Congressional investigation of RevAssist-linked and general pricing strategies for lenalidomide

INTRODUCTION

In 2022, the United States (US) Congress passed the Inflation Reduction Act (IRA) to address high drug costs and limited drug accessibility.¹ IRA’s passage followed a 2019 to 2021 investigation by the House of Representatives Committee on Oversight and Reform into pharmaceutical pricing that reviewed previously sealed communications and documents from manufacturers of blockbuster drugs. Congress concluded that pricing and market protection practices by manufacturers resulted in high costs. One investigated drug was lenalidomide, a treatment for multiple myeloma.² Lenalidomide is an example of a drug whose financial success resulted from price increases and anticompetitive market strategies.³ We review tactics that led lenalidomide to become the third largest revenue-producing pharmaceutical product worldwide, with $12.2 billion sales in 2020^4,5,6 focusing on impact on patients and Medicare and developing policy recommendations.

Review of documents produced for the investigation^5,6 provide insight into practices used to extend patent exclusivity and increase prices years after expiration of the patent granted for lenalidomide’s active pharmaceutical ingredient, which expired in 2019. All twelve high-revenue drugs investigated by the committee utilized similar practices to produce revenue gains. High costs of drugs are not tightly correlated with value and pricing decisions by many manufacturers are responsible for high costs, patient burden, and unsustainable pharmaceutical markets.⁷ As for-profit, publicly traded companies, pharmaceutical companies must maximize shareholder returns. Consequently, companies lack incentives to police themselves when it comes to drug prices. Branded lenalidomide (Revlimid) serves as a valuable case study because its manufacturers used an FDA-mandated patient safety program—Risk Evaluation and Mitigation Strategy or REMS—to avoid generic competition. Strategic use of the REMS, called RevAssist, distinguishes lenalidomide from other drugs evaluated by the House Oversight Committee. This article reviews business practices common to manufacturers of all the investigated drugs and strategies unique to lenalidomide, offering insights for reforming policy.

The House Investigation

Strategies to boost lenalidomide’s profits included price hikes linked to executive compensation and targeting the US market. Beginning in 2005, lenalidomide’s price was raised 22 times, from $215 per pill in 2005 to $719, and then following Bristol Myers Squibb’s acquisition of Celgene in 2019, lenalidomide’s price increased to $763 per pill. ⁸ (Figure 1) By late 2020, a one-month supply of branded lenalidomide was $16,023, triple the 2005 price of $4,515.⁵ Celgene’s strategies effectively yielded $53 billion in net worldwide revenue between 2009 and 2018. US revenue comprised 63 % of Celgene’s total net revenue during that period.^9–15 Details regarding how manufacturers were so effective in generating revenue were evident in documents on pricing, patent protection, safety programs, executive compensation, and patient assistance.⁶ With the exception of RevAssist, these details applied to all twelve drugs.

Figure 1. Revlimid Price Increases.

Lenalidomide is a pill taken orally that comes in six different dosages, ranging from 2.5 milligrams to 20 milligrams. The price of lenalidomide does not vary based on dosage. Although the number of pills taken per month varies from patient to patient, common treatment regimens require patients to take either 21 or 28 pills per month. This calculation reflects the Wholesale Acquisition Cost of a 21-day monthly regimen of lenalidomide, assuming a 5 mg pill. Using Average Wholesale Price, the monthly cost of a 21-day regimen of lenalidomide has increased from $5,906 in 2005 to $19,227.84 today.

Figure adapted from: House Committee on Oversight and Reform. Drug Pricing Investigation: Celgene and Bristol Myers Squibb - Revlimid. US House of Representatives. September 2020. https://oversight.house.gov/sites/democrats.oversight.house.gov/files/DRUG%20PRICING%20REPORT%20WITH%20APPENDIX%20v3.pdf (accessed 10/3/2023)

One of the drivers of lenalidomide’s pricing activity was to appease investors and improve earnings performance. The former Celgene Vice President for Sales and Marketing indicated in a deposition that Celgene could raise lenalidomide’s price at any time. Documents suggested that the company did so to boost net sales and improve lower-than-expected quarterly earnings.¹⁶ Once, the executive vice president proposed a 4% price increase for lenalidomide within one week in 2016, leading to projected net sales increase of $24.8 million. An additional 3% price increase occurred months later.^17–20

The Committee Majority report notes that Celgene rewarded executives with bonuses and compensation for lenalidomide price increases.⁵ Between 2006 and 2017, a period of substantial price increases, top executives received $400 million compensation.²¹ Celgene’s then-Chairman received a $6 million bonus, $1.5 million income, and stock options worth $8.5 million in 2016. The then Chief Executive Officer received a $3.6 million bonus and a $1 million base salary.^22–24 But for price increases, the Majority report suggests that revenue targets necessary to trigger bonuses would have been missed.^25,26

The report shows that lenalidomide’s manufacturers targeted US markets for price increases. A 2013 presentation noted stable European Union prices for lenalidomide versus rising US prices.⁶ A 2018 presentation by Celgene’s Corporate Market Access Committee described the US as “a highly favorable environment with free market pricing” versus the rest of the world.²⁷ Despite launch prices 33% lower than European Union prices,⁶ US prices exceeded European Union prices by 2010.

