Shkreli Was Right: Everyone's Hiking Drug Prices

Meet Martin Shkreli, Internet Star
  • Prices more than doubled for 60 drugs in the past year
  • House hearing Thursday will focus on soaring drug prices

After Martin Shkreli raised the price of anti-parasitic drug Daraprim more than 50-fold to $750 a pill last year, he said he wasn’t alone in taking big price hikes.

As it turns out, the former drug executive was right. A survey of about 3,000 brand-name prescription drugs found that prices more than doubled for 60 and at least quadrupled for 20 since December 2014.

Among the biggest increases was Alcortin A, a combination steroid and antibiotic gel to treat eczema and skin infections: The price soared 1,860 percent, or almost 20-fold, during the period. And a vial of Aloprim, a Mylan NV drug for cancer complications, more than doubled, according to the survey by DRX, a provider of price-comparison software to health plans.

Skyrocketing prices are getting increased scrutiny ahead of a U.S. congressional hearing this week: Democratic Representative Elijah Cummings, ranking member on a committee that is probing drug pricing, said Tuesday that pricing “tactics are not limited to a few ‘bad apples,’ but are prominent throughout the industry.”

Even after soaring prices became an issue in the U.S. presidential campaign, the cost of many drugs has continued to rise at annual rates of more than 10 percent. Drugmakers raised the prices of products as wide-ranging as erectile dysfunction drug Viagra, heart treatments, dermatology medicine and even brands that long have lost their patents. While specialty companies have had the steepest hikes, giants such as Pfizer Inc. and GlaxoSmithKline Plc kept pushing through smaller rises.

“The data shows that price increases are an integral part of the business plan,” said Jim Yocum, executive vice president at DRX.

Pharmaceutical companies often boost prices around the end and the start of the year, and the scale of recent increases was higher than what Yocum has seen in the past few years. About 400 formulations of brand-name drugs went up at least 9.9 percent since early December, according to DRX.

Crestor, Viagra

Drugmakers say that they offer significant discounts off of list price to insurers, and inexpensive generic alternatives are available. And they say they invest large amounts in research & development to come up with new breakthroughs.

Among recent increases by the world’s biggest pharmaceutical companies is AstraZeneca Plc’s blockbuster cholesterol drug Crestor, up 15 percent ahead of the arrival of a generic version in May. AstraZeneca said that it decides on price changes annually based on market conditions, a common industry practice, and it offers a savings program on Crestor that reduces co-payments to as little as $3 per prescription.

Pfizer raised prices for 24 drugs by 12 percent or more in the past two months, with Viagra increasing about 13 percent and two heart drugs whose price went up 44 percent and 86 percent, according to DRX. The New York-based drugmaker said that list prices don’t reflect discounts offered to the government, managed-care organizations, commercial health plans and programs that restrict any increases above the inflation rate. In the U.S. biopharma business, the average price increase was 6 percent last year, Pfizer said in an e-mail.

Meanwhile GlaxoSmithKline increased prices by 15 percent on 22 products over the past two months, including Lamictal XR for epilepsy, according to DRX.

“Price increases for some medicines are a reality in a competitive U.S. marketplace and we strive to handle them thoughtfully,” Glaxo said by e-mail. After discounts, the London-based company said U.S. prices declined from 2014 to 2015.

Mylan declined to comment.

Few Decreases

DRX, a unit of Connecture Inc., looked at prices for more than 6,300 doses of about 3,000 brand-name drugs from December 2014 through Jan. 15. It included patented drugs as well as old brand drugs whose patents have expired, but not generics. Half the drugs got a price increase -- including 1,100, almost a third, above 10 percent. Only about 50 had a decrease, DRX found.

Valeant Pharmaceuticals International Inc., which in recent months has been under fire for its pricing was among the most aggressive, with 13 drugs that doubled or more since December 2014. That’s more than any other large company, the survey found. The heart drug Isuprel soared 720 percent over the period, including 525 percent right after Valeant bought the rights to sell it.

In a December 2014 e-mail released Tuesday by the House Committee on Oversight and Government Reform, a Valeant official wrote to a senior vice president that a potential purchase of Isuprel and another drug, Nitropress, “would also have to be a price play.”

In a statement, Valeant said that it heard feedback from hospitals that it set the prices too high for the drugs and responded by offering discounts of as much as 30 percent. On Friday, Valeant said in a separate statement that it sets prices based on factors such as the cost of development or acquisition of a drug, its benefits versus alternative treatments, and the availability of substitutes or generics.

‘Gouge Patients’

The scrutiny on prices is only going to increase after Democratic presidential candidate Hillary Clinton vowed again to crack down on companies that “gouge patients with pricing” in a Jan. 28 tweet. Valeant and Turing Pharmaceuticals AG, Shkreli’s former company, are expected to testify at the hearing Thursday. Shkreli, who faces federal fraud charges unrelated to Turing, was subpoenaed to appear, although he has said he plans to invoke the Fifth Amendment, which allows people to avoid incriminating themselves. He declined to comment for this story via text message.

Turing said that it offers hospitals discounts of up to 50 percent on its Daraprim treatment and invests 60 percent of net revenue in R&D.

Prices for three skin gels from the small company Novum Pharma LLC, including Alcortin A, have soared 1,700 percent of more. Novum, founded in 2015, is “focused on acquiring and licensing under promoted/mature products,” according to its website. DRX data show that the majority of the increases occurred in May 2015, after Novum acquired the drugs.

Novum said list prices don’t reflect the cost for insurers and patients. Commercially insured patients get Novum’s products for $0 copayment, and cash-paying patients pay only $35, the Indianapolis-based company said in a statement.

Old Drugs

Even prices for some brand drugs that have long lost patent protection are rising sharply. AstraZeneca sold U.S. rights to two old blood pressure drugs, Zestril and Tenormin, to Alvogen in January 2015. Alvogen has raised the prices for Zestril by about 800 percent and Tenormin by about 600 percent, according to DRX.

“As the price of many of these products had remained unchanged for 10-15 years, there was a need to bring up the prices,” the company said in a statement. Even after the increases, the prices are lower than some competing brands, Alvogen said.

Mission Pharmacal Co., based in San Antonio, said the price of Lithostat, a drug used for a type of kidney stone, went up more than 10-fold after the supply of a key ingredient ran out and it had to find a new supplier. Mission considered pulling Lithostat off the market, but decided to keep selling it, reflecting its commitment to patients, said Drew Deeter, an outside spokesman for the company. “The raw ingredients are challenging to acquire, the product is difficult to distribute, and it remains a minimal revenue generator for the company,” Deeter said.

Price Doubles

Among cancer medicines that doubled in price is leukemia drug Oncaspar, which Baxalta Inc. boosted by 125 percent after acquiring it from Sigma-Tau Finanziaria Spa. Baxalta said the price adjustment will help fund testing of new formulations, and that it plans to pursue clinical research to explore the benefits of Oncaspar in other cancers.

Spending on prescription medicines isn’t growing faster than overall health-care spending, partly because of the use of generics and negotiations on discounts, according to the Pharmaceutical Research and Manufacturers of America, an industry group known as PhRMA.

While insurers and health plans do negotiate discounts, the list price is usually the starting point of the negotiation with drugmakers, DRX’s Yocum said.

“Even if they don’t get all of that price increase, they will get some of it,” he said.

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