White House Urges Drug Pricing Restraint - AIDS: The demand that pharmaceutical firms be ‘socially responsible’ points up the changing business climate for the drug industry.

The Bush Administration on Friday weighed into the growing dispute over the high cost of AIDS drugs as Assistant Secretary of Health and Human Services James O. Mason urged the pharmaceutical industry to show greater restraint in pricing life-extending medications.

“The societal good has to outweigh the good of one company,” Mason said at a press conference at a national AIDS conference here. Mounting what he termed his “bully pulpit,” Mason, who is also serving as acting Surgeon General, added: “The companies that manufacture these drugs have got to be socially responsible.”

Mason’s comments underscore how AIDS is altering the business equation for the pharmaceutical industry. Long accustomed to scientific and regulatory hurdles, drug companies must now also confront unusual levels of scrutiny by public officials and an organized, vocal and increasingly sophisticated patient community.

“What Mason is doing is trying to speed up the process that would normally take place through market forces” as competitive products are introduced, said Samuel D. Isaly, a New York drug industry consultant.

The government’s scrutiny of AIDS drug pricing is shining a spotlight on the question of drug pricing for all illnesses. “This is an issue that has been waiting for a focal point, and AIDS has provided it,” said Jean McGuire, executive director of the AIDS Action Council in Washington. She noted that the Senate Select Committee on Aging recently held hearings on pricing of all prescription drugs.

Stung by charges of profiteering and fearful of price controls, makers of AIDS drugs have responded to the new climate with price reductions, drug giveaways for indigent patients and other marketing and public relations programs.

AIDS activists who have been crusading for lower drug prices hailed Mason’s comments as especially significant coming from an Administration generally regarded as a strong proponent of the free-market. Activists continue to charge that the industry’s pricing concessions have not been sufficient, although they acknowledge that they cannot know for sure because drug companies refuse to disclose detailed data on their costs.

Mason, too, said the government “doesn’t have the slightest idea what it costs to produce these drugs.” Still, he added: “For some of these (drugs), it appears that there hasn’t been a social responsibility.”

Mason said the Administration is studying several mechanisms to achieve its goal of lower prices, including changes in the Orphan Drug Law. The law provides financial incentives to companies developing medications for rare disorders. He emphasized, however, that any changes will have to be carefully crafted to avoid having a chilling effect on industry research.

Despite two price reductions of 20% each since AZT was licensed in 1987, the latest one coming last month after members of ACT UP disrupted trading on the New York Stock Exchange, Burroughs Wellcome continues to charge over $6,000 a year for a full dose of the drug. AZT is the only antiviral agent approved for use against the human immunodeficiency virus that causes AIDS.

Another company that has been sharply criticized by activist groups is Lyphomed, which quadrupled the price of pentamidine to $99 a vial after the company began investigating the drug’s effectiveness, in aerosol form, in warding off AIDS-related pneumonia. The drug was licensed in June.

Both drugs were developed under the Orphan Drug Law, which provides a seven-year monopoly and generous tax credits to companies that develop medications for conditions afflicting fewer than 200,000 patients.

However, under current law, both drugs retain their “orphan” status even though recent studies have indicated that they should be used earlier in HIV disease--before the onset of full-blown AIDS. Government officials estimate that AZT might be useful for 500,000 HIV-infected patients.

“We are seeing, perhaps, a flaw” in the Orphan Drug Law, Mason said. “There has to be a provision” to modify a drug’s orphan status when the size of a market grows unexpectedly, he added.

But Jeffrey C. Warren, vice president for communications of the Pharmaceutical Manufacturers Assn. in Washington, warned that “it would be a very big mistake” to revise or modify a law “which has been so successful.” Under the law, he said, drug companies have undertaken development of 133 drugs for 170 rare disorders.

Makers of AIDS drugs say their prices are justified by their high expenditures on research. They are resorting to a number of tactics to defuse the controversy over drug pricing.

In addition to lowering the price of AZT, Burroughs Wellcome has donated thousands of dollars to such groups as the National AIDS Network, the National Assn. of People With AIDS and the National Minority AIDS Council.

Though there was no specific quid pro quo, all three groups refused to sign an August statement by 17 other AIDS organizations calling for lower AZT prices. Some of the organizations that signed the statement had previously turned down donations from Burroughs.

This week, Lyphomed unveiled a plan to donate unspecified amounts of pentamidine to indigent patients. Lyphomed has also hired as a consultant Jim Foster, a gay political activist and member of the San Francisco Health Commission.

Foster, who could not be reached for comment, was busy pleading the company’s case in private meetings with key AIDS leaders at the conference here this week.

Martin Delaney, director of the patient advocacy group Project Inform, called Lyphomed’s drug giveaway “a PR gesture.” While a handful of patients may benefit, “all of society suffers when a drug is overpriced because the cost is borne by insurance policyholders and taxpayers.”

But Brian Tambi, a Lyphomed senior vice president, insisted that Lyphomed “has been a very good public citizen.” Lyphomed jumped into the AIDS market when other companies were unwilling to do so, “so why should I be crucified?”

Paradoxically, at the same time some drug companies are clashing with activists on pricing, others are forming alliances to hasten the drug-approval process and bring new medicines to market faster.

Delaney of Project Inform met last week with officials of Genelabs and the U.S. Food and Drug Administration in an attempt to speed the development of GLQ-223, the U.S. version of a Chinese drug called Compound Q that Delaney’s group has been testing.

Members of ACT UP’s New York chapter worked closely with Bristol-Myers Squibb to devise the “parallel track” distribution scheme for the experimental antiviral drug DDI.

“The savvier companies have come to understand that the patient community can be their allies in moving a drug through the FDA approval process,” said Jim Eigo, a member of ACT UP’s treatment and data committee.