Here's what's behind the ads accusing Bob Hugin of 'killing off cancer patients'

Herb Jackson | NorthJersey

Show Caption Hide Caption 2018 NJ Senate election: Drug prices drive health care debate Sen. Bob Menendez is trying to make Republican opponent Bob Hugin's career at drugmaker Celgene one of the focal points as they compete for US Senate

Republican U.S. Senate candidate Bob Hugin had the commercial airwaves to himself most of this year, but that changed when a super PAC began airing ads calling him "the guy who made a killing off cancer patients."

It's a theme that Sen. Bob Menendez, the Democrat Hugin is vying to unseat, has raised many times. And voters will hear about it many more times before November.

Here's what's behind the debate, and what each side has to say about it.

Running a drug company

Hugin, 63, retired in January from Celgene Corp., where he worked for almost 20 years in positions that included president, chief executive officer and chairman.

His 34-page financial disclosure statement shows Celgene paid him $47 million in the 15 months ending March 31. He has Celgene stock worth more than $50 million and a deferred compensation plan from the company worth between $5 million and $25 million.

Hugin is using that money to run for Senate. Through June 30, he has lent his campaign $15.5 million, according to disclosures with the Federal Election Commission.

Celgene makes several drugs to treat cancer, including Revlimid, which treats a type of blood cancer called multiple myeloma.

"Revlimid is a very good example people pull out when pointing to problems with changes in drug prices," said Stacie Dusetzina, a health policy expert at Vanderbilt University Medical Center.

Since Revlimid was approved in 2005, she said, the cost of a 30-day supply grew from about $8,000 to $19,000. The company cut the price of Revlimid by 45 percent last year in Russia at the same time it raised prices 20 percent in the United States, NJ Advance Media reported on Sunday.

"People who need to take the drug, a lot of them are on Medicare. They pay close to $1,000 a month for one set of pills, and they need to take it for the rest of their life," Dusetzina said. "The way drug benefits work in Medicare Part D, the higher the drug price, the faster you get to the point where Medicare pays more. All taxpayers end up paying more in that case."

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Hugin blames health insurance

Hugin says Celgene was going under when he came on board in 1999, and now it's a successful New Jersey-based company that creates high-paying jobs and makes drugs that prolong the lives of people who might otherwise die.

Hugin blames insurance companies and the way they design health plans for the costs borne by people taking Celgene's drugs. He says coverage should better recognize the value that lifesaving drugs provide.

"We have allowed plan design to put the burden on patients unfairly," Hugin said. "Over the last three or four years, copays and coinsurance have risen ... to more than 50 percent. ... In 2016, I think, pharmaceutical expenditures went up 1.6 percent, co-pays went up 30 percent."

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Companies that develop drugs, Hugin says, need to be able to recoup their investments, fund research into new treatments and make a profit while they have commercial protection from competition. Once generics hit the market, Hugin said, the price of name-brand drugs "are going to near zero," while the public continues to benefit from their discoveries for decades to come.

Hugin's campaign said Celgene spent "hundreds of millions of dollars to ensure affordable access" to drugs by patients who could not afford them. After he came under attack in ads funded by Patients for Affordable Drugs Action over the price of Revlimid, Hugin's campaign released its own ad highlighting the story of a man whose 6-year-old son had a cancerous brain tumor and was told that his insurance company would not cover Revlimid.

"We didn't know how we'd make it work, and then Bob and Celgene stepped in," the man says.

What he leaves out

Not every patient can benefit from Celgene's discount programs. If they could, the discount would be the price.

And while Hugin was a contributor to President Donald Trump and a delegate at the Republican National Convention that nominated him, Trump's administration has cited Celgene as a company that may be using "gaming tactics" to thwart competition from generic drugs.

Revlimid is derived from thalidomide, a drug originally prescribed to treat morning sickness that was banned in 1962 because of its connection to birth defects. To reintroduce it as a cancer treatment, Celgene had to put strict controls, known as REMS, on distribution to ensure that it was not taken by pregnant women.

Generic drug makers need supplies of brand-name drugs to conduct tests and prove to the Food and Drug Administration that their version works. Celgene appears to be using REMS to keep generic drug makers from getting samples they need, the FDA said.

"They're resorting to tactics the FDA criticized. Under the guise of patient safety, this is really about preserving a monopoly position," said law professor Rachel Sachs, who teaches at Washington University in St. Louis, Missouri.

"Companies with monopoly positions have the ability to raise prices year after year, quarter after quarter, even, with impunity, and Medicare is required to pay — even some private insurers are required to pay," Sachs said. "They're raising prices not necessarily because they've given something new to society, but because they can."

David Mitchell, the founder of Patients for Affordable Drugs Action, took Revlimid to treat multiple myeloma. He said there would be a generic version on the market today if Celgene had cooperated with generics makers. The super PAC is primarily funded by a hedge fund manager and his wife, "megaphilanthropists" who set up a foundation to promote cheaper prescription drugs, among other things.

Hugin's spokesman, Megan Piwowar, said that as a senator, he would "stop the system from discriminating against the sickest Americans and advocate for payment systems based on value."

"Value" is also a word Celgene uses when asked about its price increases. The company responded to an email saying it limits prices increases to no more than once a year at a level no greater than the projected increase in national health expenditures, which was 5.3 percent in 2018.

"There may be exceptional circumstances in which additional clinical or health economic evidence demonstrates a clear and significant increase in the value of one of our medicines, in which case this standard would not apply," the company said.

Where the campaign is going

Rep. Frank Pallone of New Jersey has asked the House Energy and Commerce Committee, where he is the top-ranking Democrat, to hold a hearing about abuse of the REMS process.

Menendez said drug companies should be able to recoup their costs, but he said Celgene kept raising prices when its costs had not gone up.

"That's not about recoupment, that's about profit. Profit that is obscene. Profit that comes back on the back of cancer patients. Profit that is unconscionable," he said.

Wow! Even Donald Trump is ashamed at what Bob Hugin did at Celgene: Jacking up prices on lifesaving drugs & preventing low-cost generics, while giving huge discounts to patients in Russia. Greedy CEO Bob Hugin made his personal fortune on the backs of the sick and vulnerable. https://t.co/rFWmsm43N7 — Menendez for NJ (@BobMenendezNJ) July 10, 2018

Menendez has co-sponsored two bills, dubbed the SPIKE Act and CREATES Act. The SPIKE Act, which is currently sponsored only by Democrats, would require companies to explain their reasons when price increases exceed benchmarks. The CREATES Act, which has bipartisan sponsorship, would crack down on companies that delay providing samples for generic manufacturers.

What Bob Menendez doesn't mention

Menendez, however, has been one of the top recipients of contributions from the pharmaceutical industry in the entire Congress. Contributions during his career totaled more than $927,000, according to the Center for Responsive Politics.

The last time he ran for re-election, in 2012, Menendez was the third-highest recipient in Congress of contributions from Celgene employees. His $7,750 total placed him behind presidential candidate Mitt Romney, who got $12,459, and Rep. Leonard Lance, R-Clinton Township, who got $20,000.

While Menendez was not convicted of corruption charges in federal court last year, his co-defendant in that case, Florida eye specialist Salomon Melgen, was convicted in a separate trial of 67 charges, including submitting false claims to Medicare and falsifying patients' records.

Prosecutors said Melgen would buy what was supposed to be a one-dose vial of an expensive medication and treat several patients with it, billing Medicare for the full cost each time. When he came under investigation, Menendez questioned Medicare officials about whether their regulations were unclear. Melgen is appealing his 17-year prison sentence.