How Celgene uses safety concerns to keep its $7 billion cancer drug on top

Pam Holt, a retired teacher in Grainger, Indiana, was diagnosed with cancer in 2014. At the time, her treatment — with a derivative of the once-banned sedative thalidomide — cost $588 a month. In the past few months, her share of the bill has risen to $640 a month.

“I do have a little retirement. This is not how I planned on spending it all,” said Holt, 68, who admitted that this year she has had to put some of the pharmacy bills on her credit card. “These bills are just horrendous.”

A month’s supply of Celgene's thalidomide, branded as Thalomid, lists for about $5,000 to $9,000, including the cost paid by insurers. Its sister drug, a thalidomide derivative called lenalidomide, goes for $18,000 to $22,000 a month under the brand name Revlimid.

Celgene is the exclusive provider of both drugs, which some cancer patients use for only a few months but others take for years. Thalidomide is no longer under patent, but Celgene has effectively used US federal drug safety procedures to stonewall generic versions before they can reach market. It's not clear whether that conduct is illegal.

Celgene is by no means the only company that cites federal drug safety rules in refusing to provide samples. At a July workshop, the US Food and Drug Administration said it received at least 150 complaints from generics unable to access samples for restricted drugs. The unavailability of generics has significant monetary consequences. One 2014 study, sponsored by the Association for Affordable Medicines, estimated that misuse of the rules costs $5.4 billion each year — $960 million of that in out-of-pocket costs paid by patients.

In 2016, Celgene brought in more than $7 billion in revenue on those two drugs alone, and in the first quarter of 2017, nearly two-thirds of its revenue was attributed to Revlimid. The US Federal Trade Commission has found that when a company faces generic competition, the price of a drug typically plummets at least 80 percent.

Holt has multiple myeloma, a cancer that attacks the white blood cells. The disease can lead to breakdown of the spine and ribs without treatment. Two decades ago, a patient diagnosed with multiple myeloma might only live three to four more years. But the unlikely revival of thalidomide — a drug once banned around the world after it was linked to horrific birth defects in the 1960s — now allows cancer patients to live a decade or more with monthly treatments.

Celgene maintains its exclusivity through an FDA safety procedure. The company refuses to sell samples of its drugs to would-be rivals, citing safety concerns. Without a sample, a competitor can never prove to the FDA that its generic version is identical to the original drug — and so the FDA never certifies the generic for market.

The FDA has decried the “shenanigans” by Celgene and other pharmaceutical companies, but has said it has no authority to make them stop the practice. Celgene argues that it is complying with the relevant safety procedures, and that safety concerns outweigh any duty on the company to deal with its competitors.

Thalidomide crisis

The thalidomide crisis marked a turning point for pharmaceutical safety. Initially sold in West Germany in the late 1950s, doctors prescribed it as a sedative. It later was sold over the counter to alleviate morning sickness.  By the time its role in causing birth defects was recognized, thousands of infants in West Germany had died at birth. Those that survived — thalidomide babies — were born with malformed arms and legs, or sometimes just stumps.

In the wake of the crisis, most countries banned thalidomide from the market.

Celgene started out in 1986 as a bioremediation company, making products that break down environmental pollutants. Its trajectory changed dramatically in 1991, according to company lore, when two Celgene executives met Gilla Kaplan, an Israeli doctor at New York's Rockefeller University.

Kaplan proposed a partnership between Rockefeller and Celgene to further develop thalidomide. The drug had already been shown as an effective leprosy treatment and there were hopes that it might work for AIDS or cancer.

Celgene agreed to the collaboration.

"It was greeted with a lot of skepticism by the Wall Street community and internally, too," Sol Barer, one of the executives at the 1991 meeting who would go on to become Celgene’s president, said in 2004. "People said, 'You're going to take the most vilified drug in history, and you're going to build a pharmaceutical company around it?'"

By 1995, the FDA approved the use of thalidomide for use by AIDS patients suffering from cachexia, a wasting syndrome where individuals experience weight loss, muscle atrophy and fatigue. Within three years, the FDA had also approved thalidomide to treat erythema nodosum leprosum, or ENL, a skin condition that arises in patients with leprosy.

