Is Red Tape Depriving Patients of Life-Altering Therapies?
Medical treatment represented on a world map.
Rich Mancuso suffered from herpes for most of his adult life. The 49-year-old New Jersey resident was miserable. He had at least two to three outbreaks every month with painful and unsightly sores on his face and in his eyes, yet the drugs he took to control the disease had terrible side effects--agonizing headaches and severe stomach disturbances.
Last week, the FDA launched a criminal investigation to determine whether the biotech behind the vaccine had violated regulations.
So in 2016, he took an unusual step: he was flown to St. Kitt's, an island in the West Indies, where he participated in a clinical trial of a herpes vaccine, and received three injections of the experimental therapeutic during separate visits to the island. Within a year, his outbreaks stopped. "Nothing else worked," says Mancuso, who feels like he's gotten his life back. "And I've tried everything on the planet."
Mancuso was one of twenty genital herpes sufferers who were given the experimental vaccine in tests conducted on the Caribbean island and in hotel rooms near the campus of Southern Illinois University in Springfield where the vaccine's developer, microbiologist William Halford, was on the faculty. But these tests were conducted under the radar, without the approval or safety oversight of the Food and Drug Administration or an institutional review board (IRB), which routinely monitor human clinical trials of experimental drugs to make sure participants are protected.
Last week, the FDA launched a criminal investigation to determine whether anyone from SIU or Rational Vaccines, the biotech behind the vaccine, had violated regulations by aiding Halford's research. The SIU scientist was a microbiologist, not a medical doctor, which means that volunteers were not only injected with an unsanctioned experimental treatment but there wasn't even routine medical oversight.
On one side are scientists and government regulators with legitimate safety concerns....On the other are desperate patients and a dying scientist willing to go rogue in a foreign country.
Halford, who was stricken with a rare form of a nasal cancer, reportedly bypassed regulatory rules because the clock was ticking and he wanted to speed this potentially life-altering therapeutic to patients. "There was no way he had enough time to raise $100 million to test the drugs in the U.S.," says Mancuso, who became friends with Halford before he died in June of 2017 at age 48. "He knew if he didn't do something, his work would just die and no one would benefit. This was the only way."
But was it the only way? Once the truth about the trial came to light, public health officials in St. Kitt's disavowed the trial, saying they had not been notified that it was happening, and Southern Illinois University's medical school launched an investigation that ultimately led to the resignation of three employees, including a faculty member, a graduate student and Halford's widow. Investors in Rational Vaccines, including maverick Silicon Valley billionaire Peter Thiel, demanded that all FDA rules must be followed in future tests.
"Trials have to yield data that can be submitted to the FDA, which means certain requirements have to be met," says Jeffrey Kahn, a bioethicist at Johns Hopkins University in Baltimore. "These were renegade researchers who exposed people to unnecessary risks, which was hugely irresponsible. I don't know what they expected to do with the research. It was a waste of money and generated data that can't be used because no regulator would accept it."
But this story illuminates both sides of a thorny issue. On one side are scientists and government regulators with legitimate safety concerns who want to protect volunteers from very real risks—people have died even in closely monitored clinical trials. On the other, are desperate patients and a dying scientist willing to go rogue in a foreign country where there is far less regulatory scrutiny. "It's a balancing act," says Jennifer Miller, a medical ethicist at New York University and president of Bioethics International. "You really need to protect participants but you also want access to safe therapies."
"Safety is important, but being too cautious kills people, too—allowing them to just die without intervention seems to be the biggest harm."
This requirement—that tests show a drug is safe and effective before it can win regulatory approval--dates back to 1962, when the sedative thalidomide was shown to have caused thousands of birth defects in Europe. But clinical trials can be costly and often proceed at a glacial pace. Typically, companies shell out more than $2.5 billion over the course of the decade it normally takes to shepherd a new treatment through the three phases of testing before it wins FDA approval, according to a 2014 study by the Tufts Center for the Study of Drug Development. Yet only 11.8 percent of experimental therapies entering clinical tests eventually cross the finish line.
