How a Sleeping Drug Company Increased Prices 300% Without Anyone Noticing

Jazz Pharmaceuticals (JAZZ) has pushed up the price of its narcolepsy drug Xyrem fourfold since 2006, and it's a good example of how prescription costs in the U.S. are out of control. Xyrem now costs as much as $35,000 per year of treatment, and the company says it could double the price again without anyone noticing.

In fact, the only reason Jazz survives as a business is because of the naked price increases it has managed to extract from reimbursers -- namely health plans and the government -- none of whom have offered any pushback.

In 2009, Jazz was on the brink of bankruptcy. It became a penny stock. It put its drug development program on hold in order to service its debt; it laid off 24 percent of its workforce and cleaned house among management, replacing its CEO and CFO.

To rescue itself, Jazz began upping the price of Xyrem. The price hikes worked. Jazz's Q3 2010 "set a new record," CEO Bruce Cozadd told Wall Street in a conference call in which he also said 2010 was "a pivotal year." In a recent note to investors from Jefferies & Co. analyst Corey Davis, a chart of Xyrem's spiraling price was labeled "To the Moon, Alice!"

Jazz's business consists almost entirely of Xyrem. Jazz had Q3 revenues of $44 million, with $37 million of that coming from a 49 percent increase in Xyrem sales. Jazz president Bob Myers said he's not done yet. Another 22 percent price increase was scheduled for Xyrem on Nov. 1, he said told the conference call:

Even at our highest dose ... after the price increase the annual cost for 12 prescriptions per month is still only $35,000 per year. So yes there is a price ceiling that we want to stay below to not raise the scrutiny of payors or plans. But quite frankly we're nowhere near that ceiling right now. We could more than double that current price and still be below that ceiling. We do want to avoid big jumps in price.

This is entirely the fault of the healthcare "system." Patients haven't noticed the price increases because Jazz supplies them with coupons good for up to $1,200 in out-of-pocket costs. The rest is picked up by lackadaisical insurance companies and state and federal programs that are banned by law from negotiating prices.

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[kimmerhawk50]

Not sure how old this story is but Jazz has went through the ceiling. Today is 05/08/2013 and to date my last shipment was $8666 per month. That is almost $100,000 per year. It seems to be going up in cost every month. SOMETHING has got to be done to stop this monopoly. Jazz knows that they have the market on this. They now how desperately people with narcolepsy need this medication therefore they charge what they want because they know they can get by with it. It is ridiculous. No wonder Medicaid keeps coming up with bogus reasons to deny mine, they don't want to pay the cost. Just sickening. I am very ill because I don't have access to this medication.

[DigitalPharmacist]

Be careful with your Xyrem. Today, the FDA released a reminder on how dangerous it can be, if used incorrectly. It can cause impaired consciousness and depressed breathing. Read the entire FDA alert here (http://www.rxwiki.com/fda-alerts/xyrem-taken-alcohol-or-cns-depressants-impairs-consciousness-and-leads-breathing-problems) and discuss it with your doctor.

[DigitalPharmacist]

Be careful with your Xyrem. Today, the FDA released a reminder on how dangerous it can be, if used incorrectly. It can cause impaired consciousness and depressed breathing. Read the entire FDA alert here (http://www.rxwiki.com/fda-alerts/xyrem-taken-alcohol-or-cns-depressants-impairs-consciousness-and-leads-breathing-problems) and discuss it with your doctor.