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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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In the Pipeline

« Here and There | Main | And Now for Something Completely Different »

January 14, 2004

The Pricing Weapon

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Posted by Derek

I've been meaning to get around to the subject of Abbott's HIV protease inhibitor, Norvir (ritonavir.) Actually, the subject I've really need to get around to is its price, which in December went up by about a factor of four. That's a pretty steep move for something that's been on the market for seven years, isn't it?


Norvir is a protease inhibitor, one of many these days. It was a front-line therapy when it came out, but now it's settled into an unusual role as a supporting player. When added into other "cocktail" treatment regimens for HIV, Norvir seems to make everything more potent. There's no voodoo involved here, actually. Norvir turns out to be a good inhibitor of one of the liver enzymes (CYP3A) that is responsible for metabolizing many other medications.


That effect is enough to stop development of some drugs, to tell you the truth. No one is going to take something for a lesser illness that's a CYP3A inhibitor, because it'll make the blood levels of so many other drugs go haywire. But for HIV, especially when Norvir first came out, all sorts of side effects were tolerated. And over the years, the liver enzyme inhibition has turned from a bug into a feature. (It's still something to look out for, though, if a patient taking Norvir also takes things like sidenafil (Viagra) or a statin - see this PDF for details.)


But there's a side effect of the side effect. Norvir's taken at lower doses than other anti-HIV drugs, because it's only partially being given for its intrinsic protease inhibition. Back in 1996, as a stand-alone therapy, it was given at 1200 mg/day, which cost about $20. Today, as an adjunct to other therapies, it's given at about 100 mg/day, with a corresponding decrease in Abbott's financial expectations.


Thus the price hike, or so one has to figure. Abbott has said that the new price "better reflects the current market value of Norvir," and they point out that newer therapies run in the $20/day range, while Norvir, even at the new price, will be $8.57/day, at a 100 mg dose. Of course, that would make the original 1200 mg/day dose pricey indeed, but you don't see Abbott mentioning that. (Here's their letter to physicians (PDF) on the issue.)


Companies can charge what they want to for their products, or at least they should be able to. So Abbott is completely within its rights to raise their price to try to recoup some of what they originally thought Norvir might bring in, although you wonder if the bad press doesn't cancel that out a bit. But there's another explanation that looks even less appealing: Abbott has a more recent combination HIV therapy (Kaletra) that has Norvir as one of its components.


The new Norvir price now makes other combination therapies more expensive than Abbott's own Kaletra. So in their way, they may well be trying to compete on price here, but by raising the price of their competition rather than lowering their own. That's a rough way to do business, but given the state the drug industry's in, it wouldn't surprise me if that's exactly the plan. Profits are where you find them. I'm sure that Abbott's competitors have already made up their minds about what's going on.


So, is it right to do this sort of thing? This is where arguments about drug prices diverge from arguments about, say, the price of pearls, chocolate chip cookies, or ski equipment. There's an unavoidable moral aspect that comes into the discussion when you're talking about patients with a deadly disease. It wouldn't be nearly as big an issue if Pfizer, say, racked up the price of something that hypothetically made Viagra work better. But HIV's different.


On the purely pragmatic plane, I realize that I just said up there that I think that companies should be able to charge what they want to charge. I'll stick to that, but that doesn't mean that it's always a good idea for them to go ahead and do it. Abbott needs to realize that its actions look - no matter how strenuously they deny it - like an attempt to body-check its competition by making everything more expensive. And they need to realize that we pharmaceutical companies might not have the pricing power that we once did. If we keep doing this kind of thing, we're going to end up with no pricing power at all, and people will be clapping and cheering while we all tip over into the trash. Think about it, guys.

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