QUESTION: Using utilitarian ethics (endpoint ethics) as an ethical decision-making framework, explain whether or not it is ethical for Alexion to sell a life-saving drug, Soliris, for CDN$750,000 annually. Use a detailed stakeholder analysis as part of your answer, and explain with all case examples.

CASE STUDY: Soliris and Extreme Drug Pricing

Launched in 2007, Soliris, also known as eculizumab, i became a breakthrough drug to treat two types of rare diseases: (1) paroxysmal nocturnal hemoglobinuria (PNH) and (2) atypical hemolytic uremic syndrome (aHUS). PNH is characterized by an excessive breakdown in red blood cells, which can lead to anaemia, kidney problems, and blood clots in the blood vessels. PHN also kills one-third of patients within five years.ii aHUS causes blood clots in small blood vessels, which can lead to organ damage and significant kidney impairment, thrombosis, heart failure and brain injury.iii These diseases are considered extremely rare since they only affect 180 Canadians, out of a population of 38 million. In other words, less than 0.0004% of the countrys population.iv Soliris is not a cure but considered a miracle drug because it stops the attack on the bodys tissues and organs, and therefore, allows individuals to live normal, healthy lives. Before Soliris, treatment often involved being hooked to a [dialysis] machine for 3 to 4 hours as the blood is rinsed. v

Alexion Pharmaceuticals Inc. (Alexion), the developer of Soliris, has been recognized in Forbes business magazines annual rankings as being one of the most innovative companies for creating extremely effective treatments for once fatal diseases, transforming the lives of their patients and their families.vi

Today, Soliris, is one of the worlds most expensive drugs. vii The annual price of treatment is CDN$750,000 (or US$500,000) viii per patient, leaving governments, private insurers, and individuals with the difficult decision to pay or not to pay. ix In addition, Soliris needs to be delivered by IV infusion, so hospitals also charge a fee for administration. For example, Atrium Medical Centre, in Dayton Ohio, charges US$89,000 per treatment to the patients health plan.x

But these new medications to treat rare diseases are becoming more profitable than traditional drugs for several reasons: an increase in government funding, a longer patent-protection period, and a business model based on extreme pricing.xi

Today, cheaper generic drugs account for about 90 percent of all prescriptions filled in the United States. xii As a result, pharmaceutical companies are turning to rare-disease treatments and gene therapies as their next profit engine. xiii Many Canadian and U.S. health policy analysts are raising concerns about the trend in the rising costs of pharmaceutical drugs and their affordability.

In 2020, Soliris earned $3.5 billion in revenue for the company. xiv Founded in 1992, Alexion has offices in more than 30 countries globally. The company, however, only serves a few thousand patients worldwide with rare diseases that are not commonly known. xv In the past, these rare diseases, were not treated because the patient population was too small (and therefore not profitable enough) to attract the interest and commitment of pharmaceutical companies.

According to Alexions CEO, Leonard Bell, We focus on patients with absolutely devastating disorders that are also either lethal or life threatening...Theyre also very, very rare, so they get no attention from anybody. Theyre left with no hope, and we only go forward not with

treatments that will make it a little bit better but with treatments that will transform their lives. At the end of the day, everyone accepts [this] high-level innovation. xvi

Many patients argue that they need these life-saving drugs, but the trend for increasing drug prices is raising concerns about the sustainability of healthcare. In 2017, U.S. consumers, insurers and the government collectively spent $333 billion ...on prescription drugs, according to [the U.S.] National Health Expenditure (NHE) data a more than 41 percent increase over the previous decade. And under current law, national health spending is projected to ..reach $6 trillion by 2027.xvii

Some analysts have argued that the pricing is excessive, and that Alexion is the only seller of Soliris, a patented drug, and therefore is a monopoly that can set its own prices without any competition. But what is an excessive price? The reasons the prices are so high is because the folks that are selling the drugs believe thats the price that they can command for them. Thats what people are willing to pay, said Don Husereau, a health policy consultant and associate with the Institute of Health Economics.xviii

Pharmaceutical companies have defended their pricing and have argued that the cost of research and development has to be spread across a fewer number of users who require the drug. Therefore, the cost per person will be much higher than if millions of people need it and use it, like insulin for diabetics. xix According to Policy and Medicine, an online publication that analyzes legal, regulatory, and compliance issues affecting pharmaceutical and device industry, developing a new prescription medicine that gains marketing approval is estimated to cost drug makers $2.6 billion according to a recent study by Tufts Centre for the Study of Drug Development. xx Drug companies have also argued that developing medicines for rare diseases is complex, costly, and carries a significant risk of failure. xxi Subsequently, high prices are necessary to fund both current and future innovation.

