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Scorpion antivenom has stinging cost

Few need antivenom, but those who do face big bills

by Ken Alltucker - Nov. 13, 2011 10:37 PM

The Arizona Republic

When the federal government approved a scorpion antivenom in August, it was hailed as an important tool to protect vulnerable victims from scorpion stings.

But as doctors and patients are now discovering, the fast-acting serum for those who are stung by scorpions comes at a very steep price.

Metro Phoenix hospitals are billing as much as $12,467 per vial of the antivenom approved to help children, the elderly and others quickly recover from severe reactions from scorpion stings.

With a typical dose of three to five vials to counteract the venomous sting, hospital bills for patients and their insurance companies can exceed $62,000.

The high price of what can be a swift, effective treatment has shocked doctors and scientists, who say the drug is too expensive. People may not be covered by their insurance company because insurers are still trying to figure out a reasonable price for a drug that has been used for years in Mexico at a fraction of the U.S. price. But the situation is a classic example of why rare drugs can be so expensive in the United States.

"The price is ridiculously high," said Dr. Alejandro Alagón, a scientist who advises Mexico-based Instituto Bioclon, which makes the drug.

The Mexican biotechnology company produces more than 250,000 vials for Mexican residents, who are charged about $100 per vial at pharmacies or even less at government-funded clinics for a drug that is administered intravenously, Alagón said.

But the cost inflates when the serum is sold in the United States. Each link in the U.S. pharmaceutical supply chain, from the Mexican factory to Arizona patients, raises the price.

Health-insurance companies still are trying to figure out a fair price to reimburse health providers.

Hospitals say they are billing patients to cover their own costs, but they acknowledge that in many cases, they don't expect patients to pay the entire billed amount.

Drug-company representatives say the price of the antivenom represents market reality when introducing a new drug for a rare disease or medical condition. Because the price is so high, doctors say they are forced to discuss the drug's costs before giving it to people they feel could benefit.

"The problem right now is that it's a new drug. Third-party payers (insurance companies) are not paying for it, and the patients are getting stuck with the bill," said Brian Tiffany, an emergency-medicine doctor.

Tiffany was a researcher for antivenom clinical trials that enrolled more than 450 patients at Chandler Regional Medical Center and Mercy Gilbert Medical Center. Patients who participated in the study received the antivenom for free. Now that it has been approved, patients must pay for the antivenom.

Tiffany said he often discusses the price of the drug with adult patients and parents of children who need the drug. If patients with severe reactions decide to skip the drug, they may require time in the hospital's intensive-care unit, which is also expensive. A bark scorpion sting can cause muscle twitching, slurred speech, involuntary eye movement and breathing difficulty. Without the antidote, patients may require sedatives and a breathing machine.

"I can put a (patient) in the emergency room with all that wasted time and effort, or I can give them an incredibly expensive drug," Tiffany said. "It is a horrible position to put you (the patient) in."

Distributor explains

The drug, Anascorp, has been used in Mexico for years, but it is in its early stages in the U.S. market. After clinical trials led by the University of Arizona and conducted at Arizona hospitals, the FDA announced on Aug. 3 that the drug was approved for use by patients suffering the effects of scorpion stings.

Traditional pharmaceutical development calls for creating and marketing a drug to a large segment of the population. The large group of potential users helps pharmaceutical companies recoup the money spent on research, discovery and testing such cutting-edge therapies.

But when a therapeutic is developed for a small number of people -- so-called orphan drugs for scorpion stings, rare genetic disorders or some cancers -- drug costs can skyrocket. Drug companies market orphan drugs to a limited population, but they still must pay research, development and regulatory costs.

Rare Disease Therapeutics, a Tennessee-based company, has the U.S. rights to Anascorp through a joint development and distribution agreement with Instituto Bioclon.

Although Rare Disease Therapeutics did not pay for research and discovery of the drug already used in Mexico, it did fund the clinical trials needed to approve the drug for sale in the United States.

Milton Ellis, president of Rare Disease Therapeutics, said the company established the drug's price based on several factors, including its own costs and expected revenue from the drug.

Rare Disease Therapeutics sells the drug for $3,500 per dose to Accredo Health Care, a Memphis, Tenn.-based specialty pharmaceutical company that distributes the drugs to Arizona hospitals.

Several Arizona hospitals said they are charged about $3,780 per dose of Anascorp. Hospitals then add their own markup to cover extra costs such as patients who don't pay their full bills.

Ellis said his company established the price for the drug with the expectation that it would sell only 300 to 400 doses each year in desert regions with scorpion populations: Arizona, New Mexico and the Las Vegas area.

The FDA has granted Rare Disease Therapeutics the exclusive right to sell the antivenom in the United States for seven years. Other drug companies may petition the FDA to sell the drug after that seven-year period. However, because the market for scorpion antivenom is so limited, it's uncertain whether any generic company would seek to compete with Rare Disease Therapeutics.

