HHS to Buy Cipro at Two Different Prices, Raising Concerns of Overpayment Among Consumer Advocates

Citing an internal HHS document, the Washington Post on Oct. 26 reports that HHS' agreement with Bayer to purchase the antibiotic Cipro calls for the department to pay 95 cents a pill for part of its order and 43 cents for another part, leading some lawmakers and consumer advocates to criticize the deal. The agency will buy the drug for the lower price under a program known as "Section 340B," in which the agency negotiates low prices on drugs for hospitals and clinics that treat low-income people and those in underserved areas. Under the program, administered by HHS' Office of Pharmacy Affairs, the HHS secretary must reach an agreement with drug makers to purchase medications at prices lower than the "average manufacturer price." The HHS document obtained by the Post acknowledged the existence of the "price difference," and cautioned that it should remain undisclosed to the public "given the sensitivity to divulging pricing information." HHS did not comment on the report. Rob Kloppenburg, Bayer's director of communication, "defended the contract" with HHS, saying that Section 340B is a "federally mandated program" in which companies "provide drugs at a price fixed by the government" and have "no control ... even over the quantity." But consumer advocate Ralph Nader accused HHS of "overpaying Bayer [for one part of the order] when they are getting [Cipro] much cheaper in the other program." He added, "There's this double price structure that should not be tolerated. ... You have the same buyer representing the taxpayers of America and the same buyer is agreeing to a two-tier price system for no reason." Rep. Henry Waxman (D-Calif.), ranking member on the House Government Reform Committee, said, "The disparities in Cipro pricing show that drug prices have become so complicated that even the largest purchasers are groping in the dark to try to figure out what is a fair price and what is unreasonable" (Vedantam, Washington Post, 10/26).

Profiteering Charges...
Generic drug makers and consumer advocates say that despite Bayer's agreement to sell Cipro to the federal government at a significantly reduced price, the new contract is "still enormously profitable" for the company. Three generic drug makers said they could sell copies of Cipro for about 40 cents a pill. Dipack Chattaraj, president of the New Jersey-based generic drug maker Ranbaxy Inc., said, "[W]e'd still be making money at that price." The Wall Street Journal reports that because the pills that Bayer is supplying to the government will be stockpiled for use only in emergencies, the private market, where the drug's average wholesale price is $4.67 per pill, will remain unaffected. William Haddad, chair and CEO of the generic drug maker United States Research and Development Corp., estimated that Bayer spends "no more than" 20 cents to make each Cipro tablet. "Everybody else is making a sacrifice in these times. [But Bayer] is still making an extraordinary profit when selling to the federal government. They are not doing it out of their heart" (Harris, Wall Street Journal, 10/26).

...And Conspiracy Charges
A coalition of consumer groups on Oct. 25 filed suit against Bayer, alleging that it "conspired" with three generic drug makers to keep a generic version of the antibiotic off the market, the Boston Globe reports. The lawsuit, which is similar to a previous suit filed in California, was filed in New York by the Prescription Access Litigation Project and asks that generic versions of Cipro be allowed to enter the market immediately. The suit contends that Bayer violated antitrust laws by reaching deals during the 1990s with drug makers Barr Laboratories, Rugby and Hoechst-Marion Roussel in which Bayer agreed to pay them millions of dollars per year to cease their attempts to have Cipro's patent ruled invalid. Thomas Sobol, an attorney for Community Catalyst, a consumer advocacy group that is part of PAL, said that the agreements resulted in generic versions not being available until Cipro's patent expires in 2003. Barr CEO Bruce Downey, however, "said that the agreement with Bayer was legal and actually helpful for consumers because it prevented a long, expensive court battle" that could have delayed introduction of a generic even longer (Kowalczyk, Boston Globe, 10/26). For comprehensive public health information from the CDC on anthrax and other bioterrorism issues, please visit www.bt.cdc.gov.