How one drug got its $500,000 price tag. (With 99 Percent Invisible)

Dan: Hey there. This is An Arm and a Leg— a show about the cost of health care. 

I’m Dan Weissmann. And this episode is a big treat.

So last time, we told the story of a woman who needs a drug that costs more than half a million dollars a year

… and I promised that this time we’d tell the story of how that drug got its crazy price tag? I might have mentioned that Las Vegas and nacho cheese sauce play supporting roles.

But there’s something I didn’t tell you:  We’ve produced this story with our friends at 99 Percent Invisible. That’s a super-smart, super-charming show about the un-noticed design that shapes our world.

As befits a show about design, 99 Percent Invisible always SOUNDS amazing. And the host, Roman Mars, is one of the smoothest storytellers alive.

So this will be THEIR version of the story; me and Roman will take turns telling it— but he’s our host for the next bit. I’ll come back here at the end with a quick word about what’s next on An Arm and a Leg.   

Roman Mars: Abbey Meyers grew up in Brooklyn and married a guy she’d known since they were kids. Their first son, David, was born in 1968. By the time David was two, Abbey noticed something was different about him. David’s face would twitch. He sometimes made involuntary noises. His arms flailed around out of control, so he could barely feed himself.

Abbey Myers: He was very disturbed by the movements because other kids would make fun of him.

Roman Mars: David’s teachers often got upset with him in class. 

Abbey Myers: You can imagine the torture he went through.

Dan: One Sunday morning, when David was eight, Abbey watched him try to read the funnies. But he couldn’t keep his head steady enough. It was heartbreaking.

Roman Mars: That’s Producer Dan Weissmann, the host of a new podcast about the cost of healthcare called An Arm and a Leg.

Dan: Watching David struggle with the comics, Abbey was ready to cry. She put off doing the dishes, sat down, and picked up another section of the paper. And, through total coincidence, there was an article about a teenager who had symptoms just like David’s: Facial tics, weird noises, flailing limbs.

Abbey I just stood up and I yelled for my husband, and I said, ‘You have to read this. This is what David has.

Dan: Abbey and her husband brought the article  to David’s pediatrician. And the doctor agreed, this story described exactly what David had. This condition will sound familiar to you, but at the time, most people— even doctors— had never heard of it. It was called Tourette Syndrome.

Abbey Myers: Speaking to doctor, many doctors after that, they said they never heard of it because they simply were not taught very much about rare diseases in medical school. 

Dan: And back then, when so few people had heard of it, Tourette’s was considered super-rare.  

Abbey Myers:…It just seemed bizarre to me that I got a diagnosis out of a Sunday newspaper!

Dan: From there, Abbey found a specialist, who eventually turned her on to a potential treatment for Tourettes that was being tested out in clinical trials. Well, it wasn’t being tested for Tourettes? The drug company was mainly hoping to market this drug for schizophrenia.

Abbey Myers: but the particular drug had been made available in Europe for awhile and doctors knew it worked on Tourettes . 

Roman Mars: So David got in on a trial for this drug, with the hopes that it could be approved in the US.  And it turned out, it worked really well for him.

Dan: But! The drug trials didn’t go as well for schizophrenia, which was supposed to be it’s more common use. So the drug company decided the market wasn’t big enough, and they just dropped the drug entirely.

Abbey Myers: And so companies just said, no, they wouldn’t do it 

Roman Mars: They wouldn’t make the drug. They wouldn’t sell it. And this is how Abbey learned a term that would define the next few decades of her life. 

Abbey Myers: Orphan Drugs

Roman Mars: Orphan. Drugs.  

Dan: As Abbey learned, drug companies weren’t interested in developing  treatments for rare conditions— because the big money was in drugs with tons of customers: Antibiotics, or drugs for stuff like diabetes, high cholesterol.  The pharma companies just didn’t think selling a drug for Tourette’s would be a big money-maker.

Roman Mars: So promising treatments—like the one that had been working for David — became “orphan drugs.” With no pharma company to raise them.

Dan: To keep herself from going nuts with frustration Abbey Meyers joined the Tourette’s Syndrome Association. It was pretty small. They immediately invited her to join the board— and asked her what she wanted to be in charge of.

