We often hear in the U.S., that drug prices are too high. According to a Kaiser Family Foundation poll in Feb. 2019, 79% thought that prescription drug prices are ‘unreasonable.’ Today, we want to see if that general displeasure accurately applies to a smaller subset of the prescription drug market: old(er) antibiotics.
When a drug patent expires, generics soon flood the market, creating competition and offering prices about 85% less than the brand name version. Old antibiotics do not have any patent protections anymore, yet some of them have experienced extreme price hikes in recent years. This has alerted many citizens to the possibility that pharmaceutical companies are colluding to artificially fix prices at a higher rate to unethically and illicitly profit off of citizens. This case is all the more important because medications save countless lives from severe illnesses. The citizenry must have access to drug prices at reasonable, competitive prices, otherwise death is the cost.
In this article, the Zero Theft Movement will explore if pharmaceutical companies have unethically boosted profits by rigging the prices of old antibiotics.
What is an antibiotic?
DEFINITION
Antibiotics are medications that fight bacterial infections. They either kill the bacteria or suppress its growth and multiplication.
Before the advent of antibiotics in the 20th century, infectious diseases ran rampant. Smallpox, cholera, diphtheria, and pneumonia were only a few of the serious illnesses people two hundred years ago had to face without effective cures. Naturally, the average life expectancy at birth was 47 years in the U.S., even with the major progress made in the industrial revolution.
Effects of pneumonia. From Invicta HOG.
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Alexander Fleming and the Antibiotic Revolution
The 20th century brought along the ‘antibiotic era,’ kicked off by the accidental discovery of Penicillin in 1928 by Scottish physician and microbiologist Alexander Fleming. He actually had little success in testing the drug, so it took the better-equipped scientists Howard Florey and Boris Chain to research and mass produce it. By 1945, penicillin was made available to the general U.S. public.
This would set off the ‘antibiotics era/revolution,’ a veritable golden age of antibiotic discovery for the next three decades or so.
During the 1950s-1970s, scientists discovered all but one (Teixobactin) of the known antibiotic classes to date. Teixobactin was not discovered until the mid-to-late 2010s, and the antibiotic is still going through extensive testing (as of September 2020).
The antibiotic pipeline has dried up for a combination of reasons, but one specifically is bacterial resistance. Bacteria quickly adapt to new drugs, growing immunity to medications. This means pharmaceutical companies have to dump antibiotics that have become ineffective and fund costly research and development for a new drug. This puts off many from the antibiotics market.
Overall, antibiotics have greatly reduced fatalities from communicable diseases, and have extended the average life expectancy at birth to 78.8 years in the U.S. Antibiotics are not only life-extending; they are life-saving, nothing short of essential.
Penicillin Revenues
| Year | Revenue |
|---|---|
| 2018 | $19,240,000,000 |
| 2019 | $13,527,790,000 |
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Penicillin Production Costs
“Worldwide sales of penicillin and other beta-lactam antibiotics is now greater than $15 billion (U.S. dollars) per year. These sales numbers exist despite the fact that cost is now at an all-time low. Penicillin now costs $10 per kilogram versus $300 per kilogram in 1953. Although Europe is the major producer of beta-lactam antibiotics, newer manufacturing facilities are relocating to China and other regions of Asia where labor and energy costs are lower.”
From a report published by News Medical in 2018
Purchasing Statistics
The Food and Drug Administration published an antibacterial drug use analysis in 2012. The report provides important statistics as far as it pertains specifically to penicillin class drugs.
“Penicillin drug class accounted for around 44% of total kilograms sold for each year (1.44 million kilograms sold during year 2010 and 1.46 million kilograms sold during year 2011)…Active ingredient amoxicillin had the highest proportion of total kilograms sold of all selected systemic antibacterial drug products, accounting for approximately 34% (1.10 million kilograms sold during year 2010) and 35% (1.14 million kilograms sold during year 2011)”
In the U.S., drug prices, on average, are 2.56 times higher than those in 32 developed nations. Americans spend about $1,200 on prescription medication annually.
