Every firm could make earnings, however that is profiteering. This is gouging.The Rockford File is the story of how one very costly prescription drug threatened to financially cripple a complete metropolis. That metropolis is Rockford, Illinois, an previous industrial city exterior of Chicago. Rather than utilizing a medical insurance firm, Rockford has, for years, paid its personal well being care prices for its 1,000 workers and their dependents.
When Rockford obtained hit with the drug invoice it was so huge the mayor on the time got down to perceive why.
Larry Morrissey: Everybody’s asking the query, “Why is health care so expensive?” Because the repair is in. That’s the reply. That’s the quick reply.
When Larry Morrissey was mayor of Rockford he was hit with a disaster: town was bleeding cash.
Lesley Stahl: You came upon that the well being care finances was going bust.
Larry Morrissey: Yea, the finances was uncontrolled.
Lesley Stahl: And you needed to squeeze different issues. Like what?
Larry Morrissey: Hiring police and firefighters. Keeping firetrucks and different tools on the streets. We began realizing that pharmaceutical prices had been skyrocketing.
Lesley Stahl: And I heard that it was only one drug.
Larry Morrissey: One explicit drug known as Acthar.
In 2015, two babies of Rockford workers had been handled with Acthar, a drug that is been in the marketplace since 1952. It’s used to deal with a uncommon and probably deadly situation known as childish spasms that afflicts about 2,000 infants a yr.
Lesley Stahl: Do you keep in mind how a lot was on the finances for these two infants?
Larry Morrissey: We had been spending tons of of 1000’s of for these sick child circumstances.
Lesley Stahl: Close to $500,000– is what we heard.
Larry Morrissey: Combined, yeah.
Lesley Stahl: Combined.
Larry Morrissey: Yeah.
“Every company can make profits, but this is profiteering. This is gouging.”
The drug works – it is thought-about the gold customary for childish spasms. But as he found it wasn’t all the time so costly. In 2001, Acthar bought for about $40 a vial. Today: greater than $40,000. An improve of 100-thousand %. He needed to understand how that would’ve occurred. But for 2 years he stored operating right into a brick wall.
Lesley Stahl: Why was it so exhausting to seek out out what was occurring? And why?
Larry Morrissey: It’s absolute secrecy. There’s an absolute opaque system of pricing for medication in our nation. That’s a part of the problem.
His investigation obtained nowhere till final yr, when the Federal Trade Commission charged the drug producer, Mallinckrodt, with violating antitrust legal guidelines so as “to maintain extremely high prices for Acthar.”
Larry Morrissey: And that was the massive a-ha.
Lesley Stahl: That’s the one approach you discovered? Otherwise, you would not know.
Larry Morrissey: We could very properly not have recognized.
And what they now know infuriates them. So they’ve employed lawyer Don Haviland to sue Mallinckrodt for what they are saying is worth fixing, a cost the corporate denies.
Don Haviland: Every firm could make earnings, however that is profiteering. This is gouging.
As he dug into the case, he came upon that Acthar’s largest worth will increase got here underneath the drug’s earlier proprietor, Questcor, which Mallinckrodt purchased in 2014.
Lesley Stahl: When Questcor began elevating the worth, had been they doing any analysis and improvement, something to make the product higher, to tweak it?
Don Haviland: Absolutely nothing. There was no R & D. There was no enchancment within the product. There’s no enchancment within the firm. All they did was elevate the worth.
To maintain the worth excessive, the FTC discovered that they did one thing else: they purchased one other drug that was Acthar’s foremost competitor, a drug known as Synacthen, that is been bought in Europe and Canada for years. For how a lot?
Don Haviland: Synacthen price $33 in Canada. $33.
Lesley Stahl: The Acthar firm purchased the opposite drug?
Don Haviland: The aggressive drug, sure. That’s anti-trust, and that is why the Federal Trade Commission went after them. Because they took the one aggressive product, paid some huge cash for it, and put it on the shelf.
Lesley Stahl: So they purchased their solely competitor, after which by no means bought it?
Don Haviland: Correct.