Abbey Myers: I sure did not want to become the fund-raiser, or the arranger of special dinners or anything like that. And I wasn’t a doctor, so I didn’t want to do the research end of it.

Roman Mars: That left lobbying. And advocacy. Spreading awareness.  

Dan: Abbey started figuring out how to do that— and she found a mentor. Her name was Marjorie Guthrie.

Roman Mars: Marjorie was the widow of Woody Guthrie, the iconic American folk-singer who wrote the song “This Land is Your Land.”  Woody had died in the 1960s of Huntington’s, another rare disease.

Abbey Myers: she was on a mission for our whole life, which was to find the answers for Huntington’s disease

Dan: Marjorie was great at it. By the time Abbey Meyers started lobbying, everybody connected with rare diseases knew Marjorie Guthrie. Abbey took note of one of Marjorie’s best tricks. Marjorie would be talking with scientists, or pharma executives, and they’d be using technical jargon.

Abbey Myers: She’d say, “Please talk to me in plain English. I’m just a housewife.”

Roman Mars: And they would. And when experts couldn’t hide behind technical jargon, Marjorie Guthrie could pin them down, put them on the record, and use their words as ammunition 

Dan: For instance, they could get experts to explain exactly how promising a proposed drug might be. And why they wouldn’t sell it. 

Abbey Myers: All of that would be in there, in plain English. 

Dan: So when Abbey started meeting with government officials, she introduced herself the same way. Just a housewife. She figured it wouldn’t be a bad thing to let them underestimate her a little.

Abbey Myers: I found that people wanted to think about a woman as somebody who’s just trying to raise her kids. She’s just a housewife. 

Roman Mars: By June 1980, Abbey and Marjorie and their allies got a California Congressman to hold a hearing to call attention to the problem of orphan drugs.

Dan: This was their big chance to finally have a national audience. To put pharma companies on the spot! To make them face the patients who were waiting for treatments!  Maybe this hearing could really change things. 

Abbey Myers: Well, nobody from the pharmaceutical industry showed up. 

Dan: Also, hardly any elected representatives showed up. 

Abbey Myers: Well, no Republicans at all showed up. Maybe one or two Congressmen stuck their heads in and sat down for five minutes, then left.

Roman Mars: The gallery was pretty empty too.

Abbey Myers: Nobody was there except in the very, very last row in the room. A young man was sitting there, and I had no idea who he was. And he turned out that he was a reporter for the Los Angeles Times

Dan: That reporter was there because for him, it was a local story: one of the people testifying— a teenage boy with Tourette’s— was from Los Angeles. It resulted in a very short story, buried in the middle of the paper, where nobody was likely to see it.

Roman Mars: Except, somebody DID. 

Dan: If you’re old enough to have watched TV in the 1970s, the name Jack Klugman will instantly conjure a raspy-voiced, slightly-pudgy New Yorker. The sitcom “The Odd Couple” was huge— Jack Klugman played a middle-aged slob who’s roommates with a neat freak.

Jack Klugman: What is this? Your Christmas Present. I forgot to give it to you. What is it? Assorted Cheeses.

Roman Mars: When that show ended, Jack Klugman got his own brand new TV show, a kind of a detective series: He played a medical examiner called Quincy. 

Abbey Myers: The Quincy show, which was nice entertainment about a doctor who looked at dead bodies and decided who the murderer was.

Roman Mars: It was like a precursor to CSI, and it was kind of a big deal at the time.

The Quincy Show: “Gentlemen, you are about to enter the most fascinating sphere of police work. Forensic medicine!”

Dan: And after that little story in the Los Angeles Times came out, Abbey got a call from someone who said he was a producer on the Quincy show. She was skeptical.

Abbey Myers: I said, ‘Yes, and I’m Mrs. Santa Claus.’ [laughs]

Dan: But after a few minutes on the phone she realized the guy was telling the truth.  He was a producer for Quincy. And he happened to have a fairly rare disease himself. In fact, he was dying of bone cancer. 

Abbey Myers: And so he said, this whole thing with orphan drugs is a beautiful story. And I’d really like to do an episode of Quincy about it.

Dan: and this producer had the pull to make it happen. His name was Maurice Klugman.He was Jack Klugman’s brother.