The drug is intended for young children, the elderly and adults who suffer complications or reactions following a scorpion sting

Although Ellis would not reveal the privately owned company's expenses, he said the company paid for clinical trials at Arizona hospitals that tested the drugs, liability insurance and costs related to the Food and Drug Administration's inspections of the Mexican factory where the drug is made.

The company also may need to pay for FDA user fees if the company's totalrevenue surpasses $50 million.

The FDA assesses user fees to drug and medical-device makers to expedite the federal agency's approval process. But companies that sell orphan drugs such as Anascorp are exempted from FDA user fees if the company's revenue from all products is less than $50 million.

Rare Disease Therapeutics, which has other antivenom products, has not yet reached that revenue threshold, so it does not pay those fees.

If Rare Disease Therapeutics reaches $50 million in revenue, the FDA user fees could cost the company $800,000 or more each year, Ellis said. He wants to make sure the company has enough revenue through drug sales to handle those costs.

Based on those expenses, Ellis said he believes his company charges a fair price that patients and insurance companies ultimately will be willing to pay because the drug is effective.

Infants, young children and the elderly who do not receive the antivenom may require breathing assistance and sedatives in a hospital's intensive-care unit, and those costs would likely exceed the price of the drug, Ellis said.

"People realize it is going to save the state of Arizona a lot of money," said Ellis, who added that Rare Disease Therapeutics will not change its price. "If you are in a hospital without it (the drug), you could possibly be in intensive care for two to four days."

Hospital prices vary

More than one dozen metro Phoenix hospitals now carry the antivenom. Infants and toddlers, the elderly and other patients who experience severe reactions following a scorpion sting typically get three doses of Anascorp. If their symptoms persist after the first three doses, doctors will give a fourth or even a fifth dose.

The price can vary from hospital to hospital. Banner Health, which carries the antivenom at all of its metro Phoenix hospitals except Banner Ironwood in Pinal County, bills $7,900 per vial. Maricopa Medical Center bills $9,077 per vial, and John C. Lincoln bills $12,467 per vial. John C. Lincoln previously charged $15,120 per vial, but the hospital reviewed and dropped its price after an Arizona Republic inquiry.

Representatives of Chandler Regional Medical Center and Mercy Gilbert Medical Center, two of the busiest clinical trial sites, would not say what they charge patients. Phoenix Children's Hospital also would not disclose its pricing.

Hospital representatives said they often collect just a fraction of the amount they bill. Maricopa Medical Center does not expect its patients will pay the full amount billed; the hospital often collects based on a patient's ability to pay. The prices also may change after insurers set their own reimbursement rate for the drug.

John C. Lincoln based its price on the amount that it was charged to buy the drug. Still, the hospital acknowledged the drug is expensive, and it will seek to lower its price even more, a John C. Lincoln spokeswoman said.

Despite the amount it bills patients, John C. Lincoln so far has not been able to recover its costs for the medicine. That is common for hospitals that administer such rare drugs to patients.

John C. Lincoln has treated five patients with the serum since August. The hospital spent $68,040 on antivenom doses given to those patients, but it has collected only a total $10,047 from the three patients who have paid their bills.

Doctors and hospitals say the cost of Anascorp may be a more controversial issue next spring when scorpion stings begin to surge again. Relatively few patients are stung by scorpions during the fall and winter.

Michelle Ruha, a Banner Good Samaritan Medical Center Poison and Drug Information Center physician who participated in the clinical study, said a study needs to evaluate the cost of treating patients with antivenom compared with the cost of treating patients through other means in a hospital emergency room.

There is often little debate when children under the age of 2 are stung by a scorpion. An estimated 80 percent of children younger than 2 have a severe reaction from a scorpion sting.

"You don't want to look at a parent who has a very sick child in the ED (emergency department) and say we can give you one treatment and it will cost you this, or we can give you another treatment and it will cost you that," Ruha said. "It's not just the cost that's important. If you use the antivenom, children will be able to go home in most cases." Insurers wait

Blue Cross Blue Shield of Arizona, the state's largest private insurance company as measured by premiums, said it is still evaluating the new treatment.

The insurer will establish a fee for the drug once insurance codes are developed by the American Medical Association and a private company called Practice Management Information Corp.

Once the billing codes are established, Blue Cross Blue Shield will review medical literature and determine whether coverage should be limited to certain groups of patients such as children and the elderly.

The drug may be a hot-button issue for the state's Medicaid system, the Arizona Health Care Cost Containment System. Rare Disease Therapeutics estimates that 40 percent of Anascorp doses will be given to patients enrolled in the state's insurance program for low-income residents.

Alagón, who conducted research on the serum in Mexico, said he is surprised when people ask him whether he is making a lot of money now that the drug has reached the U.S. He explains that he has no control over the price of the drug and gets no financial benefit.

"We, as a country, lost control of our products," Alagón said. "I am upset about that, especially because they are charging so much. They are not being sensitive."

Reach the reporter at ken.alltucker@arizonarepublic.com.