Will Women Be Able to Afford the Little Pink Pill?

As Valeant Pharmaceutical International nears a deal to buy Sprout Pharmaceuticals, the maker of the new little pink female libido pill Addyi, it’s worth looking at what happens when Valeant takes over other companies. Will women be able to afford Addyi when it reaches the market?

Sometimes an increase in a drug’s price can be attributed to increased research and development costs or a relocation of a drug manufacturing plant. But in some other cases, a change of corporate ownership can result in a price hike.

Consider the case of Isuprel, a drug used to combat heart block, purchased in February 2015 by Valeant from Marathon Pharmaceuticals. Following the corporate turnover, the price of Isuprel rose by nearly 450 percent. Valeant also acquired Nitropress, a medication used to treat congestive heart failure. Subsequently, the price of Nitropress rose by 388 percent. These price increases were caused by the takeovers.

Such price fluctuations are not exclusive to cardiac medications. As pharmaceutical giants acquire new drugs, raising prices serves as a means to fund the takeovers. 

Pain medications such as Ofirmev and Vimovo have seen their prices increase following a shift in ownership. Cancer regimens, such as those that combine Yervoy and Opdivo, have become so expensive that oncologists must consider patient finances during treatment planning.

Granted, the exponential rise in the value of pharmaceuticals reflects advances in modern medicine. Research produces these drugs, and research takes substantial funds. In 2015, the average American life expectancy at birth had grown to approximately 80 years. Certainly, these drugs are keeping people alive longer.

Pharmaceutical companies assert that high prices within the industry are the result of research and development costs. Innovation is expensive. Without the ability to charge more for new products, innovation would not happen. 

But surging prices have not been solely confined to recently developed medications. Consider the case with the aforementioned Isuprel. Despite the drug being on the market for decades, its price was subject to two separate increases in the span of a single calendar year. These escalations in price not only outpaced changes in inflation, they were not even accompanied by any significant modification to the drug itself. Rather, price surges serve to fund the increasing costs of corporate turnover. 

For older drugs, the primary safeguard against price increases has been the presence of affordable generic drugs. Under the Hatch-Waxman Act, drug companies were encouraged to produce imitations of prescription medications following patent expiration. This does not apply to newer drugs whose patents have yet to expire.

Part D of the Medicare Modernization Act subsidizes the costs of prescription medication and prescription drug insurance premiums for beneficiaries. However, under the same law, Medicare is prohibited from negotiating the pricing of drugs with pharmaceutical companies. This is puzzling because the Department of Veterans Affairs is allowed to negotiate drug prices. Allowing Medicare to be able negotiate drug costs is feasible and could be used to offset increases in drug costs due to takeovers. 

Additionally, current FDA protocol has substantially raised both costs and barriers to entry for newly emerging medications. In an effort to promote safe and effective drugs, the FDA has placed a myriad of regulatory and trial processes for prospective drugs to gain approval. 

The FDA gives Americans access to high quality medication. Yet, through current policy, it simultaneously deprives Americans of potentially life saving treatments. One report showed that increased agency efficiency and greater acceleration of drug approval could save patients $4 trillion annually in extended life expectancies. 

America has consistently led the way in pioneering medical technologies. Yet, in the words of Houston oncologist Dr. Hagop Kantarjian, “the only drug that works is a drug that the patient can afford.” Consumers of Addyi should watch carefully when Valeant takes over.

Joseph Mitrani is a contributor for Economics21.

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