The next year, the New England Journal of Medicine published a landmark paper on the use of thalidomide in patients with multiple myeloma. While Celgene couldn’t market the drug as a multiple myeloma treatment, doctors nonetheless frequently prescribed it as one. In 2003, the company estimated 92 percent of the prescriptions for Celgene’s Thalomid were for cancer patients.

The FDA didn’t officially approve Thalomid for use on multiple myeloma until 2006. Later that year, the FDA also approved Celgene’s Revlimid as a multiple myeloma therapy.

To gain FDA approval, Celgene agreed to restrict the drugs’ distribution and warn patients of the potential side effects, what’s officially called a Risk Evaluation and Mitigation Strategy, or REMS, program. Doctors and pharmacies must register with the company before they prescribe or dispense the drugs. Patients watch a video and receive written materials and counseling on the risks each month. Women of child-bearing age must agree to use two forms of birth control while taking the drugs.

That program — originally intended to ensure patient safety — has allowed Celgene to maintain its control over the market for thalidomide to this day.

Celgene declined to comment, citing ongoing litigation. A spokesman for the company, however, noted that several companies have now applied to the FDA to offer a generic Revlimid. The spokesman provided a two-page handout describing Celgene's "commitment to patients and safety" in the "interest of promoting fact-based reporting."

Mylan lawsuit

In 2003, Mylan, the world’s second-largest generic pharmaceutical company, became interested in developing a generic thalidomide. The FDA process for a generic is a simpler version of what a branded drugmaker goes through for a new drug: The company provides evidence that its generic is the same drug as the original in what is known as a “bioequivalence study.”

The only problem with a bioequivalence study: Mylan needed some of the original product to test against, and Celgene wouldn’t provide a sample.

Mylan first sought Thalomid from its distributor in 2004. When that didn’t work, Mylan wrote to Celgene asking for a sample, according to court documents in a federal antitrust suit between the companies.

Celgene eventually responded, telling Mylan that it couldn’t provide samples because of the FDA’s restricted distribution program.

At that point, January 2006, Mylan wrote to the FDA asking for help in obtaining thalidomide samples. After some back-and-forth, the FDA told Mylan that the company's proposed safety protocols for a bioequivalence study of thalidomide were acceptable with some changes.

Mylan informed Celgene of the FDA’s approval. For the next two years, the companies traded letters, with Mylan asking for samples and Celgene requesting more information. A similar pattern would occur with Revlimid.

Fed up with Celgene’s delays on Thalomid, Mylan went straight to the FDA about Revlimid. The FDA approved Mylan’s safety procedures for Revlimid about a year later. The two companies continued to swap letters until Mylan filed the antitrust suit in 2014, accusing Celgene of antitrust violations for withholding samples.

Lannett Company and Dr. Reddy’s Laboratories also sought Thalomid and Revlimid samples from Celgene without much success.

Lannett sued Celgene in 2008, seeking to use antitrust law to force the branded drugmaker to provide samples. The companies reached a confidential settlement in 2011, and Lannett filed with the FDA in 2015 to offer a generic Thalomid. Celgene then filed patent infringement litigation against Lannett, and the companies settled in October, reaching a license agreement that will allow Lannett’s generic product to enter the market in 2019.

The only problem: By the time Lannett’s generic gets on the market, few patients will still be taking Thalomid. Most multiple myeloma patients now take Revlimid, which Celgene maintains is safer.

Thalomid isn’t covered by patents, but Celgene holds some related to Revlimid that expire in 2022. Those patents are the subject of litigation, and generics argue that the patents are invalid.

One company, Natco, agreed to settle litigation in exchange for a license to offer Revlimid in 2023. Under that license, Natco can only sell a limited volume of generic Revlimid until all of Celgene’s patents expire in 2027, meaning Natco’s entry likely won’t bring down prices much.

Insurance

Prices paid by patients vary widely depending on their insurance. A 2015 Kaiser Family Foundation study found that Revlimid has a median out-of-pocket cost of $11,538 a year for Medicare patients.

David Mitchell began taking Revlimid soon after his multiple myeloma diagnosis in November 2010. Insured through his employer, Mitchell’s co-pays for a month’s supply cost about $42.

Five and a half years later, when Mitchell stopped taking Revlimid, his co-pays had crept up to $250 a month.

The price of Revlimid has continued to climb. In 2017, Celgene hiked the price three times, increasing it 19.8 percent over the previous year.

