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Ralph Nader > In the Public Interest > Sandoz Pharmaceutical Company Price Gouging – Clozaril

August Erspamer, a retired 75 year old chemist, is the father of a son who is a schizophrenic patient at the Augusta Maine Mental Health Institute for 19 years.

The elder Erspamer is a diligent, caring father. After meeting the Sandoz Pharmaceutical company, he is also a very indignant man on a crusade. He believes that Sandoz’s exorbitant price for its drug, Clozaril, still under a patent monopoly, amounts to a “ruthless exploitation by Sandoz of the mentally ill, their families and medical insurance (particularly Medicaid) in the United States.”

Clozaril was in the news a few years ago because it was the first drug to be sold in a bundled fashion — that is you used the drug only if you agreed to a blood monitoring program conducted by a Sandoz partner. The avowed reason for bundling, according to Sandoz, was that the drug has side effects that can be anticipated in time if there is testing.

For some schizophrenics, who have not responded to other drugs, Clozaril has been deemed effective. Out there are serious side effects, including respiratory problems, in some patients. The Federal Trade Commission sued Sandoz to stop bundling and Sandoz settled the case by stopping this tie-in arrangement.

Before the suit’s settlement, Sandoz was charging $8944 per patient per year, including monitoring. In western Europe, Sandoz is selling the exact same drug for between $1000 and $2000 per year. Governments there do not stand for such gouging, as does Washington, because their health insurance systems are paying much of the bill. The monitoring is less expensive than in the U.S. and is paid under them health insurance programs as well.

Now consider August Erspamer’s economic problem. Already he has been paying $1000 a month to the Augusta Mental Health Institute (AMHI) for his son’s treatment. Neither Medicare nor Blue Cross/Blue Shield cover mental illness. Almost a year ago, he gave written permission, as his son’s guardian, to have AMHI began the treatment with Clozaril.

By April of this year, with his son several months into the bundled treatment, he was told by the Sandoz partner that a repricing was starting. Since the FTC settlement ended bundling, Mr. Erspamer could obtain the drug from the pharmacy at the retail price. Buying the drug from Sandoz at wholesale, he was told, would cost $8556 per year arid another $4056 per year for the monitoring.

In short, Sandoz’s Clozaril monopoly was going to profit even more after the bundling stopped, because it had the unfettered greedy power to do so. And while bundling may be violative of the antitrust laws, as 32 states are charging Sandoz with doing, straight out gouging is permitted.

Sandoz knows that is patent runs out in 1994 and is determined to make between $1 and $2 billion in annual sales until competition starts to drive the price down. Although the taxpayers, through Medicaid, pays for this super‑ expensive drug, your state and federal government is not investigating nor demanding, as a powerful big consumer should, a lower price.

Dr. Reid of the Texas Department of Mental Health told the Wall St. Journal: “I feel that I am being blackmailed by the company. The price amounts to a ransom for the taxpayers while holding chronic schizophrenic patients hostage to their illness.” Gilbert Honigsfeld, Sandoz’s director of communications, observed: “We are not a charity.”

But an internal Sandoz document noted that “Clozaril drug cost is $500 per year (per patient).”

Mr. Erspamer is continuing his fight to reduce the price of the drug for his son and thousands of other similar patients. He repeats again and again that Sandoz’s price in Europe is a quarter to an eighth of the price in the U.S.A.

Some members of the Senate and some weekly television programs are showing interest in his arguments. Maybe the interest will spread to hundreds of other drugs that Americans overpay for as compared to the prices for the same drugs by the same companies in Canada and other nations.