Although manufacturers report price hikes responding to research and development costs, the report contradicts this. Lenalidomide’s research and development was funded mostly by federal grants to Rockefeller University (for thalidomide).⁴⁷ After purchasing thalidomide, Boston Children’s Hospital identified lenalidomide benefits with a $2.3 million National Institute of Health grant to Dana Farber.^48,49,50 Federally funded trials by the Eastern Cooperative Oncology Group and Mayo Clinic supported the 2006 FDA approval of lenalidomide for multiple myeloma.^51,52 Memoranda indicated that Celgene invested in lenalidomide following on National Cancer Institute and Mayo Clinic-funded clinical trials.⁵³ A 2017 FDA approval for lenalidomide for multiple myeloma after high-dose melphalan with autologous stem-cell transplant resulted from a federally funded US Alliance for Clinical Trials in Oncology study.^54,55 More than half of trials Celgene reported as supporting price increases in 2016 to 2018 were funded by non-Celgene entities.⁵⁶ The Committee cited manufacturers of pregabalin and ibrutinib as other examples where federal funding supported drug development. The Committee noted in 2021 that the world’s fourteen largest drug companies spent more compensating executives and investors than on research and development.⁵

The report argues that rebates, product costs, and marketing did not necessitate lenalidomide price increases. Data showed that the largest negotiated discount for lenalidomide was 5% in commercial markets.⁵⁷ Celgene “does not provide contracted price reductions for Medicaid, Veterans Administration programs, or Medicare Part D.”⁵⁷ With respect to production, lenalidomide’s revenue dwarfed Celgene’s manufacturing costs for all products.⁵⁸ Manufacturing costs were stable over time. Although Celgene reported that patient assistance programs necessitated price increases, data indicated otherwise. Patient assistance programs accounted for 0.4% of lenalidomide’s revenue.⁹ From, 2011 to 2018, the report shows that co-pay programs accounted for 0.16% of lenalidomide’s US net revenue.^60,61

Using RevAssist to Deter Generic Entry

The Committee reviewed documents identifying anti-competitive practices. One concerning behavior among antitrust regulators is use of REMS to block competitors. RevAssist, the REMS specific to branded lenalidomide, was central to strategic delays. In 2010, FDA mandated lenalidomide’s manufacturer maintenance of RevAssist, requiring signatures of patients, providers, and pharmacists before dispensing lenalidomide.²⁸ Despite FDA warnings that RevAssist could not be used to block or delay generic approvals, Celgene filed 22 patents on RevAssist and wielded those patents against generic competitors. Citing mandatory use of RevAssist by all purchasers of lenalidomide, the manufacturer prevented generic competitors from obtaining samples for pharmacokinetics and pharmacodynamics as required for FDA approval of generic products. ²⁹

The Majority report cites Celgene memos directly indicating that RevAssist prevented “generic encroachment.”⁵ The report presents FDA estimates that Celgene used RevAssist to delay 14 generic manufacturers from purchasing samples.³⁰ When Mylan Pharmaceuticals attempted to obtain samples in 2013, the Committee discovered that Celgene used RevAssist and safety issues to delay sales of samples until Mylan sued.³¹ Mylan estimated that denial of samples cost consumers $637 million annually.³² In 2019, Celgene settled with Mylan for $62 million over sample delays.³³

Celgene also created a “patent thicket” with 27 additional patents for Revlimid, adding eight orphan drug indications (with benefits for taxes and patent extension), and 91 FDA protections extending patent exclusivity to 2028.³⁴ Policy analysts reported that most ‘evergreen” patents were not “novel” nor “non-obvious.”^35–39 Incorporation of RevAssist into market protection initiatives was unique. None of the nine other investigated manufacturers had similar safety programs in place. Celgene also obtained additional patents for Revlimid in the early 2000s for breast cancer, which excluded generic competition until 2028. ^40,41,42 As with lenalidomide formulation patents, the US Patent Trial and Appeal Board upheld these “use patents.” ^43,44 Although generics entered the US market in 2022, they did so under reverse settlement agreements limiting generic production until 2026. This is the subject of antitrust litigation.⁴⁵