Abbey Myers: I mean, these things happen in the movies. They don’t happen to real people. But that’s what happened.

Roman Mars: The episode actually got made! It happened. And in the episode, a teenager with Tourette’s dies under suspicious circumstances.

Dan: Turns out, it’s not exactly a murder—, but by the time Quincy figures that out, he meets another young man with Tourette’s and gets obsessed with the problem of orphan drugs.Here’s Quincy— talking with that kid’s dad:

QUINCY: So if you’ve got a disease that happens to have a low incidence rate, don’t count on the pharmaceutical companies for any help.

Dad: That’s why they call them ORPHAN drugs. The miracles, cures for rare diseases, that no one wants to adopt.

QUINCY: But isn’t there a bill that’s before congress?

Dad: The orphan drug bill, it’s still being considered.

Dan: The show suddenly goes from a mystery to a policy drama. Quincy goes all in on the orphan drugs issue. He lobbies pharma companies, the FDA, Congressmen, becomes a total policy nerd.

Roman Mars: At the big finish, the kid with Tourette’s— after a pep talk by Quincy— gives a blockbuster speech at a Congressional hearing.

Tony:  I’m thinking about the other victims, not just of Tourette’s, but anyone who’s unlucky enough to have a disease that never made it to the top 40.

Dan: This Congressional hearing was obviously fictional— but it got a real-world response.

Abbey: When that show was broadcast, Jack Klugman received thousands and thousands of letters, and they didn’t even open them. They just had these big sacks, like Santa Claus sacks, and they stuffed all the mail into them, and they sent all those sacks to me.

Dan: The letters were from people with rare diseases, and people who just wanted to do something to help solve the orphan drug problem. With this kind of publicity and support, Abbey and her friends got another congressional hearing. On March 10, 1981, real-life elected officials heard testimony about a real-life proposal to create financial incentives for pharma companies to take on orphan drugs.

Roman Mars: On hand to give that proposal a boost of star power was Jack Klugman himself. The actor flew to Washington and testified in this new hearing in Congress.This time it was PACKED. 

Abbey Myers: People just sat down on the floor in the aisles. It was pandemonium because Jack Klugman was in the room. 

Dan: I’m telling you, Jack Klugman was a big deal in those days! 

Roman Mars: An orphan drug bill passed the house. But! It got stalled in the senate, where Abbey heard a single Senator was secretly blocking it.* It was rumored to be Orrin Hatch. 

Dan: So Jack Klugman and his crew swing into action. They do ANOTHER episode of Quincy— one where a single Senator is holding up an orphan-drug bill. In the climactic scene, Quincy confronts that Senator in his D.C. office.

Senator: If I choose to keep voting against this bill, it’s because I think it’s in the best interest of the nation!

Quincy: Then you better be ready for the reaction.

Senator: There won’t be any reaction! I’ve played this course too many times.

Quincy: Well, maybe the rules have been changed. Why don’t you take a look out your window, Senator?

Dan: The Senator glances incredulously towards the window. then back to Quincy. 

Then both guys turn and walk solemnly over to this huge picture window, and out in the street, there is a BIG demonstration heading straight towards the senator’s office! The camera gently zooms past the two men, and focuses on the action outside.There are hundreds of people, lots of them in wheelchairs. They’ve got colorful signs with slogans like  like “Now is the Time Vote for the Orphan Drug Bill” And— in a direct pitch to the fictional senator watching through the window— “We Need you, Senator Reeves.” This sequence lingers and lingers.

Roman Mars: These extras were all actual people with rare diseases that Abbey Meyers and her colleagues recruited.  Except, not actually in Washington. They shot it in Pasadena, where the weather was better.

Dan: The fake march on Washington totally worked. The fake Senator on the show caved

Fake Senator: “I cannot support this bill. But I won’t stand in it’s way”

Roman Mars: And so did the real-life senator. *Orrin Hatch* 

Abbey Myers: There would not be an orphan drug act if it was not for that episode of Quincy

Dan: The Orphan Drug Act passed the Senate, President Ronald Reagan signed it into law, and the fake March on Washington became, in some people’s minds, a real-life event.

