^(wap) (ATTN: National editors)<

^More information re drug and development; changes cost of<

^sulfamethoxazole in 1st graf; addition to 19th graf to suggest<

^impact on taxpayer; other changes throughout<

^High Price of New AIDS Drug Causes Controversy (Washn)<

^By Malcolm Gladwell=

^ 1991, The Washington Post=

WASHINGTON _ To slow the course of the disease destroying their immune

systems, most AIDS patients spend between $2,000 and $3,000 a year on the drugs

AZT and DDI. To prevent against a form of tuberculosis, many spend another

$3,000 a year on clarithromycin, and for pneunomia the bulk of AIDS patients

are on sulfamethoxazole, which costs about $100 a year.

But all of these bills pale next to the price of foscarnet, the newest

addition to the arsenal of anti-AIDS drugs. Approved several weeks ago by the

FDA to treat the blindness that afflicts 30 percent to 40 percent of AIDS

patients, foscarnet costs $21,000 a year.

The company that makes foscarnet, the Sweden-based Astra Pharmaceuticals

Inc., says this is more than a fair price because the drug cost $100 million to

bring to market and would have no more than a few thousand customers.

But AIDS activists, citing calculations of their own, charge that foscarnet

actually will be hugely profitable. Researchers, noting that the U.S.

government paid for a significant share of foscarnet's development costs, have

called the price irresponsible. Even some pharmaceutical industry officials

have worried that foscarnet's high price may provoke Congress into controlling

drug prices.

At a time when drug prices are the fastest rising segment of health care

costs, many industry observers feel that foscarnet may ignite the long

smoldering controversy over what constitutes a fair price for a new drug.

``There is an awful lot of hyperbole in all of these discussions,'' said

Stephen Skuce, an AIDS activist in Boston. ``But anyone who thinks this isn't a

naked grab at Medicaid funds, third-party payer funds and the limited funds of

some of the least fortunate people in the U.S. is hopelessly naive.''

``These drugs are priced for kings and most AIDS patients are paupers,''

said Rep. Henry A. Waxman, D-Calif., chairman of the House health and

environment subcommittee. ``We have to find a way to give better coverage to

people with HIV and a way to restrain prices for all drugs.''

Foscarnet is a drug given intravenously to patients suffering from an

infection of the retina caused by the cytomegalovirus (CMV), a disease that is

a common cause of blindness among HIV infected people in the final stages of

AIDS. Taken daily for as long as the patient can tolerate the drug or remains

alive, it both cures the blindness, prevents re-infection and has been shown to

fight the spread of HIV.

As effective as it is, however, the drug does not fit the profile of an

expensive drug. The chemical on which it is based was discovered in 1924, and

the drug's anti-viral properities have been known since the 1970s. Nor is it

the kind of complex molecule that can be very difficult and expensive to

manufacture.

``It's very simple,'' said Clyde Krumpacker, a researcher at Beth Israel

Hospital in Boston who helped develop the drug. ``Next to lithium, this is the

simplest drug ever approved by the FDA.''

Foscarnet also benefited from the special treatment given to AIDS drugs by

the federal approval process. While some companies are required to test their

drugs in thousands of people over several years to demonstrate safety and

effectiveness, Astra was allowed to get by with much less data. In making its

case to the Food and Drug Administration, Astra presented results from five

studies _ typically of six or eight months' duration _ totaling 180 people. Of

the studies, four were funded by the company, one by the National Institutes of

Health.

From start to finish foscarnet spent a year before the FDA, about one-half

to one-third as long as new drugs typically take. Members of the advisory

committee that recommended the FDA approve the drug said they deliberately let

Astra get by with less evidence of safety and effectiveness because it was

intended for AIDS patients.

But none of this special treatment added up to a low price. ``They poured a

lot of money into this drug and didn't really get much out,'' said Samuel

Isaly, a drug industry analyst in New York.

Astra, for example, tried unsuccessfully to reformulate foscarnet as a creme

to be used in treating herpes. But then another drug came along that proved

more effective, so they shelved the project at the last minute. They then tried

to reposition the drug as a general anti-viral, which did not work either.

Even proving that the drug worked for CMV retinitis, the company says, was

expensive. The clincial trials, though small, were costly because the patients

involved were hospitalized and were so ill they had to be monitored closely.

Astra also said they spent an additional $15 million giving the drug away to

patients before it was approved.

The total cost of developing foscarnet, estimates Astra Vice President Nigel

Rulewski, was $100 million. Given the company's estimate that only about 6,000

patients will be taking it at any one time, and then for an average of six

months, the drug may gross $63 million a year. Considering the costs of making

and selling it _ which the company will not disclose _ and the amount of drug

the company says it will continue to give away to those without any insurance,

Rulewski argues it is in fact underpriced.

``I don't think Astra assumes that it will ever make back the money that we

spent,'' said Rulewski. ``I don't think we will ever get into a profit

position. It's one of those things that while it looks good on the surface, it

doesn't really make any money, as hard as it is to believe that.''

Even Rulewski, however, concedes that the company's revenue estimates for

foscarnet are conservative. Others call them fanciful. Foscarnet's only

competition is a drug known as ganciclovir, which costs $8,000 a year. And in a

three-year, $15 million government-funded trial that ended late last month,

patients taking foscarnet were found to live four months longer than those

taking ganciclovir. Some researchers speculate that this is because foscarnet

has additional action against HIV.

Analysts at the AIDS Action Council estimate that in the wake of those

results, a more realistic market for foscarnet is between 8,000 and 20,000

patients and a more realistic duration for treatment is one year. If that is

the case, the potential first-year revenue from foscarnet would be between $420

million and $168 million, and Astra would recoup its investment on the drug in

a matter of months. Much of this cost will be borne by the taxpayer because

approximately 40 percent of all AIDS patients have medical expenses paid by

Medicaid.

At a time when the drug industry is under increasing scrutiny from Congress

for high drug prices, Astra's pricing strategy has made some pharmaceutical

officials nervous. Others have argued that because the company was given

special treatment by the FDA, enabling it to get its drug to market more

quickly, it should have been more restrained in setting a price for foscarnet.

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