Revlimid waiting, part of a regimen of four drugs I would take as standard induction therapy, and I was able to start it within days.
The initial dose of Revlimid cost $18 255 for a month’s supply, and my insurance covered the cost.
Within a month, my blood tests showed a massive drop in a key cancer indicator.
My pain gradually subsided too. By the end of April, the pain was a 3 or 4 instead of the usual 9 or 10.
Piggy bank
The discovery in Arkansas made thalidomide, which Celgene sold as Thalomid, an instant hit. As a result, Celgene’s revenue increased nearly sevenfold to $26.2m in the year after the presentation. It sold its thalidomide pills for $7.50 each.
From those modest beginnings, Celgene took a slightly altered version of that pill and turned it into one of the bestselling and most expensive prescription drugs in history.
The development of the drug that would become Revlimid took me deep into the confounding world of drug patents, which ostensibly protect drugmakers, allowing them to recoup the massive investments they made in developing a new product.
Celgene drew on patent law, a drug safety system and even patient assistance programmes, to guard the exclusivity of its prized drug and the massive revenue it generated.
Those tactics, detailed in reams of court filings, allowed Celgene to treat Revlimid like a piggy bank, tapping it whenever it wanted.
Amid the early success of Thalomid, Celgene identified two potential threats: one was obvious. Thalidomide caused birth defects, a risk that could result in it being pulled from the market.
The other was that Celgene held limited patents on the drug. Patents are exclusive legal rights to inventions, and researchers file them on nearly every aspect of drug development as soon as they can, locking up everything from specific sets of ingredients to the way the drug is used and administered.
Thalidomide was an old drug and Celgene’s patents did not cover the active ingredient, leaving it open to competition. The patents it did have, covering items like the optimal dosages and its use in treating particular diseases, were considered weaker and open to a court challenge.
If Celgene could create a new version of thalidomide, ideally one that didn’t cause birth defects, the company could seek more and stronger patents that would extend beyond those of the original drug.
So its researchers tested analogues of thalidomide – drugs that have a similar effect but are different from the parent compound in minor ways, such as having one less oxygen atom. The analogues are also more potent than the original, meaning they can achieve a similar effect at lower doses.
Celgene was not alone in its efforts. D’Amato was also studying thalidomide analogues and filing patents on their use, which he and Boston Children’s Hospital licensed to a Celgene competitor, EntreMed.
With duelling patents, the companies sued each other in 2002.
Celgene was flush with cash from rising sales of thalidomide. But EntreMed was burning through money as it focused most of its resources on developing other drugs discovered in Folkman’s lab.
In December 2002, the companies settled.
Celgene agreed to pay Boston Children’s Hospital royalties from future Revlimid sales. In exchange, the hospital and D’Amato licensed their patents of thalidomide analogues to Celgene. Celgene also agreed to pay EntreMed $27m.
For Celgene, the fight with EntreMed was a valuable experience. It learned that competition can be neutralised.
Revlimid’s rise
Celgene had kept the price of Thalomid low when it was initially intended for Aids patients, CEO John Jackson told investors in 2004, as the company “didn’t want huge numbers of people demonstrating” outside its office.
That wasn’t a problem with cancer patients. There was “plenty of room for very substantial increases” in the price of the drug now, Jackson told investors.
Just two days earlier, Celgene had hiked the price of Thalomid to $47 a pill.
“There was a common internal theme at Celgene that cancer patients were willing to pay almost any amount for the drug,” wrote David Schmidt, a former national account manager at the company, in a whistleblower lawsuit he filed after his employment was terminated in 2008. The lawsuit was voluntarily dismissed by Schmidt.
When Celgene launched Revlimid in December 2005, it set the initial price at $55 000 a year, or $218 a pill – about double what analysts expected.
Seven months later, when the FDA approved the drug for multiple myeloma, the price jumped to $70 560 a year, or $280 a pill.
The cost to manufacture each Revlimid pill, meanwhile, was 25 cents. I found a deposition marked “highly confidential” in which a top Celgene executive testified that the cost started at that and never changed.
At the same time, Celgene worked to mute any criticism of Revlimid.
In 2005, Celgene received reports that LA oncologist Dr James Berenson was “bashing” Revlimid in presentations sponsored by patient groups.
In one email, a senior company official said, “it is time for us to take Jimbo to the wood shed”. The company discussed a range of options for dealing with the doctor, from taking legal action to arranging a sit-down with Celgene’s chief executive.
Ultimately, the company appears to have decided on a friendlier course of action. Berenson became a frequent paid speaker and consultant for the company, with payments totalling at least $333 000, according to Celgene disclosures.
Payment records show that between 2013 and 2018, Celgene paid doctors $11m for speaking engagements and consulting work related to Revlimid.
At the same time as it showered doctors and patient groups with money, Celgene was shutting out Beth Wolmer. She told me John Jackson, then CEO, had promised her a paid board seat at the company as a way of compensating her for her role in the discovery, before the company cut off communication.
Wolmer sued Celgene in 2009, seeking $300m or more for alleged misappropriation of her idea and what she termed the “unjust enrichment” of Celgene.
Celgene said it never promised to compensate Wolmer. The company also suggested she greatly inflated her role in the discovery and, in any event, waited too long to take legal action.
In 2010, a judge granted Celgene’s motion for summary judgment in the case, agreeing that the statute of limitations had expired while expressing “admiration” for Wolmer’s “contribution to the struggle against this terrible disease”.
