Patent protection means you get to charge whatever the market will bear. In this case, it bears a 935% increase in the price tag.
Xyrem is the brand name for sodium oxybate. Sodium oxybate is the sodium salt of γ-hydroxybutyric acid, or GHB—the “date rape drug.” It’s an old drug—even older than aspirin—and it’s FDA-approved for the treatment of excessive daytime sleepiness caused by narcolepsy.
Basically, the very qualities that make it ideal for drugging young women in bars also allows narcoleptic patients to get a deep night’s sleep in order to encourage daytime wakefulness. If its approval can be extended to other patients who have trouble sleeping, the sky will be the limit on how successful this drug can be for its manufacturer, Jazz Pharmaceuticals.
According to “Narcolepsy Blues,” a recent article from Grant’s Interest Rate Observer, Xyrem generated a second-quarter sales growth this year of 43%, despite the fact that between 2006 and 2013, Jazz raised the price of Xyrem by 935%. A year’s worth of the medicine now costs $65,146; its gross profit margins are close to 100%—far better than 60% of the other drugs made by Jazz.
In 2002, Xyrem was granted seven years’ market exclusivity under the FDA orphan drug program: there were no similar drugs to treat cases of excessive daytime sleepiness and cataplexy caused by narcolepsy. Even though GHB is classified as a Schedule 1 drug, which “has no currently accepted medical use in treatment in the United States” and may not be marketed or prescribed, Xyrem (the sodium salt of GHB) is listed as a Schedule 3 drug, which has a currently accepted medical use and may be prescribed. There is no reason for this distinction except as a means to give Jazz greater sales.
How can they do this? Patents are granted by the patent and trademark office. They can be granted anywhere along the development lifeline of a drug and can encompass a wide range of claims. Patents can last up to up to twenty years. On the other hand, market exclusivity is granted by the FDA upon its approval of a drug. These are exclusive marketing rights, and can run from 180 days to seven years. Drugs can have patent exclusivity, market exclusivity, both, or none. It all depends on what criteria they fit.
Now, five years after its Orphan Drug Act market exclusivity expired, Xyrem still faces no competition. Even though other companies have filed applications for generic versions of the drug—not to mention different formulations of the drug—Jazz has also managed to get a patent on how they distribute the drug, since it is a controlled substance. This is facing legal challenges, but until it is resolved, Jazz maintains its monopoly, selling the drug at ludicrously high prices—and reaping a financial bonanza.
Another example is Sovaldi, a drug developed by Gilead Sciences to treat hepatitis C; which can cost up to $84,000 for a single course of treatment. Not all high prices are because of greed alone: the invention of a new drug—which includes the R&D costs of all the molecules that fail the process, not to mention the drug approval process itself—costs, according some estimates, between an average of $1.2 billion to as much as $5 billion.
The monopoly on certain drugs, and high R&D costs that the FDA’s approval process virtually ensures, may be keeping many beneficial treatments off the market. The great pity of it all is that FDA approval doesn’t guarantee, or even promise, drug safety. Each year there are, on average, 526,527 adverse events for FDA-approved drugs—275,421 of which have “serious outcomes,” including death.
So much for the FDA being “the consumer watchdog for safe and effective drugs”!