Leadiant (it) fined for price gauging

The Dutch ACM has imposed a fine of €19m on the Italian pharmaceutical company Leadiant for 'hijacking'.

Leadiant had bought the registration of CDCA, that originally had been registered for use against gal stones. The same CDCA had been used for over 40 years in the treatment of people with CTX, a metabolic disease that leads to neurological damage, sometimes resulting in death. After acquiring the rights to CDCA, Leadiant registered it for use against CTX. By this action they acquired exclusive rights for this use. Once that was done they raised the price 300 times. Thus causing an immense extra cost for the 60 CTX patients in The Netherlands (suddenly €120.000 a year per patient). There was a work around for this through producing the medication by the pharmacist of the hospital where the patients were treated (custom medication so to say). But a complaint was also filed and the - surprising - outcome was that the actions of the pharmacist amounted to 'abuse of market position' in a situation where the gains were in no way justified by investment, innovative nature of the treatment or risk taken.

Of course Leadiant will appeal. It's interesting though that the decision was taken at all.

Hazir - this seems like an obvious abuse of EU rules about orphan drug status that grant 10 year exclusivity for drugs that treat very rare diseases. I'm not sure why they were granted this, since it's not a new drug at all, has no patent protection, and isn't even all that hard to make.

Now, the tricky question is whether they'd be the only game in town even without the exclusivity provision in the EU. It's entirely possible. AIUI it's not used widely for gallstones any more, and the number of patients with this specific deficiency is vanishingly small. There are fixed costs keeping any mfg process running (mostly regulatory and quality overhead), so there's very little reason for competition since no one's going to make serious money off of this kind of drug. So it's not shocking that you'll get a single company abusing their market position and pricing power for these very small markets.

Compounding pharmacies are one option, but frankly I wouldn't want to touch a compounding pharmacy with a ten foot pole, there are all sorts of issues using them even for relatively simple drugs. I wonder if there's scope for some sort of non-profit model for these low marginal cost but low volume drugs - you can have the specialization and institutional knowledge that accrue in pharma, but without the profit motive that drives predatory pricing in small markets. Maybe there could be some sort of incentive structure to help pharma companies spin out these low-value/low-volume products into independent non-profits...

Isn't that more or less what happens unless a new use is found for existing medication? The crazy abuse very often occurs then.

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Originally Posted by Hazir

Isn't that more or less what happens unless a new use is found for existing medication? The crazy abuse very often occurs then.

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No, there's very few drugs that are made on a nonprofit basis. Sure, you often get different companies that produce low margin 'legacy' drugs, but those companies have no incentive to make drugs that have relatively high overhead and very low volumes unless they can make a large margin - they'd much prefer to focus on drugs that are low margin but high volume.

The argument this company makes is that they did the work to prove that this legacy drug was effective in treating this rare condition, which justifies the exclusivity and the increased price. I am not convinced by this argument because it was already being used ad hoc for this purpose, and it's unclear to me that there was substantial physician demand for solid proof of its efficacy beyond their observational studies in the clinic. It smells like an excuse to wring more profit out of an aging drug a la Shkreli and the like.

The fact of the matter is that rare diseases that can be readily treated with existing (lowish cost) drugs should not be profit centers for pharma companies, they should be unexpected bonuses that accrue to society. I am completely on board with very high pricing for new drugs that make meaningful improvements or even cures for rare diseases - the incentives to develop them simply don't exist if you're going to go with a standard high volume pricing formula, and it also helps that these tend to be very hard diseases to treat. It's a (vaguely) similar issue to the incentives around developing new antibiotics. But for something that already exists? It makes sense to manufacture and sell at cost.

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Originally Posted by wiggin

Now, the tricky question is whether they'd be the only game in town even without the exclusivity provision in the EU. It's entirely possible. AIUI it's not used widely for gallstones any more, and the number of patients with this specific deficiency is vanishingly small. There are fixed costs keeping any mfg process running (mostly regulatory and quality overhead), so there's very little reason for competition since no one's going to make serious money off of this kind of drug.

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I'm not sure if that one is any more popular, but if someone's manufacturing UDCA, they're producing CDCA along the way (as an aside, the reductive step in the cheno -> urso synthesis pathway was the very first reaction I did when I started working in lab 15 years ago). For a company in ths bile acids line of business, the process is likely running already, so it's not like the potential competitors would need to set up the pipeline from scratch, or even modify the existing one significantly.

... which makes it even more puzzling why they were granted exclusivity.

Oh, it's more than just manufacturing, of course, having the regulatory/quality overhead is unique to the product. We're only talking about hundreds to low thousands of patients, so it's hard to spread those costs out and make any money if you're competing in the market. It's just not worth it.

The people who fined them didn't see any significant investment nor risk taking when they fined them. So not even that explains raising the price 300 times.

The ACM may not have a lot of pharmaceutical expertise, but they know how to read accounts.