By Rachel Sachs

Yesterday, the FDA approved a steroid, deflazacort, for the treatment of Duchenne Muscular Dystrophy (DMD). DMD is a rare, heartbreaking, and ultimately fatal genetic disease with few if any real treatments, and the steroid may be helpful to patients. Deflazacort’s sponsor, Marathon, has offered the drug at a list price of $89,000 per year. High, but actually much lower than the typical prices charged for new orphan drugs, which can easily run to $300,000 or more per year.

Here’s the big problem: deflazacort isn’t really a new drug. As the Wall Street Journal and Endpoints have pointed out, the drug is approved in many other countries, and its list price is about $1,000-$1,600 in Canada and the UK. Patients have been importing the drug and accessing it since the 1990s. Now, patients will pay many times those prices for the same product they had already been purchasing.

But the drug had not previously been approved in the United States, and surely Marathon conducted new clinical trials to demonstrate the drug’s benefit? Not clearly. Marathon mostly relied on clinical trial data from the 1990s that had not been fully analyzed. In return, Marathon gets 1) a seven-year market exclusivity period for the drug (as required by the Orphan Drug Act) and 2) a valuable priority review voucher (as required by law for rare pediatric diseases).

This is not acceptable. Full stop. It is the worst sort of gaming that other companies have engaged in over the years. And at a time when the drug industry is under fire for its high prices, PhRMA cannot afford to have its members (of which Marathon is one) acting this way. If PhRMA and patient groups funded by pharmaceutical companies are serious about drug pricing, here are three things they should do/encourage right now:

PhRMA needs to distance themselves from Marathon and come to the table on drug pricing issues. There are different ways of doing this. Former Pfizer senior executive John LaMattina has argued that big companies should leave PhRMA and form their own company – now would be a good time to consider that. Congress (presumably the House Oversight and Government Reform Committee, but possibly also the Senate Committee on Finance) can call for an investigation and hearings into Marathon’s activities. How much did Marathon invest into the approval of deflazacort, looking ahead to a certain payday? Marathon didn’t take a “risk” on this product in the way that we normally think pharmaceutical companies need to do. Is this just like Knight Pharmaceuticals’ investment of $10 million into FDA approval and subsequent sale of a $125 million priority review voucher? Patient advocates can take the lead in encouraging their Congressmen on this front. A more extreme intervention would be to give the FDA the authority to deny market exclusivity or to decline to award priority review vouchers in cases like this. The FDA has limited statutory discretion to deny these benefits to companies, as a federal district court ruled against the agency in another case involving gaming in the past few years. It’s clear that the industry is not sufficiently able to police itself on this front. In good faith, the industry should consider giving more authority to regulators to decline to reward the worst abusers of the system.

I am not unsympathetic to the pharmaceutical industry’s concerns here. I have defended Gilead as regards Sovaldi’s high list price. I have argued Medicaid should pay more for some drugs to encourage companies to develop more drugs for low-income Americans. But this is not acceptable, PhRMA, and we all know it.