Discussion

Sponsors of New Drug Applications are required by statute to list patent numbers and expiration dates for each patent that could reasonably form the basis of a claim of infringement in the Orange Book, FDA’s repository of drug patent information. These patents must either claim the drug or a method of use. There is no process for FDA evaluation or screening of patent suitability for Orange Book listing. The FDA takes the position that its role is “purely ministerial.” Consequently, drug makers commonly list REMS patents in the Orange Book so that they can form the basis of a patent infringement suit triggering a 30-month stay in FDA’s approval of Abbreviated New Drug Applications. Recently, the Court of Appeals for the Federal Circuit affirmed delisting of a REMS patent from the Orange Book for sodium oxybate, a narcolepsy drug.⁶³ Collaboration between the Patent and Trademark Office and the FDA to determine whether individual REMS patents claim a method for using a drug could help avoid unwarranted delays in generic drug application review.

More broadly, the Preserving Access to Affordable Generics and Biosimilar Act passed the Senate Judiciary Committee by one vote in February 2023.⁶² This legislation would limit pay-for-delay deals such as those negotiated for lenalidomide. The bill allows for presumption of anti-competitive effects if makers of follow-on products receive anything of value in exchange for agreements to delay marketing, sales, or product development. The bill includes forfeiture of the 180-day exclusivity period for the first generic filer if it is found violating provisions of the proposed Act. Currently, certain statutory conditions result in forfeiture of the 180-day period, such as a generic filer’s failure to market its product for certain periods of time after approval, but addition of forfeiture for pay-for-delay activity would remove incentives to acquiesce in anti-competitive behavior litigation.

Based on experiences with RevAssist and negotiation of reverse settlement agreements with generic competitors who chose not to engage in patent litigation over RevAssist patents, another reform could focus on reducing use of potentially anti-competitive reverse settlement agreements (known as pay-for-delay arrangements), particularly when proprietary REMS programs are operational. RevAssist prevented pregnancies that could lead to teratogenic effects. However, use of this program to block competition caused harms of its own and should be discouraged. A private antitrust suit was recently filed in the Northern District of California against Celgene, Bristol-Myers Squibb, and various manufacturers of generic lenalidomide for violation of state and federal competition laws resulting from aggressive use of RevAssist and subsequent pay-for-delay with generic manufacturers.⁶⁶

The Oversight Committee’s findings that the ability of manufacturers of twelve high revenue drugs to impose discretionary price increases not offset by rebates or discounts and not justified by changes in market conditions highlight broad needs for pricing reforms. The Fair Accountability and Innovative Research Drug Pricing Act would increase transparency associated with drug price increases by requiring drug companies to notify the Department of Health and Human Services and provide a rationale thirty-days prior to price increases exceeding certain thresholds.⁶⁴ The Inflation Reduction Act requires manufacturers of certain drugs that experience price increases higher than the rate of inflation to pay rebates, measures that will lower beneficiary coinsurance and save billions of dollars.⁶⁵

Conclusion

The House Oversight Committee has reviewed how Celgene and Bristol Myers Squibb used RevAssist to facilitate blockbuster revenue status of branded lenalidomide. REMS-related actions were unique in comparison to strategic actions taken for other drugs evaluated by the Committee. The FDA requires the maker of lenalidomide to develop and implement a REMS in order to prevent embryo-fetal exposure that could lead to teratogenic effects and ensure that the drug’s benefits outweigh its risks. The lenalidomide REMS is one of 60 FDA-approved REMS with Elements to Assure Safe Use, which include mandatory patient counseling, prescriber certification, and requirements for contraception for persons of child-bearing potential. Despite apparent benefits, RevAssist facilitated prices resulting in branded lenaliomide becoming the third largest revenue-earning drug.³⁹ Multifaceted patient, prescriber, and pharmacy registration and monitoring requirements and patents on RevAssist enabled Celgene to control drug access, limit generic competition, and continue price increases. The CREATES Act, passed in 2019, addresses use of REMS to obstruct access to samples. It confers on developers a private right of action if companies do not provide sufficient quantities of reference products needed for bioequivalence testing within a certain period of time after receiving requests. Drug manufacturers can show, as a defense, that they did not restrict reference product sales and that it is available on the market in sufficient quantities at commercially reasonable terms. The CREATES Act permits monetary remedies and attorney’s fees for unjustified delays. CREATES is no magic bullet. It depends on time-consuming litigation and does not go far enough to prevent REMS-related strategic delays. Additional policy reforms to address strategic abuse of REMS in particular are needed.