The upshot is that millions can suffer and thousands of people may die awaiting approvals for life saving drugs, according to Elizabeth Parrish, the founder and CEO of BioViva, a Seattle-based biotech that aims to provide data collection platforms to scientists doing overseas tests. "Going offshore to places where it's legal to take a therapeutic can created expedited routes for patients to get therapies for which there is a high level of need," she says. "Safety is important, but being too cautious kills people, too—allowing them to just die without intervention seems to be the biggest harm."
Parrish herself was frustrated with the slow pace of gene therapy trials; scientists worried about the risks associated with fixing mutant DNA. To prove a point, she traveled to a clinic in Colombia in 2015 where she was injected with two gene therapies that aim to improve muscle function and lengthen telomeres, the caps on the end of chromosomes that are linked to aging and genetic diseases. Six months later, the therapy seemed to have worked—her muscle mass had increased and her telomeres had grown by 9 percent, the equivalent of turning back 20 years of aging, according to her own account. Yet the treatments are still unavailable here in the U.S.
In the past decade, Latin American countries like Columbia, and Mexico in particular, have become an increasingly attractive test destination for multi-national drug companies and biotechs because of less red tape.
In the past decade, Latin American countries like Columbia, and Mexico in particular, have become an increasingly attractive test destination for multi-national drug companies and biotechs because of less red tape around testing emerging new science, like gene therapies or stem cells. Plus, clinical trials are cheaper to conduct, it's easier to recruit volunteers, especially ones who are treatment naïve, and these human tests can reveal whether local populations actually respond to a particular therapy. "We do have an exhaustive framework for running clinical trials that are aligned with international requirements," says Ernesto Albaga, an attorney with Hogan Lovells in Mexico City who specializes in the life sciences. "But our environment is still not as stringent as it is in other places, like the U.S."
The fact is American researchers are increasingly testing experimental drugs outside of the U.S., although virtually all of them are monitored by local scientists who serve as co-investigators. In 2017 alone, more than 86 percent of experimental drugs seeking FDA approval have been tested, at least in part, in foreign countries, like Mexico, China, Russia, Poland and South Africa, according to an analysis by STAT. However, in places without strict oversight, such as Russia and Georgia, results may be fraudulent, according to one 2017 report in the New England Journal of Medicine. And in developing countries, the poor can become guinea pigs. In the early 2000s, for example, a test in Uganda of an AIDS drug resulted in thousands of unreported serious adverse reactions and 14 deaths; in India, eight volunteers died during a test of the anti-clotting drug, Streptokinase—and test subjects didn't even know they were part of a clinical trials.
Still, "the world is changing," concludes Dr. Jennifer Miller of NYU. "We need to figure out how to get safe and effective drugs to patients more quickly without sacrificing too much protection."
Breakthrough therapies are breaking patients' banks. Key changes could improve access, experts say.
Single-treatment therapies are revolutionizing medicine. But insurers and patients wonder whether they can afford treatment and, if they can, whether the high costs are worthwhile.
CSL Behring’s new gene therapy for hemophilia, Hemgenix, costs $3.5 million for one treatment, but helps the body create substances that allow blood to clot. It appears to be a cure, eliminating the need for other treatments for many years at least.
Likewise, Novartis’s Kymriah mobilizes the body’s immune system to fight B-cell lymphoma, but at a cost $475,000. For patients who respond, it seems to offer years of life without the cancer progressing.
These single-treatment therapies are at the forefront of a new, bold era of medicine. Unfortunately, they also come with new, bold prices that leave insurers and patients wondering whether they can afford treatment and, if they can, whether the high costs are worthwhile.
“Most pharmaceutical leaders are there to improve and save people’s lives,” says Jeremy Levin, chairman and CEO of Ovid Therapeutics, and immediate past chairman of the Biotechnology Innovation Organization. If the therapeutics they develop are too expensive for payers to authorize, patients aren’t helped.
