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VTDigger: Welch Seeks to Close Loophole in ‘Dysfunctional’ Drug Market

September 30, 2016
In The News

By Erin Mansfield

Vermont’s lone congressman has introduced a bill he says would lower prescription drug costs for hospitals, targeting an aspect of what he calls “market dysfunction.”

The Closing Loopholes for Orphan Drugs Act is the 10th bill Democratic Rep. Peter Welch has introduced in Congress targeting prescription drug prices. Many of them focus on small changes in market dynamics.

“We have a broken market,” Welch said in an interview. “There’s no competition and there’s no transparency. It’s being manipulated very effectively by the pharmaceutical companies to maximize profits and to keep opaque what the justification is.”

Welch’s new bill, which he introduced with a Republican co-sponsor, would stop pharmaceutical companies from being able to exploit a provision in federal law that allows the companies to maintain high prices for their products.

The bill would rewrite the 1983 law that encouraged pharmaceutical companies to develop drugs to treat diseases so rare that the medications wouldn’t be profitable because so few people would need to buy them. Those drugs were termed “orphans” in the market. 

But because of a loophole in the law, a company can develop a new drug that treats millions of people per year, Welch said. The company can then tell the U.S. Food and Drug Administration that the drug also treats a small population of people who have rare diseases.

The FDA will then award the company “orphan drug status” that legally bars certain hospitals from negotiating down the price of that drug. That means even though the status was designed for drugs that treat only rare diseases, it is being used to help the makers of widely used drugs.

“It started with a well-intended congressional action that gave economic incentives to pharmaceutical companies to develop drugs to help people who had rare diseases,” Welch said. “What’s happened since then is that the pharma companies have created a loophole, and they’re driving a Brink’s truck through it.”

“The industry has been gaming the system by slicing and dicing indications so that drugs qualify for lucrative orphan status benefits,” a researcher at Johns Hopkins University said in November. “As a result, funding support intended for rare disease medicine is diverted to fund the development of blockbuster drugs.”

Welch pointed to a drug called Remicade, which treats rheumatoid arthritis and a condition of the colon, two conditions that affect millions of Americans every year, according to the U.S. Centers for Disease Control and Prevention.

The FDA awarded Remicade orphan drug status in 2003 because it can also treat juvenile colitis, according to a press release from the drug manufacturer, Johnson & Johnson. The disease is very rare in children, according to Welch.

The cost of using prescription drugs with the orphan designation was an average of $112,000 per patient in 2014, according to The Washington Post. The average cost per patient to take drugs without the designation was $23,000, the Post said.

Judy Tartaglia, the CEO of Central Vermont Medical Center, supports Welch’s bill. She said in a statement that removing the orphan drug loophole would allow small hospitals to get discounts on the drugs “in many situations, and would result in significant savings” to her hospital.

Three-quarters of Americans say prescription drug prices are too high, and one-quarter have trouble affording them, according to a poll from the Kaiser Family Foundation.