KC pharma CEO’s 400 percent drug price hike a symptom of our sick health care system

The U.S. is one of only two nations in the world that allow direct advertising of pharmaceuticals.
The U.S. is one of only two nations in the world that allow direct advertising of pharmaceuticals. Big Stock Photo

Does Kansas City have its own “pharma bro” in Nirmal Mulye of Nostrum Laboratories right down on N. Topping Ave.?

The drug firm’s founder and CEO has drawn unwanted international attention in recent days for raising the price of a 50-year-old generic antibiotic it produces by 400 percent. And he raised more eyebrows when he told London’s Financial Times that it was his “moral requirement” to make as much money as possible for his company. Democratic Sen. Claire McCaskill has taken notice as well, teaming up with Republican Sen. Susan Collins of Maine to send Mulye a letter asking him to explain himself.

But Mulye told The Star’s editorial board that he has been “misinterpreted in every possible way” in this media kerfuffle. “Maybe I understand how the president feels, because this is fake news,” he said with a laugh.

And he makes a compelling case that he’s no Martin Shkreli. Before his conviction for securities fraud, Shkreli, the hedge fund manager and founder of Turing Pharmaceuticals, made his name by snapping up expiring rights to commonly-used drugs, then raising their prices exorbitantly.

By contrast, Mulye says Nostrum is simply reacting to the free market. And, for better or (likely) worse, that’s the reality of the pricing structure in the modern profit-based U.S. health care system.

Nostrum’s version of nitrofurantoin is used to treat bladder infections. New Food and Drug Administration rules early this year mandated stricter standards for toxic heavy metals such as arsenic and lead in the drug — regulations that also apply to Casper Pharma’s Furadantin, the brand name that Nostrum’s generic can take the place of at the pharmacy counter.

Casper is the one to blame for the higher cost, Mulye said. After the new FDA mandates, that company raised its price to $2,800 a bottle, while Nostrum’s generic equivalent rose to the comparative bargain of $2,400. And that’s just the list price, he noted.

“When was the last time you actually paid what was on the price tag for something?” he asked. “(Insurers) are actually paying less. We’re not the villains. We’re actually the saviors. We’re bringing the product out on the market at a different, but still lower price than the brand (name).”

After a summer of presidential tweets decrying rising drug prices, Health and Human Services Secretary Alex Azar has set his sights on the issue, telling Bloomberg News Wednesday that “every player in the system has their share of blame.

Drug manufacturers say high prices for new drugs are necessary because of the years of research, development and safety trials necessary to gain approval from the FDA.

Mulye also points his finger at FDA regulations, which he says are increasingly onerous for small drug makers such as his. “Our plant in Ohio — American jobs, by the way — actually has lost millions of dollars over the years. The entire plant has to remain FDA compliant, every room. It’s like a hotel where you can only rent a few of the rooms for years. You have to raise the price on those to make up for all the empty ones you still have to maintain.”

Mulye contends that lawmakers conflate the generic market his firm trades in with the brand-name pharmaceuticals game — which has a vastly bigger lobbying footprint in Congress.

“Washington doesn’t understand how generic pricing works, and maybe they don’t want to understand,” he said.

Christopher Loucks, assistant director of pharmacy supply chain for the University of Kansas Health System, said generics are a significant part of the health care cost equation. Generic injectables are “most of our drug cost on the inpatient side,” he said. “And they’re also the most critical lifesaving drugs that we use. One of the challenges we see in that space is the lack of competition among producers.”

A host of factors drives up American health care spending, which the Centers for Medicare and Medicaid Services estimates will grow 4.7 percent per capita every year through 2025. Prescription drug spending is projected to increase 6.3 percent per year during that period.

The United States doles out about $10,200 per person on health care each year, according to the Organisation for Economic Co-operation and Development. That’s over $2,000 more than second-place Switzerland.

Meanwhile, the U.S. and New Zealand are the only countries on the planet where TV commercials urge consumers to ask their doctor if the medications they’re selling are right for them.

This isn’t a sustainable path. The magic of the free market can work wonders with the price of a big-screen TV or a gallon of gas, but it’s increasingly clear that our nation’s health care system is headed for a reckoning.

Nirmal Mulye may indeed have a moral obligation to his company’s bottom line. But when will a critical mass of voters insist that the U.S. assert its own morality by joining the rest of the world’s developed nations in assuring a basic level of health care for all our citizens?