The little-known FDA program that’s driving drug prices higher

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While the nation focuses on the depredations of Turing Pharmaceuticals, its CEO Martin Shkreli and his decision to jack up the price of an important drug by 5,000% (I reported the issue here), not enough is being said about the other factors contributing to America’s sky-high prescription drug costs.

Consider the Food and Drug Administration’s unapproved-drugs initiative, launched in 2006. The program is well known to some physicians and hospitals and their patients, who blame it for huge increases in the price of drugs that have been in common use for decades -- even, in one case, for millenniums. It’s little known to the general public. That’s a shame, because it underscores an enormous flaw in our drug-approval process that rewards a few clever manufacturers at the expense of patients.

Thanks at least partially to the FDA program, the price of vasopressin, a drug useful in cases of cardiac arrest and often found on crash carts, has risen 10-fold. Hospitals report that a vial of neostigmine, which is used to reverse the effects of anesthesia, has gone from less than $5 to $90.


The most notorious case is that of colchicine, which was first used to treat gout 3,000 years ago and has been in generic use in the U.S. since the 1800s. Following a 2009 FDA order awarding exclusive rights to a branded formulation of colchicine to a Philadelphia drug maker and barring competing generics from the market, its price rose 50-fold.

In many of these cases, the new manufacturers had done little to alter, much less improve, the traditional drugs before claiming FDA-mandated exclusivity periods ranging from three to seven years. Some performed new safety or efficacy testing, but often these trials merely confirmed what doctors had known about the drugs after decades of use.

“The question is how much of the price increase is justified,” said Joseph E. Biskupiak, research professor at the University of Utah College of Pharmacy.

The agency’s unapproved-drugs initiative has laudable aims. The goal is to bring grandfathered medications that were in use before the FDA instituted rigorous testing requirements for safety and efficacy into line with modern standards.

But federal law also allows the FDA to incentivize drug research and development by granting marketing exclusivity to manufacturers who demonstrate a new use for a drug, or even a new dosing regime. If the new indication applies to an “orphan” condition suffered by a small number of patients, the exclusivity period can be seven years.

As Aaron S. Kesselheim and Daniel H. Solomon of Harvard Medical School reported in 2010, that’s what turned colchicine from a traditional medication for gout into a branded monopoly for the firm URL Pharma, which put colchicine on the market as Colcrys.


The firm claimed the drug’s effectiveness against the orphan condition of familial Mediterranean fever, a genetic condition affecting only 100,000 patients in the world, and also in a low-dose formulation for gout. URL sued to bar other companies from selling colchicine, and raised the price from nine cents per pill to $4.85. State Medicaid programs, which had been spending about $1 million a year on colchicine, were now facing bills totaling $50 million.

The FDA says such price increases are beyond its jurisdiction, as it is not expected to take price into account when regulating a drug: “FDA does not regulate according to economic factors, nor do we have control over drug pricing,” a spokesman told me.

Yet granting exclusivity to an already widely prescribed drug “reveals a substantial loophole” in the drug regulatory system, B. Joseph Guglielmo of UC San Francisco’s department of clinical pharmacy observed in 2013. Exclusivity is “meant to encourage discovery of new molecular entities and bring them to market,” he wrote, not to give nimble drug companies huge profits for modest efforts.

Although URL did perform its own clinical trials, moreover, their findings added little to what was already known about the drug. Physicians were already moving toward low doses in their treatment of gout, an approach that the drug maker merely confirmed. And colchicine long had been a recognized treatment of familial Mediterranean fever.

In this case, Kesselheim and Solomon suggested, the drug company’s “reward appears to be out of proportion to the level of investment.” More critically, its work led to “no evidence of any improvement to the public health.”

The authors suggest that one way to avoid unwarranted giveaways to drug makers is to place responsibility for clinical trials on widely available grandfathered drugs in the hands of the FDA or National Institutes of Health, which could perform them in the public interest.


Utah’s Biskupiak adds that the FDA should be more discriminating about which drugs it scrutinizes under the unapproved-drugs program. The agency says it gives priority to drugs with potential safety risks or that lack evidence of effectiveness, but it’s unclear that colchicine, vasopressin, and neostigmine fell into those categories after widespread use over decades or more.

The program “should apply to drugs where there’s a signal it’s unsafe or that it just doesn’t work,” Biskupiak said. “If doctors have been using it for 50 years with no problems,” he said, then the FDA is just giving drug companies “an arbitrage opportunity” to turn a profit.

Nor is the cost of these giveaways insubstantial. Wrote Kesselheim and Solomon, “[T]he financial burden of market-exclusivity ... falls primarily on the patients who are given prescriptions for the drug, or their insurers.”

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