“The right to receive care and the right of pharmaceuticals developers to profit should never be at odds,” Levin stresses. And yet, sometimes they are.
Leigh Turner, executive director of the bioethics program, University of California, Irvine, notes this same tension between drug developers that are “seeking to maximize profits by charging as much as the market will bear for cell and gene therapy products and other medical interventions, and payers trying to control costs while also attempting to provide access to medical products with promising safety and efficacy profiles.”
Why Payers Balk
Health insurers can become skittish around extremely high prices, yet these therapies often accompany significant overall savings. For perspective, the estimated annual treatment cost for hemophilia exceeds $300,000. With Hemgenix, payers would break even after about 12 years.
But, in 12 years, will the patient still have that insurer? Therein lies the rub. U.S. payers, are used to a “pay-as-you-go” model, in which the lifetime costs of therapies typically are shared by multiple payers over many years, as patients change jobs. Single treatment therapeutics eliminate that cost-sharing ability.
"As long as formularies are based on profits to middlemen…Americans’ healthcare costs will continue to skyrocket,” says Patricia Goldsmith, the CEO of CancerCare.
“There is a phenomenally complex, bureaucratic reimbursement system that has grown, layer upon layer, during several decades,” Levin says. As medicine has innovated, payment systems haven’t kept up.
Therefore, biopharma companies begin working with insurance companies and their pharmacy benefit managers (PBMs), which act on an insurer’s behalf to decide which drugs to cover and by how much, early in the drug approval process. Their goal is to make sophisticated new drugs available while still earning a return on their investment.
New Payment Models
Pay-for-performance is one increasingly popular strategy, Turner says. “These models typically link payments to evidence generation and clinically significant outcomes.”
A biotech company called bluebird bio, for example, offers value-based pricing for Zynteglo, a $2.8 million possible cure for the rare blood disorder known as beta thalassaemia. It generally eliminates patients’ need for blood transfusions. The company is so sure it works that it will refund 80 percent of the cost of the therapy if patients need blood transfusions related to that condition within five years of being treated with Zynteglo.
In his February 2023 State of the Union speech, President Biden proposed three pilot programs to reduce drug costs. One of them, the Cell and Gene Therapy Access Model calls on the federal Centers for Medicare & Medicaid Services to establish outcomes-based agreements with manufacturers for certain cell and gene therapies.
A mortgage-style payment system is another, albeit rare, approach. Amortized payments spread the cost of treatments over decades, and let people change employers without losing their healthcare benefits.
Only about 14 percent of all drugs that enter clinical trials are approved by the FDA. Pharma companies, therefore, have an exigent need to earn a profit.
The new payment models that are being discussed aren’t solutions to high prices, says Bill Kramer, senior advisor for health policy at Purchaser Business Group on Health (PBGH), a nonprofit that seeks to lower health care costs. He points out that innovative pricing models, although well-intended, may distract from the real problem of high prices. They are attempts to “soften the blow. The best thing would be to charge a reasonable price to begin with,” he says.
Instead, he proposes making better use of research on cost and clinical effectiveness. The Institute for Clinical and Economic Review (ICER) conducts such research in the U.S., determining whether the benefits of specific drugs justify their proposed prices. ICER is an independent non-profit research institute. Its reports typically assess the degrees of improvement new therapies offer and suggest prices that would reflect that. “Publicizing that data is very important,” Kramer says. “Their results aren’t used to the extent they could and should be.” Pharmaceutical companies tend to price their therapies higher than ICER’s recommendations.
Drug Development Costs Soar
Drug developers have long pointed to the onerous costs of drug development as a reason for high prices.
A 2020 study found the average cost to bring a drug to market exceeded $1.1 billion, while other studies have estimated overall costs as high as $2.6 billion. The development timeframe is about 10 years. That’s because modern therapeutics target precise mechanisms to create better outcomes, but also have high failure rates. Only about 14 percent of all drugs that enter clinical trials are approved by the FDA. Pharma companies, therefore, have an exigent need to earn a profit.