Mallinckrodt admitted no wrongdoing, however in settling the case the Federal Trade Commission pressured the corporate to pay $100 million. Not that a lot, he says, for an organization that makes greater than a billion a yr on Acthar alone.
Don Haviland: It’s a drop within the bucket on this case. $100 million? It’s nothin’.
Lesley Stahl: In an e mail to us, Mallinckrodt stated that when the massive worth improve got here, they did not personal the corporate. It was Questcor, not them. Should they be accountable? They– they–
Don Haviland: Absolutely. It’s their firm. They personal Questcor. They personal the enterprise mannequin. And they are not reducing the worth.
In reality, Mallinckrodt has raised the worth by about $eight,000 a vial since buying the corporate.
Mallinckrodt, which declined our request for an interview, despatched us this e mail, saying that it has invested in new analysis and improvement into the drug. When we requested them how a lot, they advised us, “This information is confidential and proprietary.”
In our personal investigation, we discovered that, with solely about 2,000 circumstances of childish spasms a yr nationwide, the corporate made a strategic resolution in 2010 to promote Acthar for different ailments.
We had been capable of finding an previous press launch that stated as a lot: the corporate was going to “…Expand our existing markets (and) find new therapeutic uses for Acthar.” And so the corporate started to market the drug for a number of power circumstances like rheumatoid arthritis that have an effect on adults.
Dr. Peter Bach: What’s stunning to me is half-a-billion spent on this drug for seniors the place there is not any proof that it is the proper drug for any of them.
We requested Dr. Peter Bach, who research the fee and worth of medicine at Memorial Sloan Kettering in New York, to look into Acthar for us. What obtained his consideration is that by 2015, Medicare was spending half a billion a yr on Acthar – tens of 1000’s of per vial not for weeks, as with infants, however for years.
Lesley Stahl: Is there any proof that these medication are efficient for the ailments that seniors are taking it?
Dr. Peter Bach: I imply, none that the Food and Drug Administration would contemplate convincing.
Lesley Stahl: So the Food and Drug Administration has not accepted the medication for these ailments?
Dr. Peter Bach: So the approval for these medication predate any customary of proof that we use at the moment.
The FDA accepted the usage of Acthar to deal with these power circumstances in 1952 — when drug firms had been solely required to display a drug’s security, not its efficacy.
Dr. Peter Bach: And extra vital, there’s many different medication that work which are actually fairly cheap.
Lesley Stahl: Why did docs prescribe Acthar for these ailments if there’s one thing cheaper?
Dr. Peter Bach: Many of the docs who prescribed a variety of Acthar additionally had been getting cash from the corporate that makes Acthar, for talking, for consulting, for operating analysis research for the corporate, including as much as big sums. And these docs seem like those who’re more than likely to additionally prescribe Acthar.
According to Pro-Publica, an investigative reporting group that tracks how a lot physicians earn from drug firms, Mallinckrodt paid docs tens of millions over a virtually 2-year interval, with the highest earner getting greater than $350,000.
Dr. Peter Bach: They’re utilizing a time-tested technique, they elevate the worth to a really excessive degree and so they focus their energies on a number of docs whom they will get to prescribe the drug. And it really works nice for his or her income. It does not assist sufferers. And in 2015, it added as much as half-a-billion of bills for Medicare.
Whether or not it is efficient for these different circumstances, and the corporate says it’s, Medicare isn’t allowed to barter the worth of medicine due to a regulation handed by Congress.
Instead, Medicare largely depends on a little-known enterprise to do the negotiating for them, known as pharmacy profit managers or PBMs, and it is not simply Medicare, it is also cities like Rockford that rent them to barter down the worth of medicine. But as you will see, even pharmacy profit managers can profit when drug prices are excessive.
The firm negotiating prices for Rockford is Express Scripts, the nation’s largest, representing tens of tens of millions of sufferers. Rockford can also be suing that firm.
Don Haviland: Express Scripts at the moment is the 22nd largest firm in America. Bigger than Home Depot, Microsoft, Comcast, family names.
Lesley Stahl: So what are you saying in regards to the position that Express Scripts, performed on this explicit case?
Don Haviland: So they did not use their shopping for energy. They did not use their clout. Their job was to exit and negotiate a lower cost from the producer. They did not do it.