The Penicillin Price Tag
For a drug discovered in 1928, one would expect it to be now widely accessible for a (more) affordable price. Generics have flooded the market, dropping the cost of some beta lactam drugs significantly. That is not the case across the board, though. Particularly for penicillin medications that doctors administer and/or made by a single manufacturer (Pfizer, in many cases).
| Drug | GoodRx Prices | WellRx Prices |
|---|---|---|
| Amoxicillin | $5 | $4 |
| Penicillin v Potassium | $7 | $4 |
| Penicillin G, pfizerpen | $229 | $37.03 |
| Bicillin L-A (Penicillin G Benzathine) | $1,726 | $356.63 |
| Unasyn | $2,479 | $10.52* |
*cost of generic Unasyn
Prices as of September 2020
Amoxicillin-clavulanic acid (Amoxicillin), FDA-approved in August 1984 and now available in generic forms, was the fifth most commonly prescribed antibiotic in 2008 in the community, with a 2.4% increase in prescriptions from 2007.
The Case of Bicillin L-A
Bicillin L-A (Penicillin G Benzathine), in particular, received national attention due to global shortages. The antibiotic is the only drug that prevents mother-to-child transmission of Syphilis. The disease affects about ~6 million people around the globe. In business terms, that is a generally low demand, figures that do little to move the profit needle.
Only four (three in China, one in Austria) manufacturers produce the core ingredients for the drug. Furthermore, an Aljazeera report states: “These companies [manufacturers] produce only 20 percent of what they could…” The news outlet quoted the World Health Organization (WHO) the reasons for Bicillin L-A’s limited manufacturing: the drug is “off patent, offers little profit and […] demand data is extremely limited…” The connection between minimal profitability and limited manufacturing has led to shortages all over the world.
“As an off-patent medication, BPG [Bicillin L-A] is currently sold at a very low price. CHAI estimated that it is sold on average at a cost of US$0.11 for a 1.2 million international unit (IU) dose and US$0.20 for 2.4 million IU dose in low-and middle-income countries (LMICs). Some countries additionally set a cap on the price at which BPG can be sold which also keeps the price low. However, as an injectable drug, BPG must be manufactured under sterile conditions which require significant financial investment in specialised manufacturing infrastructure.”
From WHO
However, in the U.S., those penny prices do not apply. Apart from the prices listed above, a single shot of the antibiotic reportedly cost some clinics $350 in 2019. Perhaps to offset the low prices available elsewhere, Bicillin L-A is being sold at a premium in the U.S. But we have not found information expressly stating that is the reason for the price tag.
Defenses for why some Old Antibiotics remain expensive
Limited Manufacturers and Cost of Production
“In many cases, there is a single manufacturer for these agents; this has been demonstrated by the recent drug shortages of vital therapies…the resultant increase in demand can bring with it a rise in penicillin cost that does not disappear when drug supplies are replenished. Many of these agents can be expensive to produce and that expense does not dissipate when patents expire.”
(Source)
The lack of (ethical) profitability from manufacturing old antibiotics deters many pharmaceutical companies from producing them. Less than an intentional or immoral monopoly or cartel over core drug materials, here we have a case where little manufacturing competition exists because few pharmaceutical companies have the desire to make minimal returns on the antibiotics market (despite potential moral obligations to provide supplies for drugs).
Nevertheless, to no doubt cut labor and material costs, much of the U.S.’s ingredient production has been outsourced overseas. Just under ¾ of active pharmaceutical ingredient manufacturing facilities operate outside of the U.S., in fact.
That being said, one could argue that the exorbitant prices for certain old antibiotics allows manufacturers to keep production alive. Antibiotics cost as much to manufacture as any other drug, but they historically have been priced much lower than treatments for heart disease or cancer.
