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REP. WAXMAN's AZT PRICE INQUIRY SEEKS COST BREAKDOWN

Executive Summary

REP. WAXMAN's AZT PRICE INQUIRY SEEKS COST BREAKDOWN for development, production and marketing of Burroughs Wellcome's Retrovir both before and after the product's 1987 approval. Among a series of 27 questions submitted to company President T. E. Haigler, Jr. in a Sept. 7 letter, the California Democrat asked for total costs incurred in supporting the product in each year since approval, domestically and worldwide. Waxman asked that the firm provide precise breakdowns of costs for each of the three (1987-1989) post-approval years: "What portion of these costs represents facility expenses? What portion of these costs represents purchase of raw materials? What portion of these costs represents an allocation of overhead expenses? What portion of these costs represents production expenses? What portion of these costs represents non-facility, non-overhead R&D costs? What portion of these costs represents other expenses." Other questions focus on AZT sales, profits, patents on the drugs, government grants and other forms of assistance Burroughs Wellcome received in developing the product. The House Commerce/Health Subcommittee chairman asked B-W to respond by Sept. 22. Sen. Kennedy (D-Mass.) is also said to be considering a hearing that will focus on AZT pricing. AZT continues to draw intense political and press coverage because of the mobilization of the AIDS activist groups. The close examination may provide a way into the larger issue of drug pricing and R&D cost recovery. Waxman said he anticipates "scheduling a hearing of the subcommittee to allow" Burroughs Wellcome to present the company's position on the AZT price and to receive testimony from industry analysts and from people with AIDS and their third-party payors." After almost a year of AZT marketing, Wellcome lowered the price of AZT from approximately $ 10,000/patient year to an estimated $ 7,000. The firm testified that the high cost was attributable to the expense of manufacture, studies, a small patient population, and its anticipation that the product might become obsolete within a year after approval. Noting that marketing has now continued for two and one-half years and the indications and patient population have "expanded geometrically," Waxman said the subcommittee's concerns have "not abated but grown." The original pricing structure was intended "to realize a reasonable return on investment during a short product life," he noted, "but that rationale appears no longer to be applicable and yet the price has not been adjusted accordingly." The "continued high price of the drug now appears to be an attempt to charge whatever patients, governments, ]and[ insurers can scrape together because they are desperate and have no alternative," the congressman said. "This seems particularly inappropriate in light of the generous federal assistance given to the company in the development, approval and marketing of the drug." At the 1987 hearing, Burroughs Wellcome "was given every benefit of every doubt that your price was necessary to continue R&D efforts and that only reasonable returns would be expected over the lifetime of the product," Waxman added. "Few such doubts remain now and we cannot continue to allow your pricing policies to go unexamined."
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