nyceve posted a diary describing how policy holders of BCBS lose their coverage for filing a claim.

The state’s largest health insurer systematically — and illegally — cancels coverage retroactively for people who need expensive care, 10 former Blue Cross members claimed in lawsuits filed Monday.

And, an article in the NYT claims that the price of nitrogen mustard, used in treating some types of lymphoma, increased from $77.50 to $548.01 in a two week period.

more below

Last August, Merck, which makes Mustargen, sold the rights to manufacture and market it and Cosmegen, another cancer drug, to Ovation Pharmaceuticals, a six-year-old company in Deerfield, Ill., that buys slow-selling medicines from big pharmaceutical companies.

The two drugs are used by fewer than 5,000 patients a year and had combined sales of about $1 million in 2004.

Now Ovation has raised the wholesale price of Mustargen roughly tenfold and that of Cosmegen even more, according to several pharmacists and patients.

Sean Nolan, vice president of commercial development for Ovation, said that the price increases were needed to invest in manufacturing facilities for the drugs. He said the company was petitioning insurers to obtain coverage for patients.

The increase has stunned doctors, who say it starkly illustrates two trends in the pharmaceutical industry: the soaring price of cancer medicines and the tendency for those prices to have little relation to the cost of developing or making the drugs.

Doctors are questioning the reason for the increase.  A Dr. Len Lichtenfeld, the deputy chief medical officer of the American Cancer Society stated,

“Nitrogen mustard has been around forever.  There’s nothing that I am aware of in the treatment environment that would explain an increase in the cost of the drug.”

And, Dr. David H. Johnson, a Vanderbilt University oncologist,  former president of the American Society of Clinical Oncology,

“I’d like to have some evidence from them that it actually costs them X amount, so that the pricing makes sense.”

According to Sean Nolan, vice president of commercial develepment of Ovation,

“It’s unfortunate that a price adjustment had to occur.  Investment had not been made in these products for years.”

Ovation, which is privately held, needs money for research and development of new rx’s for rare diseases, Nolan also claimed.

This contradicts a claim made by  Henry A. McKinnell, the chairman of Pfizer.  In his book, McKinnell writes

that drug prices were not driven by research spending or production costs.

“A number of factors go into the mix [of pricing.] Those factors consider cost of business, competition, patent status, anticipated volume, and, most important, our estimation of the income generated by sales of the product.”

Also, once a price is set, the FDA does not regulate it, nor is Medicare supposed to consider price when deciding whether or not to cover a rx.  Compare w/private insurance companies, as they are allowed to consider price in determining whether or not it will be covered and under which formulary.

As a result, the price of many medications, in particular, cancer medications have increased rapidly.    This is the second time that the price of an anti-cancer drug has been increased by Ovation.  As reported by the NYT,

In 2003, the company bought Panhematin, a treatment for a rare enzymatic disease called porphyria, from Abbott Laboratories. While Abbott still produces Panhematin, Ovation raised Panhematin’s price, which had been $230 a dose, to $1,900, according to Desiree Lyon, executive director of the American Porphyria Foundation.

The price of other cancer medications has also increased.  For example, in 1992, Bristol-Myers Squibb was being protested for charging $4,000 a year for Taxol, a breast cancer treatment.

Now, most new cancer treatments are priced at $25,000 to $50,000 annually. In some cases, companies are pushing through substantial price increases on already-expensive drugs.

Last year, Genentech raised the price of Tarceva, a lung-cancer drug, by about 30 percent, to $32,000 for a year’s treatment.

Dr. Susan Desmond-Hellmann, the president of product development for Genentech, justified the price increase

“Tarceva was a more powerful and more active agent than what we understood at the time of launch, and so more valuable.”

 In other words, it works, so make it available to only to those who can afford it.

According to Dr. Richard Hoppe, a professor of radiation oncology at Stanford University Mustargen’s previous price was a comparative bargain, giving Ovation the chance to increase it.  

“There’s only one company that makes the drug, and they can decide what it’s worth.”

Mustargen’s sales are tiny and its patent has expired, so no drug maker will produce a generic.

After reading nyceve’s diary and this, it is worth wondering if the rx cos. have prices cancer treatments so high, that they are cancelling coverage of cancer claims in order to show a profit?

And, sadly, many cancer medications are not covered under Medicare D(isaster) without a prior-authorization, or going through step therapy.