Oregon State University pharmacy professor Daniel Hartung has long suspected that corporate greed is behind skyrocketing prescription drug costs, not pharmaceutical companies’ investment in research as company executives regularly claim.

Now, Hartung and his research team have the evidence straight from some of those responsible for growing drug costs, revealed in anonymous interviews with four pharmaceutical executives and published Monday in the journal Neurology.

The core findings of his study, that thirsts for profits have driven companies to regularly hike prescription drug prices, were not “earth shattering,” the OSU and Oregon Health & Science University College of Pharmacy associate professor said.

“What we thought was going on was essentially confirmed,” Hartung said. Pharmaceutical companies “have expectations from their shareholders and Wall Street to meet growth. They need to continue to grow.”

Most Americans think drug prices are too expensive. Nearly four out of five people surveyed in February by the Kaiser Family Foundation said that drug prices are “unreasonable.” Three in ten said haven’t taken their medications as prescribed due to cost.

Pharmaceutical company executives told Congress in February that they have to charge a lot for drugs to pay for research into new medications. But the four executives who spoke confidentially to Hartung painted a different picture, citing a need for ever-increasing revenue and an unfettered ability to raise prices as two of the core reasons their companies kept hiking costs.

Oregon Rep. Rob Nosse got a bill passed last year that requires companies to disclose drug costs to the state and, if the costs rise, to explain why. That’s one of the first steps, the Portland Democrat said, to getting drug prices manageable for regular people.

Although he said he wasn’t surprised by Hartung’s findings, he said it will give him new ammunition in pushing for change.

“It sure does make a difference,” Nosse said of the study. “It creates a justification, politically, to do something different.”

MULTIPLE SCLEROSIS PATIENTS HIT HARD

As a high school student in Newton, Massachusetts, Mark Woodlief was a track and field athlete. Now, the 53-year-old Portland resident’s feet graze the floor with every slow step he takes.

He first felt signs of multiple sclerosis when he was 28, Woodlief said, when for six months he felt pins and needles in his left arm. He thought it was bad circulation from smoking cigarettes, he said.

Then, one day, he woke up barely able to see from his left eye. Within weeks he got a diagnosis: Relapse-Remitting Multiple Sclerosis. With every year since, he has gradually lost mobility. He got a cane in 2002 and a scooter in 2005.

“A normal person just gets up from the table. I have to be very intentional about it,” he said. “Otherwise, I’ll fall.”

Multiple sclerosis patients’ immune systems attack the protective layer around nerve cells, damaging the pathways for the electric signals our bodies use to do things.

In one version of the disease, patients experience periodic attacks, with symptoms that include muscle spasms, chronic pain, problems walking, memory loss and slurred speech. In other versions, patients experience a steady decline.

The disease afflicts about 914,000 people in the United States, according to a March analysis of insurance claims and Census data, and there is no known cure. At the rates cited by the study, about 14,350 Oregonians have the illness.

Nearly 400 Oregonians in 2018 paid about $3,350 out of pocket for the multiple sclerosis drug Tysabri, according to data from the Oregon Department of Consumer and Business Services, and insurance companies paid $18.6 million.

Drugs for multiple sclerosis, the disease Hartung focused on for his interviews with executives, have seen some of the steepest price increases in the last decade.

Treatments introduced in the 1990s that cost around $10,000 a year when they first entered the market now cost around $80,000. This year, people with multiple sclerosis on Medicare paid about $6,900 out-of-pocket for their drugs, according to another study by Hartung, published in February in the journal Health Affairs.

Five drugs that treat multiple sclerosis made Oregon’s list of the top 25 most expensive drugs, one of them placing third, according to data from the new program that tracks prescription prices. Three multiple sclerosis drugs made the list of drugs whose costs increased the most since 2018.

INSIDERS EXPLAIN

For at least the last five years, Hartung has been trying to understand why multiple sclerosis drug prices have been going up.

Hartung rang the alarm bells in a 2015 study, in which he found that prices for some drugs went from around $10,000 a year in the early 1990s to $60,000 a year in 2013.

Why costs rose so much was uncertain, Hartung wrote in the study, also published in the journal Neurology.

“However, the simplest explanation is that pharmaceutical companies raise prices of new and old” multiple sclerosis drugs, he wrote, “to increase profits and our health care system puts no limits on these increases.”

Then, Hartung realized one angle of analysis he hadn’t tried was talking to people who worked inside of the industry, he said. Study co-author and chair of the Oregon Health & Science University’s Department of Neurology Dr. Dennis Bourdette reached out to four pharmaceutical executives who agreed to talk about what factors determined multiple sclerosis drug prices.

In 30-minute interviews, the executives told Hartung and an expert in interview-based research that companies raised prices principally to maximize revenue, not to pay for research or manufacturing costs.

“The rationales for the price increases are purely what can maximize profit,” one former executive said.

The companies needed to increase their revenues to lure and retain investors. One interviewee said their employer had to compete for shareholders’ attention and the only way to do that was with revenue.

“You have to demonstrate better than average returns for your shareholders or they’re going to go elsewhere,” said another.

In the 1990s and early 2000s, Hartung wrote, companies selling multiple sclerosis drugs could drive revenue simply by selling them to more people. But after the market for multiple sclerosis becomes saturated, he wrote, executives told him the “simplest” way to keep cash flowing was to jack up prices.

The executives also said that a new drug’s initial price was set based in part on what consumers would think the cost said about the quality of the drug. One executive said that a higher cost for a new drug could convey an advantage over the drugs already on the market. Selling a new drug more cheaply than those people can already buy, meanwhile, could signal lower quality, Hartung learned.

“We can’t come in at less,” an executive told Hartung. “That would mean we’re less effective, we think less of our product, so we have to go more.”

That pattern could be changing because of recent scrutiny of drug prices, Hartung wrote, noting that Ocrevus, a recently-launched multiple sclerosis drug that is better than several other similar drugs, came into the market costing about 30% less than average.

The executives also helped explain why drugs cost so much more in the United States.

Multiple sclerosis drugs are far cheaper in Europe, where single-payer systems decrease pharmaceutical companies’ leverage to raise costs.

The executives told Hartung that drugs in Europe are cheaper because the United States market is “unique in its capacity to absorb price increases.”

“It is only in the United States, really, that you can take price increases,” an executive said.

A spokeswoman for Pharmaceutical Research and Manufacturers of America, the industry’s main trade group, presented three objections to the study.

In an email, Holly Campbell said that the four executives Hartung interviewed do not represent the entire industry. And the paper fails to highlight major recent innovations in multiple sclerosis drugs that make taking the drugs easier, she wrote, and it does not mention pharmaceutical companies’ efforts to “align price to patient outcomes.”

Hartung readily acknowledged that the study has some flaws. The sample size is small, he said, and his co-author, Bourdette, reached out to the four executives in the study because he knew them.

But those very limitations indicate another problem Hartung wrote he sees in the pharmaceutical industry.

The small number of people willing to talk even anonymously for the study, he wrote, is “emblematic of the opaqueness of the pharmaceutical industry.”

-- Fedor Zarkhin

fzarkhin@oregonian.com

desk: 503-294-7674|cell: 971-373-2905|@fedorzarkhin

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