Loopholes allowed Martin Shkreli's Turing Pharmaceuticals to raise the price of a decades-old drug 5000 percent and keep generic competitors off the market. Now a different loophole may force him to lower that price.
Pharmacy Benefit manager Express Scripts is partnering with San Diego-based Imprimis Pharmaceuticals to cover a version of the drug, Daraprim, which fights toxoplasmosis, for about $1 a pill. With $30 billion in quarterly revenue, Express will add heft to tiny Imprimis' efforts to provide a cheap Daraprim alternative. Shkreli, who is standing by Daraprim's price hike, has manged to provoke a player that might actually foil his strategy.
The loophole this time? Compounding. By combining Daraprim’s active ingredient with a separate drug called leucovorin, which is usually taken alongside Daraprim to protect a patient's bone marrow, Imprimis didn't need FDA approval. Imprimis was already offering the compounded drug to patients who paid out of pocket. But the expertise of Express Scripts, the largest pharmacy benefit manager in the U.S. by number of claims, and the second largest in revenue last quarter, should make the compound dramatically more reimbursable, available, and widely used.
Shkreli’s justification for refusing to cut Daraprim's $750-per-pill list price was that the price doesn't really matter to patients, hospitals get discounts, and patient assistance programs keep out-of-pocket costs low and mean no patient should be denied access. But people frequently take the drug after they leave the hospital. And most of the burden of the massive price increase flows to payers like PBMs and insurers.
It’s not uncommon for PBMs to work with drugmakers to lower prices. It’s less common for them to partner with a compounding pharmacy on a single drug that serves such a tiny patient population. That's one reason price increases like Shkreli's often fly under the radar of payers, who are more concerned about 5- and 6-figure cancer, arthritis, and hepatitis drugs. But Shkreli may have underestimated how much he irked payers and physicians.
Doctors will have to specifically request this compound in order to get it instead of Daraprim. Ordinarily, that would be a barrier to usage. But in this case, the drug is used only rarely and by specialists who were infuriated by Turing's price increase and its impact on their ability to secure it. They’ll be motivated to prescribe a $1 pill, and ExpressScripts is working with the Infectious Disease Society of America and the HIV Medicine Association to make sure they know about it.
In a statement to Bloomberg News, Turing's head of R&D argued that the compounded drug isn't FDA approved and its safety is uncertain, which may give some doctors pause. But ExpressScripts signing on is a huge endorsement for a compound that is literally just Daraprim's half-century-old ingredient combined with another drug that patients already take with it.
It’s a bit ironic for Express Scripts to support compounding pharmacies and this particular FDA loophole. The company has criticized some compounding pharmacies for inflating prices of topical medicines, blocked a bunch of them from reimbursement for such treatments, and got sued for its troubles. But compounding to lower prices is OK by Express Scripts.
Express Scripts' battle with Turing isn't entirely selfless, though Chief Medical Officer Steve Miller said it was motivated in part by calls from infectious disease doctors and a desire to increase access to the drug. Still, one of the ways PBMs profit is when they secure lower drug prices from manufacturers, and they're often criticized for limiting patient access to expensive drugs. But in this case the company gets a rare chance to play hero.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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