Abbey Myers: People will say to me, Oh, that march on Washington was wonderful. There wasn’t a march on Washington.

Roman Mars: But, you know, it was on TV!

Dan: Abbey Meyers went on to help start a new advocacy group— the National Organization for Rare Disorders— and she ran it for more than 20 years. But these days, when people ask her about her legacy, this is what she tells them:

Abbey Myers: Be careful what you wish for. It might come true.

Dan: The Orphan Drug Act of 1983 created financial incentives for pharma companies to develop drugs to treat “orphan” conditions.The Orphan Drug Act basically says that once the FDA agrees that a proposed treatment would address a rare condition— under current definitions, that means it affects fewer than 200,000 people in the U.S. — then the developer of that drug qualifies for special goodies. That includes subsidies— actual taxpayer cash— for clinical trials— and a big prize at the end:The first drug company to get FDA approval for a certain kind of treatment gets market exclusivity— basically  a monopoly.

Roman Mars: No one else can market an equivalent drug in the U.S. for seven years.

Dan: Which means during that seven year period, the company gets a chance  to make money off this drug, even if relatively few people use it, by setting a higher-than-usual price.  

Abbey Myers: You know, if you have a drug for high blood pressure, it’s probably half of the United States needs blood pressure medicine. But with a rare disease, you’re not going to make money if you charge a normal price for those. 

Roman Mars: And then drug companies realized if they had the monopoly… they didn’t have to charge anything that would be remotely considered a normal price! They could charge pretty much whatever they wanted. Especially if the insurance companies were paying for it.  

Dan: It took pharma companies a few years to catch on to how good a deal the Orphan Drug Act could be, but by the 1990s, things were definitely rolling. One rare-disease drug came out in 1991 with a price tag of 150 thousand dollars a year. It was huge money. 

JS: I’ve been involved with biotechnology and healthcare companies for almost 30 years.

Dan: This is Joshua Schein. And he’s one of the many entrepreneurs who took advantage of the orphan drug policy.

Roman Mars: In 2003, Joshua Schein started a company called Lev Pharmaceuticals. And this company had just one mission. One single thing it was going to do. 

Dan: Lev Pharmaceuticals was going to market a drug for a rare disorder called hereditary angioedema. Actually, the drug already existed— it had been used successfully in Europe for 30 years— but nobody had taken it through clinical trials in the US. As Schein, recalls, that looked like a good set-up: 

Schein: It seemed like a very good opportunity from its inception. We saw a serious unmet clinical need in the U.S

Dan: To bring this treatment from Europe to the point where it could be sold in the U.S. meant that Joshua Schein would have to raise enough money for Lev Pharmaceuticals to run clinical trials for FDA approval. Which would be a lot easier to do as a publicly traded company.

Roman Mars: And that’s how they found…. Fun City Popcorn.

Schein: right, it’s not a typical path and that’s not a typical name for a biotech company.

Dan: Fun City Popcorn sold popcorn and nacho cheese sauce to concessionaires all around Las Vegas. They had hundreds of clients: malls, ball parks, skating rinks, you name it.

Roman Mars: But of course, Lev didn’t pursue Fun City for their nacho cheese sauce recipe. It turned out Fun City’s owners were getting out of the popcorn business. And they were game to try something new. 

Dan: Fun City agreed to actually MERGE with Lev Pharmaceuticals, thus bestowing on Lev their status as a publicly-traded company. Which made it  easier  for Lev to attract even MORE investors. 

Roman Mars: But for a few months, until they could get the paperwork sorted out, they had to go by the name Fun City Popcorn.  

Schein: We felt we could overcome the name Fun City Popcorn and the jokes that might bring up.

DAN: Did people kid you about it?

Schein: Sure. Still do, apparently.

Dan: Schein could laugh all the way to the bank. Over the next few years, Lev Pharmaceuticals raised about $75 million to pay for the clinical trials that would win FDA approval.

Roman Mars: Of course, Joshua Schein still had to get the trials done— and do it before anyone else!

Dan: After all, the Orphan Drug Act is set up to give a monopoly to whoever gets to the treatment first. Finishing second can mean losing the whole investment.

Schein: It was a real horse race to see who could finish the trials first

Roman Mars: And Schein won this particular race. 