The generic threat
After the FDA approved Revlimid in late 2005, it also granted Celgene seven years of market exclusivity because the drug treats a rare disease. In those seven years, Celgene raised the price of the drug nine times, increasing the price per pill by 82% to $397 in 2012.
The company also fended off challengers by claiming its patents protected the drug from competition until 2027.
But by 2010 generic makers were already working on copies of the drug, preparing to challenge those patents and enter the market earlier. A government analysis has found that generics generally lower the price of brand name drugs by an average of 85% after just one year.
Celgene was well aware of the danger generics posed and warned in a 2012 financial filing that their entry into the market could have a “material adverse effect” on its finances. At that point, Revlimid sales made up 70% of the company’s revenue.
The drug still posed a risk of birth defects like the parent compound. In approving the drug, the FDA had mandated a strict safety programme to control its prescription and distribution.
Celgene realised early on that this could also be a tool to thwart competition. An internal company presentation noted that the safety programme could make it “more difficult for generic companies to access” thalidomide for testing.
Generic drug makers are required by the FDA to test their version against the brand name drug, so they need to buy small amounts of Revlimid from the company.
By 2012, at least six generic makers had asked to purchase Revlimid for testing. In every case, Celgene refused.
Federal regulators took notice. The FDA had warned Celgene that it could not use the safety programme “to block or delay approval” of generic competitors. Now, it appeared to be doing just that.
The Federal Trade Commission, which enforces antitrust laws, had been investigating Celgene for years and in June 2012 notified the company it was poised to take action.
In its letter, the FTC noted that while Celgene refused to sell its drugs to potential competitors, it routinely provided Revlimid to other third parties worldwide, including researchers and universities studying the drug.
Then, in August 2012, the FDA directed Celgene to sell a small amount of Revlimid to a generic competitor.
With both federal agencies bearing down on Celgene, a closed-door meeting was held at FDA headquarters.
Celgene started by denying it was using the safety programme to block generics, according to minutes of the meeting. (The minutes were filed in a court case against Celgene, and it is unclear if they were prepared by the agencies or the company.) Citing the threat of birth defects, the company said it had legitimate safety concerns about selling Revlimid to generic companies and needed to protect its investment in the drug.
The meeting ended without a resolution. The FDA had no way of enforcing its directive to Celgene. The FTC staff, however, drafted a complaint alleging the company engaged in unfair actions to maintain a monopoly, hoping either that it would push the company to agree to sell to competitors to avoid legal action or that Celgene would be forced to do so by the courts.
Celgene appeared to relent, telling the FTC it would sell to generic makers, as long as the FDA approved their safety plan. In July, the FDA approved the safety protocols of generic maker Mylan.
Still, Celgene refused to sell. The agency would close its case in 2017 without taking any action.
With would-be generic competitors sidelined by Celgene’s refusal to sell drugs for testing, the company continued to raise the price of Revlimid.
One Saturday in March 2014, Celgene President Mark Alles sent an internal email complaining of disappointing first quarter Revlimid sales.
“I have to consider every legitimate opportunity … to improve our Q1 performance,” he wrote. But the only idea he proposed was a familiar one: raise the price of the drug.
Alles said he wanted a meeting that Monday to discuss an immediate 4% price increase, followed by another increase of 3% at the beginning of September.
The company implemented those hikes, and a third in December. It brought the price of Revlimid to $9 854 a month, or $469 a pill, and boosted Revlimid sales for the year to $5bn. Alles didn’t respond to requests for comment.
Generics
Celgene found a solution to the generic threat when it struck a deal to settle a lawsuit brought by generic maker NATCO Pharma in 2015. NATCO could bring a generic to market, Celgene agreed, but not for seven more years – in March 2022. Even then, the generic would be limited to less than 10% of the total market for Revlimid in the first year, with gradual increases after that.
The deal set the bar for deals with other rivals for limited generic sales, and it ensured that unlimited generic competition, and lower prices, would not arrive until 2026.
The delayed entry of generics may have been bad news for patients and healthcare payers, but Celgene’s stock jumped nearly 10% the day after it was announced.
Celgene had cumulatively raised the cost 20% to $662 a pill, the largest one-year increase in the drug’s history.
By increasing the price of Revlimid, Celgene executives boosted their pay, because bonuses were tied to meeting revenue and earnings targets.
In total, Celgene paid a handful of top executives about half a billion dollars in the 12 years after Revlimid was approved.
Celgene also cited the cost of developing drugs and its expansive research efforts as reasons for the high cost of Revlimid. Celgene said it spent $800m to develop Revlimid and spent several hundred million more on additional trials to study the use of the drug in other cancers.
Those combined figures represent about 2% to 3% of Revlimid sales until 2018.
Drumbeat continues
Revlimid can be difficult to live with. Some patients quit the drug after developing severe gastrointestinal issues, infections or liver problems. The drug also poses an increased risk of stroke, heart attack and secondary cancers.
Those are the trade-offs for keeping multiple myeloma in check.
Meanwhile, the drumbeat of price increases continues under Bristol Myers Squibb, helping the company bring in $48bn in revenue from Revlimid since it purchased Celgene. Bristol said its pricing “reflects the continued clinical benefit Revlimid brings to patients, along with other economic factors”.
Last July, the cost of my monthly Revlimid prescription increased by 7% to $19 660.
At the beginning of this year, my insurer switched me to generic Revlimid. I didn’t fight it, thinking it would result in a dramatic decrease in what ProPublica’s health plan pays for the drug.
It turns out it is not much of a savings: the generic costs $17 349 a month.
ProPublica article – The price of remission (Creative Commons Licence)
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