America Living With AIDS

AM E R I C A Living

With consolidated purchase, state
Medicaid programs could opt to supply medications to Medicaid recipients
at a negotiated reduced rate. The Medicaid program could be expected to save
considerable sums on drug costs for
Medicaid recipients. Lack of access to
early intervention because of inability
to pay for medication remains a significant barrier to care for the uninsured,
whose care would therefore be particularly enhanced by this program.
The consolidated purchase approach
is attractive for two reasons. First, there
are precedents, such as the federal
childhood vaccine program. Second,
consolidated purchase could actually
increase sales of AIDS drugs. The
administrative cost would depend on
the structure of a consolidated purchase
program, but experience with the consolidated purchase of vaccines suggests
that savings could be considerable.
Amendment of the
Orphan Drug Act
The high cost of drugs used in HIV
treatment is explained in part by their
patent protection and "orphan drug"
status. The Orphan Drug Act of 1983
was intended to encourage development of drugs for treating small numbers of people with rare diseases
(Asbury, 1991). It provides financial
incentives, tax breaks, and a seven-year
exclusive right to the drug's market.
Although drug companies' expectation of recouping investments in

research and development and realizing a profit is legitimate, it is also legitimate for the public to expect a reasonable price for lifesaving drugs.
Frequently cited examples of drugs
granted orphan drug status that have
subsequently generated considerable
sales and profits include AZT,
aerosolized pentamidine, recombinant
human growth hormone, and recombinant erythropoietin (EPO) (Thoene,
1991). EPO, although principally used
for patients who are suffering from
renal disease, is also used to treat HIVrelated anemia. Of the aforementioned drugs, only pentamadine (with
1990 sales estimated at $480 million)
would be clearly affected by reform of
the orphan drug law, since the others
are currently protected by patent law
beyond the seven-year exclusivity of
orphan status (Asbury, 1991). Reform
of the Orphan Drug Act, however,
could affect other drugs still under
research, as well as orphan drugs used
in other diseases.
Reform of the Orphan Drug Act
through a cap on sales or profits has a
number of implications. It would
deny orphan status to a drug once it
had proved very profitable, while
retaining orphan status for small market or unprofitable drugs. Thus, one
result would be to return the application of the law to its original intent.
Further, by preserving orphan status
until a drug has achieved high profitability, manufacturers could still
recover the cost of research and development phases of a new drug for a
rare disease; thus, research incentives
would not be lost. For a previously

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