Wednesday, September 30, 2015

Extreme Rise in Some Drug Prices Reaches a Tipping Point

Fiscal Times

By Eric Pianin
September 30, 2015

The powerful pharmaceutical industry is doing its best to hold back the tide, but mounting public outrage over excessive pricing of both old and new drugs may prompt government intervention after the 2016 election.

The controversy is already playing out on the presidential campaign trail and on Capitol Hill where House Democrats are demanding Valeant Pharmaceuticals provide documentation to justify the soaring costs of its drugs.

Meanwhile, Democrat Hillary Rodham Clinton’s campaign purchased ads in Iowa and New Hampshire this week for Clinton to claim credit for forcing another company, Turing Pharmaceuticals AG, to partially roll back a massive increase in the cost of a long-standing drug used to treat AIDS and cancer patients. Clinton accused the company’s 32-year old CEO, Martin Shkreli, of “price gouging” on Twitter.

Billionaire Donald Trump, the GOP presidential frontrunner, also jumped into the act, calling Shkreli a “spoiled brat” for boosting the cost of the drug, Daraprim, from $13.50 to $750 a pill.

Shkreli, a hedge fund manager, has become the new symbol of industry greed and insensitivity. He recently announced he would cut back the price, without saying by how much.

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At one time critics focused much of their wrath on Gilead Sciences Inc., the California based pharmaceutical company that charged as much as $1,000 a pill for the new wonder drug Sovaldi for treating the potentially lethal Hepatitis-C virus. The cost of the drug blew a hole in the budgets of the Department of Veterans Affairs, Medicare and Medicaid and forced federal and state officials to ration the availability of the popular drug.

Nevertheless, the drug does save money in the end by avoiding costly liver transplants and associated follow-up treatment. The other newcomers to the pharmaceutical business offer no such deal. They simply have business plans that depend on exploiting existing drugs by raising costs to unsustainable levels for quick returns. If they succeed, the pharma percentage of overall health care costs could make the current 9 percent spent on drugs look like chump change.

Now industry critics have two easy targets to choose from – including Turing and Valeant, a major firm that jacked up the price of two heart medicines three to six fold the same day it acquired the rights.

In both cases, the companies weren’t marketing newly developed drugs, which may have cost tens of millions of dollars to develop but drugs that have been on the market for many decades – making it far more difficult to justify a huge increase in price. Citron Research, an online investment research company, published a damning report on Valeant’s marketing practices this week, describing them essentially as “jack up prices and cut spending.”

While most pharmaceutical companies spend an average of 17 percent of their income on research and development, Valeant spends only 3 percent, according to the report. A chart accompanying the analysis shows how prices charged by the company for roughly 30 older prescription drugs have risen over the past two and a half years, from as little as 90 percent for a nasal spray to 2,288 percent for ear drops.

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The Wall Street Journal first reported that on the same day the company acquired the drugs, it tripled the cost of a vial of Nitropress to $805.61 and increased the cost of a vial of Isuprel from $215 to $1,346.

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