Use Time
Antibiotics are not like medications that treat chronic diseases (e.g. insulin). One ‘course’ of the drug should eliminate the specific bacterial infection you have contracted. You don’t need to keep taking them for life. This makes them a short-term treatment that does not have consistent, recurring users, limiting potential profits considerably.
This extends beyond older antibiotics to the few newly developed ones. A major reason why the antibiotic pipeline has dried up since the golden age is the considerable research and development costs vs. the potential profits. The limited use window, coupled with the ‘antibiotic resistance crisis,’ has put off many pharmaceutical companies from making headway into discovering antibiotic classes and developing new drugs.
According to the Commonwealth Fund, the “U.S. spends more on health care than other high-income countries but has worse outcomes.” Are average Americans getting ripped off? FInd out what citizens have discovered…
Sudden Antibiotic Price Hikes: Nitrofurantoin and Cycloserine
It would be wrong, however, to claim all old antibiotics fail to bring in big returns due to generics, bacterial resistance, low demand, and/or patent expiry.
Nitrofurantoin
Nitrofurantoin is an antibiotic used to treat urinary tract infections (UTIs), one of the most common bacterial infections around the world, with ~150 million cases every year. About 6 to 8 million Americans contract the infection per year. The drug appears on the World Health Organization’s List of Essential medicines, and has been on the market since 1953.
According to a WIRED report, pharmaceutical company Nostrum Laboratories “hiked the price [of Nitrofurantoin]—by more than 400 percent.” The Elsevier’s gold standard drug database reported the price went up from $474.75 to $2,392.
CEO of Nostrum Labs., Nirmal Mulye, defended the sudden price bump to The Financial Times: “I think it is a moral requirement to make money when you can . . . to sell the product for the highest price.” Mulye noted that their decision to raise the price came after Casper Pharma had raised their prices for their version of Nitrofurantoin (Furadantin) to $2,800 over the course of three years (2015-2018).
UTIs, unlike many other new and old antibiotics, present a considerable opportunity to profit globally. The bacteria that causes UTIs has grown resistant to other antibiotics, making nitrofurantoin the single most effective medication to treat Syphilis. Granted, the patent for nitrofurantoin has expired, but Nostrum Labs and Casper Pharma have avoided pricing themselves out by being the only two companies that have produced a liquid form of the drug. They have cornered the youth and elderly markets as well as those who have difficulty swallowing.
Cycloserine
Cycloserine is an antibiotic used to fight multidrug-resistant tuberculosis (MDR-TB). It was discovered in 1954, and appears on the WHO’s List of Essential Medicines.
In 2015, the New York Times reported the price of cycloserine had risen from $480 to $10,800 for 30 pills overnight after its acquisition by Rodelis Therapeutics. Rodelis returned the rights to the Chao Center—a nonprofit organization associated with Purdue University and the original producer.
The Chao Center immediately brought the price down to $1050. According to NBC news, the nonprofit settled on double the original price because it “will help reduce the amount of money the Chao Center loses in producing the drug [~$10 million].”
In the NYT report mentioned above, a concerning practice has emerged among pharmaceutical companies. They acquire “old, neglected drugs, often for rare diseases, and turn them into costly ‘specialty’ drugs.”
In 2019, only 102 people had MDR-TB. That’s a typical figure for MDR-TB cases. Not only does the few cases make ethical return on ‘speciality’ drugs extremely difficult, patients are essentially paying premiums in order to ensure money is going back to producing the drug.
Part II Awaits…
Without a doubt, a grey area exists as it pertains to the prices of older antibiotics. There are genuine concerns about a general lack of demand and profitability in a case such as benzathine penicillin. However, the repackaging of old medication as ‘speciality’ drugs and the far-reaching antitrust lawsuit indicates that unethical and illicit activity is occurring with drug prices as a whole, not just the antibiotics market.
But this is just the first part of the penicillin and old antibiotics story. In part II, we will address major lawsuits as well as Congress’ history of inaction.
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