Schein: I’m very pleased with how this worked out. It worked out, most importantly for patients.

Roman Mars: And, of course, he’s also glad it worked out for the shareholders.

Schein: Most companies don’t, don’t pan out. And so, I’m pleased that, as management of a company, that we were able to provide a return for our shareholders.

Dan: It was a BIG return. In 2008, a couple weeks before the FDA gave the new drug its final approval, Lev Pharmaceuticals sold for $442 million. Within a few years, the new owner was making $400 million BACK from this one drug EVERY YEAR— thanks to a price that made this one of the world’s most-expensive drugs: more than half a million bucks a year, per patient. And then, that owner sold itself to a still-bigger company for $4.2 billion. 

Roman Mars: That company’s CEO says the company’s entire strategy is  to make money from treatments for rare diseases. The orphan drug act— and the crazy pricing that is its legacy— is this company’s whole vision for making tons of money. This is why Abbey Meyers has mixed feelings about her legacy.

Abbey Myers: 30, 35 years later, the orphan drug act has been responsible for the most miraculous treatments in many diseases, but some of the companies that make these drugs have put a price on them that make the drugs absolutely unaffordable.

Roman Mars: In other words, it’s like a ransom note for thousands of desperately-ill people.

Dan: Joshua Schein from Lev Pharmaceuticals has a different perspective.  He says: It’s hard enough to get money to develop these drugs even WITH the Orphan Drug Act’s incentive of a  massive payout.

Schein: These drugs are hugely expensive to develop, and the failures far, far outnumber the, successes. And without, um, without a system in place, like the orphan drug act, these drugs would not come to market

Roman Mars: Of course, it doesn’t have to be this way. Abbey Meyers and other have their own proposals for how to balance incentives with reasonable prices. It’s a giant debate. 

Dan: If you look at a list of the most-expensive drugs, you’ll notice two things: They are unbelievably expensive— tens of thousands of dollars a month. And they are generally for rare conditions. Whoever pays an individual bill— insurance companies, patients— the whole thing contributes to the spiraling cost of health care.

Roman Mars: And it’s going to take more than a fake tv march on washington to fix the problem.

Dan: Oh, man: Thank you to our friends at 99 Percent Invisible for making this episode with us.

And let me just say, on that last point:  figuring out what it’ll take to fix these problems— that is exactly why we are doing this show, An Arm and a Leg— so we can see the problems clearly, and maybe find some answers, together. Or at least bring down our blood pressure enough, by enjoying a good story or two, that we can start to think about things in a less freaked-out way.  

Next time, on An Arm and a Leg: Why you’re probably going to choose the wrong health insurance. And, uh, so am I. 

Lynn Quincy: People would rather go to the gym or do their taxes than shop for health insurance.

Dan: No kidding. We get the scoop from an economist on WHY its so freaking hard— and way off in the distance— I spot a ray of light. 

Meanwhile, thanks so much for listening to these first episodes of An Arm and a Leg. Our first season runs for the next five weeks. You can find out more at arm-and-a-leg-show, dot com, and you can subscribe ANYWHERE you get podcasts.   

Go ahead and do that now— and I’ll see you here next week. Cool?

I mean, I’m shopping for health insurance, and I could use the company.  

Till then, take care of yourself. 

This is An Arm and a Leg, a show about the cost of health care.

This episode was produced by me, Dan Weissmann, edited by Avery Trufleman for 99 Percent Invisible, with additional editing by our own Whitney Henry-Lester. Mix and tech production by Sharif Yousef for 99 Percent Invisible with additional production by our Adam Raymonda. Music for 99 Percent Invisible by Sean Real, and our music is by Dave Winer. 

Daisy Rosario is consulting producer for An Arm and a Leg.

Thanks to Abbey Meyers, Joshua Schein, and NORA GUTHRIE. 

You can find An Arm and a Leg on Facebook. We’re on Twitter and Instagram at arm-and-a-leg-show.  Our own website is arm and a leg show dot com. 

Thanks to Public Narrative for serving as the fiscal sponsor for our launch.  Public-narrative dot org.

Thanks to the donors who made that launch possible— and to our Patreon supporters! Welcome aboard, and thank you.