Mitchell now takes three different cancer medications, which under Medicare and his supplemental insurance have no out-of-pocket costs.

“They have the market power to make prices increase,” Mitchell said of Celgene. “Myeloma patients like me just have to take it.”

Infuriated by Celgene’s conduct, Mitchell retired last year and founded Patients for Affordable Drugs, an organization that advocates for policies to lower drug prices. He is also the lead plaintiff in an antitrust class action against Celgene over its alleged abuse of the federal drug safety program.

“Celgene treats its patients like a piggy bank, and they can do it because they are hiding behind REMS,” said Mitchell, 67. “It’s wrong. It’s an ugly, awful practice.”

Barton Fisk, a retired IBM sales engineer, pays more than $1,000 a month for his Revlimid. He can no longer afford both his cancer treatment and the almost equally expensive drugs for his multiple sclerosis, which has left him using a walker. Fisk said he, too, has become jaded about Celgene after reading a company securities filings showing billions in profits.

“It makes me angry that the system is permitting this,” Fisk said. “It really upsets me, but I don’t know what to do about it. We’re just normal working people.”

FDA non-enforcement

The FDA said it has no authority to bring an enforcement action against a company that doesn’t provide samples.

“We made it clear that drugs, even under REMS, can be used for bioequivalence studies and so forth, but we can't compel companies to give their drug away to a competitor,” Janet Woodcock, director of the FDA’s division that regulates drugs, told a House panel in March.

In a November speech, FDA Commissioner Scott Gottlieb urged companies to “end the shenanigans.”

“This needs to stop,” Gottlieb said. “I consider these tactics unfair and exploitative practices, and they’re in direct conflict with our broader public health goals.”

While the FDA won’t bring any actions, the agency has referred cases of alleged REMS abuses to the FTC, which investigates antitrust and consumer protection violations.

The FTC opened an investigation into Celgene’s conduct in 2009. The agency considered filing an antitrust suit in 2011 when Lannett was facing difficulties, it is understood, but held off when Celgene and Lannett reached a settlement.

The FTC intervened in Mylan’s suit in 2014, urging the judge not to dismiss the case.

“Celgene is in the business of selling Thalomid and Revlimid, and Mylan is requesting access to samples of these products in the same form, and at the same price, as they are sold to the public,” lawyers for the FTC wrote.

The judge agreed to let the case go forward.

In October, the FTC closed its investigation into Celgene, in large part because the agency felt its involvement was no longer needed.

Mylan and Celgene have now been duking it out in court for three years. According to Mylan, the antitrust suit — in which it accused Celgene of monopolizing the market for Thalomid and Revlimid — was its last option. Mylan repeatedly asked for samples, got the FDA to approve its safety procedures — even though that is not required — but 13 years later, it doesn’t have samples.

For its part, Celgene said it had legitimate business reasons for withholding the samples.

Celgene wanted to ensure “that the product was going to be used safely, that patients' health was going to be maintained, and safe conditions [were maintained] not only for the people involved in the test but the personnel who were administering the test,” a lawyer for the company told a New Jersey federal court last month. “Also, Celgene had legitimate business issues in terms of wanting to insure itself from the liability standpoint.”

The judge overseeing the case appears ready to side with Celgene. In a preliminary oral ruling on Dec. 13, US District Judge Esther Salas said it was reasonable for Celgene to ask Mylan to get FDA approval for the safety procedures before it would sell samples.

Salas hasn’t yet issued a final ruling, but her initial view would cut back Mylan’s suit and could affect the antitrust class action by Mitchell and others against Celgene over its conduct.

Congressional action

Congress is aware of the problem. A bipartisan group of senators — from Texas Republican Ted Cruz to California Democrat Dianne Feinstein — introduced legislation to allow generics to sue for access to samples. The legislation has support from pharmacy, doctor, hospital and generic drug groups, but is opposed by branded drugmakers.

The FDA has also offered only a lukewarm response to the legislation.

“I don’t want to be playing whack-a-mole with companies,” the FDA’s Gottlieb told senators in June. “I want to have in place a consistent framework and a consistent set of rules that prevent these kinds of abuses.”

For Holt, her feelings toward Celgene are mixed.

“I’m thankful to Celgene because I’m alive, but my goodness,” Holt said. “I have to struggle. People have to go without. It’s heart-wrenching.”