Lesley Stahl: How would they get the worth down? What would they do?
Don Haviland: I can provide you an instance the place you have obtained a high-priced remedy, one specifically, the drug was $13.50. It was raised in the future 5,000% to $750.
Lesley Stahl: One day?
Don Haviland: Express Scripts says, “We’re not gonna pay it.” The firm refused to decrease the worth. They went out and obtained one other producer to fabricate it for $1. $1.
Lesley Stahl: They really requested one other firm to make the identical remedy?
Don Haviland: Yep, and that is the one they coated for his or her sufferers and payers.
Lesley Stahl: And are you alleging that they might have accomplished this on this case?
Don Haviland: Absolutely.
“The underlying problem we have with prescription drugs in this country is that every single actor has the potential to make money when drug prices go up.”
He argues that Express Scripts ought to’ve used that very same clout to drive the cheaper different Synacthen to market, the one which bought in Canada for $33 a vial.
We needed to ask Express Scripts why it did not. But they advised us on this e mail that “due to pending litigation” they might not talk about the matter. But Don Haviland thinks he is aware of why they did not combat for a lower cost.
Don Haviland: In a phrase, the cash. It’s all in regards to the cash. They clearly have a divided loyalty.
Dr. Peter Bach: Express Scripts is a giant company. It additionally has components of it that generate income when medication price extra and when costlier medication are bought.
Lesley Stahl: Whoa. Wait, wait, wait, (LAUGH) wait. You’re saying that this PBM whose operate is to maintain medication’ prices low makes cash when drug prices are excessive? Is that what you have simply stated?
Dr. Peter Bach: Yes. So Express Scripts is many firms, not simply the PBM. It additionally owns a pharmacy that sells costly medication. It additionally owns an organization that ships and packs costly medication. All of these different components of Express Scripts company earn more money the extra Acthar goes out the door, the extra prescriptions for Acthar are stuffed and refilled.
The metropolis of Rockford was capable of finding out another piece of the puzzle: that Express Scripts, the corporate it employed to maintain prices down, additionally had a contract to be the unique distributor of Acthar.
Rockford’s lawyer, Haviland accuses Express Scripts of dishonest town.
Don Haviland: They serve two totally different constituents. You’ve obtained the producers on one aspect and the cities of Rockford and sufferers on the opposite aspect.
Lesley Stahl: We have an e mail from Express Scripts and so they say that they do not assume there is a battle of curiosity. And that Express Scripts doesn’t set the worth for medicines. That’s their response
Don Haviland: We contracted with them for price containment. And they did not do it.
But within the Rockford lawsuit, Express Scripts has denied any wrongdoing, and, in its movement to dismiss argues it was not “contractually obligated” to comprise prices.
Don Haviland: It is laughable for them to say that. That is their enterprise mannequin. They– they promote the mannequin of, “We will contain your costs. We will lower drug prices.” I welcome that argument in court docket earlier than a jury of 12. I welcome that argument.
Lesley Stahl: What do you consider this? This is your world. You work within the space of drug prices and why they go up.
Dr. Peter Bach: The underlying problem we have now with prescription medication on this nation is that each single actor has the potential to generate income when drug prices go up. Remember that for medication that docs give to their sufferers, they earn more money after they give costly medication than cheaper medication. It’s true of hospitals, too. It’s true of pharmacies as properly. And so this ever-expanding pie is serving everybody.
Everyone besides those that want the drug and people who pay for it like Medicare. Mayor Morrissey says it has been an extended and troublesome journey attempting to untangle the net of pursuits that price his metropolis a lot cash.
Larry Morrissey: The drug firms do not promote, hey we’re raping you. We’re making the most of you. We’re exploiting youngsters and abusing taxpayers. They do not speak that approach, proper? Although that is what the online impact is of what they’re doing.
Lesley Stahl: You nearly sound such as you’re calling them a bunch of crooks.
Larry Morrissey: That’s your phrases. I like these phrases. I feel they’re good phrases. And so long as they will get away with the rise in worth, they will do it. Until anyone pushes again.
Produced by Richard Bonin and Ayesha Siddiqi.