Old-Drug Price Hike ‘Perversion of the System,’ Biogen CEO Says

  • Scangos is chairman-elect of drug industry lobby group
  • Biotech index enters bear market after week of declines

Turing Pharmaceuticals AG’s decision to raise the price of a decades-old drug it company acquired by 50-fold was a “perversion of the system,” said the leader of one of the U.S. largest biotechnology companies and the incoming head of the drug industry’s lobby group.

The pricing decision by Martin Shkreli, Turing’s founder and chief executive officer, “dropped down a storm on the whole industry" that drugmakers don’t deserve, Biogen Inc. Chief Executive Officer George Scangos said Friday in a telephone interview. He called the move by Turing’s CEO “arrogant” and “naïve.”

Scangos is next in line to be chairman of the pharmaceutical industry’s Washington lobbying group, Pharmaceutical Research and Manufacturers of America, which has defended drugmakers this year as they’ve come under criticism for the price of medicine.

The increase in the price of the drug, Daraprim, to $750 a pill from $13.50 brought the ire of Democratic presidential candidate Hillary Clinton, who on Monday tweeted that the change was “outrageous” and that she would reform the industry. Since her comment, the Nasdaq Biotechnology Index has fallen 13 percent in its worst week since August 2011, and is on the brink of entering a bear market.

Turing didn’t conduct extensive research to invent Daraprim before raising the price. Shkreli has argued that when he bought the drug in August, he raised the price 50-fold so that he could turn a profit and fund other discovery and clinical trials at his company.

“We are a research-based company who intends to initiate 4 phase 3 clinical trials in the next 12 months," Shkreli said in an e-mail Friday.

“Turing is to a research-based company like a loan shark to a legitimate bank," Scangos said in the interview.

Shkreli declined to comment on Scangos’s additional remarks. 

About 2,000 Americans each year use Daraprim, which treats the disease toxoplasmosis. While the parasite that causes the disease is common, it doesn’t usually cause symptoms and typically only needs to be treated in patients with compromised immune systems, such as people with HIV.

The drug industry has been under fire all year for its prices, with Gilead Sciences Inc. taking much of the criticism for its hepatitis C treatment Sovaldi. Sovaldi hit the market in December 2013 bearing the promise of a cure and a price tag of about $1,000 a day for 12 weeks. Gilead has argued that its drug represents a huge breakthrough for patients and can save the health-care system costs by keeping people with hepatitis C from eventually needing a liver transplant or getting liver cancer.

Insurance companies, which typically split medication costs with patients, have been particularly vocal in condemning prices, while pharmaceutical companies have argued that profits are used to develop the next generation of drugs and motivate innovation in a field often fraught with failure. Drugmakers have argued that inefficiencies by hospitals and doctors add far more costs.

Biogen, for example, is spending $2 billion to develop and test a drug for Alzheimer’s, including the building of a manufacturing plant, Scangos said. While Biogen is optimistic about the drug’s chances of approval based on early data, the drug could still fail, he said. “Then it’s an investment wasted.” If successful, Biogen will price its Alzheimer’s drug based on the benefit it brings to patients, he said.

Biogen’s drugs aren’t cheap -- prices for its multiple sclerosis drugs have risen quickly over the years, and typically have a list price of more than $50,000. They will eventually face cheaper generic copies after their patents run out.

A period of patent exclusivity allows drugmakers “to provide investors with the kinds of returns they need to justify the risks," then generic companies can step in to make cheaper copies, "and our children will get it for almost nothing," Scangos said.

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