Harms of Price Hikes for Old Drugs Detailed at Senate Panel

  • Patient health at risk when prices, supply change, doctor says
  • Aging Committee hears from experts at hearing in Washington

Drug price increases hurt patients and disrupt the supply of medicine in the U.S., experts told a Senate panel that’s investigating the industry.

While companies should be rewarded for developing new drugs, the system “never anticipated companies acquiring off-patent drugs and then jacking up their prices to enormous heights,” Senator Susan Collins, a Maine Republican, said in a prepared statement at the start of the Senate Special Committee on Aging’s hearing Wednesday.

During the session, doctors and pricing experts testified on the impact of price increases for older generic drugs. The committee is led by Collins and Senator Claire McCaskill, a Democrat from Missouri who has called for government intervention. Executives from pharmaceutical companies aren’t scheduled to speak, though the committee has asked them to provide documents as part of its probe.

In one case, a patient whose brain infection was being controlled with an anti-parasitic drug called pyrimethamine, or Daraprim, was unable to get the pills when the price shot up and distribution of the treatment changed, said Gerard Anderson, director of the Center for Hospital Finance and Management at the Johns Hopkins Bloomberg School of Public Health. Without the medicine, the patient’s infection flared.

“After an extensive hospital stay, the patient recovered fully,” Anderson said in his written testimony. “Her own cost and the cost to the health system, however, were enormous.”

$750 a Pill

Daraprim treats an infection called toxoplasmosis and is sold by Turing Pharmaceuticals AG. Led by Martin Shkreli, Turing acquired the rights to the decades-old medicine in August and immediately raised the price to $750 a pill, from $13.50, and implemented a closed distribution system.

“I noticed in the morning paper, this is the same guy who thought it was a great idea to pay millions of dollars for the only existing album of the Wu-Tang Clan,” McCaskill said at the hearing. Shkreli earlier this year paid $2 million to buy the sole copy of an album by the legendary rap group, Bloomberg Businessweek reported Wednesday.

A spokesman for Shkreli didn’t immediately return a request for comment.

Frequent Target

While Shkreli has been a frequent target for criticism, “the Turing example of a several thousand percent price increase is only the tip of the iceberg,” Anderson said. “Many other generic companies are doing the same thing.”

That has prompted calls to action by lawmakers. “This is a market failure, and when there’s a market failure, the government has a role in addressing it,” McCaskill said in a prepared statement.

Regulators, insurance companies and presidential candidates have been scrutinizing the cost of prescription drugs this year, after pharmaceutical and biotechnology firms introduced treatments for cancer, hepatitis C and other conditions that can cost tens of thousands of dollars for a course of treatment.

That scrutiny has hurt the market -- since Democratic presidential candidate Hillary Clinton targeted the high cost of treatments in a September tweet, the Nasdaq Biotechnology Index has fallen 7.3 percent through Tuesday.

Turing’s price increase has made it more difficult for David Kimberlin, a doctor at the University of Alabama at Birmingham’s hospital, to care for babies with toxoplasmosis, Kimberlin said. Erin Fox, director of the Drug Information Service at University of Utah Health Care, said that price increases for two drugs from Valeant Pharmaceuticals International Inc. has forced the university’s health system to change how it treats heart attacks.

The price hikes raise “troubling questions about whether companies like Turing and Valeant are taking advantage of the patients who depend on their products for survival,” McCaskill said in her statement.

Valeant said Wednesday that price increases for several of its drugs weren’t representative of the company’s practices.

“We set prices based on a number of factors, including the cost of the development or acquisition of a drug, the availability of substitutes or generics, and the benefits it offers versus alternative treatments that might be more costly,” Laurie Little, a Valeant spokeswoman, said in a written statement. The company provides “significant volume discounts” for hospitals that use some of its drugs in large quantities.

The Senate committee has asked drugmakers including Valeant and Turing for documents on older drugs that have seen big price increases. Wednesday’s hearing is the first in a series looking into why the prices for some generic drugs are rising and what can be done about it.

Pharmaceutical firms say the income from their drugs helps fund new research and rewards their risk-taking. Shkreli has said it’s his job to maximize profits for investors in Turing.

Policy Proposals

One way to lower prices would be to force drug companies to disclose how much they actually sell their drugs for after discounts and rebates, according to Anderson, and to allow programs like Medicaid to set their payments based on the figure. He said lawmakers should also consider restricting mergers of companies that make generic drugs.

Mark Merritt, who heads Pharmaceutical Care Management Association, the lobbying group for firms that administer drug benefits for insurers and employers, also testified. Merritt told the panel that the companies he represents, known as pharmacy benefits managers, or PBMs, have a key role to play in reining in drug prices.

Increasing competition and speeding up FDA approval of drugs will help lower prices, and government-imposed price controls aren’t appropriate, Merritt said in his written testimony.

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