Skewed Incentives Increase Costs
Pricing isn’t solely at the discretion of pharma companies, though. “What patients end up paying has much more to do with their PBMs than the actual price of the drug,” Patricia Goldsmith, CEO, CancerCare, says. Transparency is vital.
PBMs control patients’ access to therapies at three levels, through price negotiations, pricing tiers and pharmacy management.
When negotiating with drug manufacturers, Goldsmith says, “PBMs exchange a preferred spot on a formulary (the insurer’s or healthcare provider’s list of acceptable drugs) for cash-base rebates.” Unfortunately, 25 percent of the time, those rebates are not passed to insurers, according to the PBGH report.
Then, PBMs use pricing tiers to steer patients and physicians to certain drugs. For example, Kramer says, “Sometimes PBMs put a high-cost brand name drug in a preferred tier and a lower-cost competitor in a less preferred, higher-cost tier.” As the PBGH report elaborates, “(PBMs) are incentivized to include the highest-priced drugs…since both manufacturing rebates, as well as the administrative fees they charge…are calculated as a percentage of the drug’s price.
Finally, by steering patients to certain pharmacies, PBMs coordinate patients’ access to treatments, control patients’ out-of-pocket costs and receive management fees from the pharmacies.
Therefore, Goldsmith says, “As long as formularies are based on profits to middlemen…Americans’ healthcare costs will continue to skyrocket.”
Transparency into drug pricing will help curb costs, as will new payment strategies. What will make the most impact, however, may well be the development of a new reimbursement system designed to handle dramatic, breakthrough drugs. As Kramer says, “We need a better system to identify drugs that offer dramatic improvements in clinical care.”
In today's podcast episode, law professor Gaia Bernstein talks about the challenges of keeping control over our thoughts and actions, even when some powerful forces are pushing in the other direction.
Each afternoon, kids walk through my neighborhood, on their way back home from school, and almost all of them are walking alone, staring down at their phones. It's a troubling site. This daily parade of the zombie children just can’t bode well for the future.
That’s one reason I felt like Gaia Bernstein’s new book was talking directly to me. A law professor at Seton Hall, Gaia makes a strong argument that people are so addicted to tech at this point, we need some big, system level changes to social media platforms and other addictive technologies, instead of just blaming the individual and expecting them to fix these issues.
Gaia’s book is called Unwired: Gaining Control Over Addictive Technologies. It’s fascinating and I had a chance to talk with her about it for today’s podcast. At its heart, our conversation is really about how and whether we can maintain control over our thoughts and actions, even when some powerful forces are pushing in the other direction.
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We discuss the idea that, in certain situations, maybe it's not reasonable to expect that we’ll be able to enjoy personal freedom and autonomy. We also talk about how to be a good parent when it sometimes seems like our kids prefer to be raised by their iPads; so-called educational video games that actually don’t have anything to do with education; the root causes of tech addictions for people of all ages; and what kinds of changes we should be supporting.
Gaia is Seton’s Hall’s Technology, Privacy and Policy Professor of Law, as well as Co-Director of the Institute for Privacy Protection, and Co-Director of the Gibbons Institute of Law Science and Technology. She’s the founding director of the Institute for Privacy Protection. She created and spearheaded the Institute’s nationally recognized Outreach Program, which educated parents and students about technology overuse and privacy.
Professor Bernstein's scholarship has been published in leading law reviews including the law reviews of Vanderbilt, Boston College, Boston University, and U.C. Davis. Her work has been selected to the Stanford-Yale Junior Faculty Forum and received extensive media coverage. Gaia joined Seton Hall's faculty in 2004. Before that, she was a fellow at the Engelberg Center of Innovation Law & Policy and at the Information Law Institute of the New York University School of Law. She holds a J.S.D. from the New York University School of Law, an LL.M. from Harvard Law School, and a J.D. from Boston University.
Gaia’s work on this topic is groundbreaking I hope you’ll listen to the conversation and then consider pre-ordering her new book. It comes out on March 28.
