AIDS wasting: a lucrative business

Patients suffering from rare medical conditions often have a hard time finding effective prescription treatments, even if the drugs have been around for a long time. The consumer base of patients with rare diseases is very small, so it is difficult for pharmaceutical companies to make a profit from selling these treatments.    

To make sure medication for rare diseases are continually produced, the US government created the orphan drug classification. This status is granted to drugs that are important for the treatment of serious diseases, but wouldn’t otherwise be profitable to produce. Companies that decide to sell an orphan drug get financial support and exclusive rights to manufacture the product, and patients usually get easy access to their medication.

However, many pharmaceutical companies use this system as a government sanctioned monopoly. Since the patient’s health depends on their medication, and all other companies are prohibited from producing it, the company that initially picked up the orphan drug can set any price and still remain sure that it will sell.

In 1995, Savient Pharmaceuticals reintroduced a promising anabolic steroid, called Oxandrolone, to treat cases of extreme weight loss caused by Hepatitis and HIV wasting syndrome. Oxandrolone was available for around $800 per year when it came out thirty years ago, but since it was classified as an orphan drug the cost of an annual prescription increased to almost $11,000. International companies have offered to produce it for less than the original 1970’s cost (around $600 per year), but federal law forbids patients from purchasing the medication from anywhere but Savient Pharmaceuticals.

Of course, no one should be surprised that US pharmaceutical companies don’t hesitate to force dying AIDS patients to pay arbitrarily huge sums of money for treatments that cost nearly nothing to produce. Corporations are legally obligated to maximize profits for their shareholders. But there is no excuse for the federal government’s continued facilitation of this kind of price gouging.

With the help of this program, dying patients have become the best type of customer for many different pharmaceutical companies. In 2006, Genzyme Corporation made more than $900 million on an orphan drug for Gaucher disease, while spending less than $30 million to produce it. In Brazil, a drug to treat leprosy and certain types of cancer sells for seven cents per pill, but its orphan drug status allows Calgene Corporation to charge more than $55 per pill in the US.

Price gouging on these medications has become so extreme that insurance companies are even starting to reduce the coverage of diseases that are treated with orphan drugs. Many insurance providers now require that the patient pay for half of the costs of medications under the orphan drug status, and some will no longer cover any part of the prescription cost.

The orphan drug act was created to protect patient health, but its efficacy relies on pharmaceutical companies having some amount of morality. This very obvious flaw has attracted no changes to the legislation, even though it has been ruthlessly exploited for years.

If the federal government is going to create programs that interfere with the free market, it should be prepared to provide the oversight necessary to ensure their success. As is the case with the orphan drug program, a half-assed attempt at regulating capitalism can often do more damage to the citizenry than what would have happened without government intervention.