Many health policy analysts argue that this is not entirely true. Gerard Anderson, professor of health policy and management, explained, research and development is only about 17% percent of total spending in most large drug companies, and often profits are not re-invested back into the company for future projects, but distributed instead to shareowners through cash dividends.xxii

Governments also provide billions of taxpayer dollars to fund drug research and development. According to one report, U.S. taxpayers pay tens of billions each year in the form of government-funded basic and applied pharmaceutical research and drug development done at organizations like the National Institutes of Health (NIH). xxiii One study show[ed] that from 2010 to 2016 NIH funding contributed to published research associated with every single one of the 210 new drugs approved by the [U.S.] Food and Drug Administration during those years. Yet in return for this..., American taxpayers still [saw] drug prices climb each year. xxiv

Patient advocates argue that without investment in research and development, how will new

drugs get developed to help those that need it? In the U.S., for example, there are an estimated

7,000 rare diseases affecting approximately 30 million Americans that need researchers to find cures.xxv xxvi

Many scholars argue that there is a lack of transparency in drug pricing and that excessive profits are at the expense of peoples health and financial well-being. For instance, governments, companies and insurers for employee health benefit plans, argue that the cost is

simply too high. Employers and unions say the impact is already being felt. Some small businesses, hit with just a single claim...have considered ending their employee health coverage. Others have drastically cut back coverage for drugs, and some employers are considering excluding coverage for expensive and novel treatments like gene therapy. xxvii

Some price reviewers found that Alexion artificially increased its drug price (over its operational costs) by not only factoring in research and development costs, but also healthcare cost savings to patients from less trips to the hospital and fewer blood transfusions, which were costs not incurred by Alexion itself. xxviii

According to Canadas Patented Medicine Prices Review Board (PMPRB),in 2019, high-cost medicines accounted for almost 50% of all patented medicine sales, [and] Canadian list prices were fourth highest among 31 Organisation for Economic Cooperation and Development (OECD) countries. xxix

The Institute for Clinical and Economic Review (ICER) is another organization examining the pricing of Soliris. According to an ICER report, the cost is well beyond typical thresholds.xxx The National Institutes of Health counts 6,000 diseases that afflict less than 1% of the population. Thats 30 million people; treating every one with a $30,000 drug would cost $1 trillion, the size of the global pharmaceutical market. xxxi

Currently, there is no Canadian company that produces a similar drug to treat PNH and aHUS. To encourage research and innovation, Canadian and U.S. governments have provided incentives to corporations such as tax incentives and subsidies. In 1983, the U.S. passed a law called the Orphan Drug Act, which provide[d] government subsidies for clinical trials as well as tax incentives and additional monopoly protection to companies that develop[ed] products for rare diseases.xxxii According to one U.S. report, of 59 new drugs approved in 2018, more than half, or 34, were for rare diseases. Those treatments are typically the most expensive, helping to drive an increase in overall spending on prescriptions nationwide. xxxiii

However, today, many stakeholders are concerned with pharmaceutical unethical practices. For example, Alexion has tried to lobby the government against drug price reforms, and to influence patient groups legally to keep drug prices high. One nonprofit organization representing patients, called aHUS Canada, disclosed on its website that it received unrestricted educational grants from Alexion. When nonprofit organizations receive large corporate donations, it is unlikely that they will speak negatively about that corporation in the media or elsewhere. In many ways, the donation acts as a bribe to benefit the pharmaceutical companys public image. Drug-makers donating money or in-kind support to patient advocacy groups is a common and troubling practice, according to Michael Law, a professor in the Centre for Health Services and Policy Research at the University of British Columbia.xxxiv As soon as you get a patient that gets themselves on TV, gets themselves in the newspaper it becomes difficult to say no to someone who needs a life-saving treatment. Governments then agree to pay for it. Subsequently, taxpayers bear the cost of an excessive drug price and pharmaceutical companies can continue to keep their prices high.

In 2021, AstraZeneca, the UK pharmaceutical company, purchased Alexion Pharmaceuticals in an acquisition for US$39 billion dollars.xxxv Today, the AstraZeneca now owns the drug, Soliris, and all the rights to price it. AstraZeneca expects to earn $6 billion annually from Alexions C5 inhibitors to treat rare diseases. xxxvi In 2021, no price reductions were publicly made.