Valeant, Shkreli Put Profits Above Patients, Congress Saysby and
`$1 bn here we come,'' Martin Shkreli writes in e-mail
House oversight committee democrats release internal documents
Valeant Pharmaceuticals International Inc. and Turing Pharmaceuticals AG, both under congressional investigation over skyrocketing drug prices, were focused on making money before helping patients, members of Congress said internal documents obtained from the companies show.
“$1 bn here we come,” former Turing Chief Executive Officer Martin Shkreli said in an e-mail to the chairman of the board on May 27, after the company had made progress toward acquiring the antiparasitic drug Daraprim, according to a memo from House Oversight and Government Reform Committee’s ranking Democrat Elijah Cummingsof Maryland. After buying the drug later that year, Turing raised the price by more than 50-fold, to $750 a pill.
“I think it will be huge,” Shkreli said in an e-mail on Aug. 27, talking about the $375 million in revenue he expected from Daraprim after the increase. “Almost all of it is profit. Should be a very handsome investment for all of us.”
Committee Democrats had requested documents from Turing and Valeant ahead of a hearing Thursday, and summarized the more than 300,000 pages they received, including e-mails, corporate projections and analysis on revenues and profits. Shkreli and Valeant interim CEO Howard Schiller are set to testify, although Shkreli, who faces federal fraud charges unrelated to Turing, has said he will invoke the Fifth Amendment right not to testify.
Valeant said in a statement that it’s offering discounts for the two drugs probed by the committee, and making changes to how it runs its business and growth will be driven by volume instead of price. “We’ve heard from hospitals, as well as from Congress, that we set the price for these two drugs too high, and we’ve responded by offering volume-based discounts of up to 30 percent for each of them,” Valeant said.
Turing said by e-mail that it “has pledged that no patients would be denied access to Daraprim.” Turing has a patient assistance program that offers some the drug free of charge and began offering 50 percent discounts to hospitals in November. Shkreli declined to comment.
“The documents show that these tactics are not limited to a few ‘bad apples,’ but are prominent throughout the industry,” Cummings said in a statement. “They confirm what Americans across the country have experienced firsthand for years -- that many drug companies are lining their pockets at the expense of some of the most vulnerable families in our nation.”
Drug pricing has come under increased scrutiny in recent months, becoming an issue on the U.S. presidential campaign trail. Democratic hopeful Hillary Clinton vowed again to crack down on companies that “gouge patients with pricing” in a Jan. 28 tweet. Data from a survey of about 3,000 brand-name prescription drugs suggest that price rises are widespread throughout the industry. Prices more than doubled for 60 drugs and at least quadrupled for 20 since December 2014, according to DRX, a provider of price-comparison software to health plans.
Valeant last year bought two drugs, Isuprel and Nitropress, and soon after raised their prices of by 525 percent and 212 percent, respectively. The documents show that Valeant “identified goals for revenues first, and then set drug prices to reach those goals,” Cummings said.
Valeant CEO Michael Pearson, who is currently on medical leave, was advised by an outside consultant that the drugmaker could jack up prices on old drugs under the radar for huge gain, according to the congressional memo. The consultant said in an e-mail that therapies like Isuprel and Nitropress weren’t regularly reviewed by payers on formularies, the lists that insurers and pharmacy benefit managers use to restrict drug use and hold down prices.
"Products have been in the system for so long that reviews are practically rubber stamped,” the consultant, who wasn’t named in the congressional memo, said in an e-mail to Pearson in December 2014.
In a presentation explaining soaring sales from products including Isuprel and Nitropress, Valeant said it had engaged in “Aggressive Pricing through consultant recommendation,” according to the congressional memo.
Price vs. Volume
The documents also highlighted what some analysts called an apparent contradiction between what Valeant was saying publicly and internally last year. On a call with investors and analysts on April 29, Pearson said that volume was a greater driver of growth than price increases. On May 21, then-CFO Schiller told Pearson in an e-mail that about 80 percent of sales growth in the first quarter came through price increases, according to the congressional memo. Even taking out Marathon, the newly-acquired company that brought Isuprel and Nitropress to Valeant, price increases represented 60 percent of growth, Schiller said in the e-mail.
Pearson’s comments on the earnings call were consistent with Valeant’s quarterly filling, Renee Soto, an outside spokeswoman for Valeant, said by e-mail. “When the company talks about price v. volume, they refer to organic growth, which would have excluded Marathon and other acquisitions.”
The documents show that both Valeant and Turing employed a public-relations strategy to distract from price increases by focusing on patient assistance programs.
Turing Chief Commercial Officer Nancy Retzlaff, who is set testify at the House drug price hearing on Thursday, sent an e-mail to a colleague June 1 talking about the possibility that a doctor might prescribe a cheaper alternative medicine instead of Daraprim.
“We want to avoid that situation,” Retzlaff wrote. “The need to address co-pay assistance is a key success factor.”
Retzlaff didn’t immediately respond to a phone call seeking comment.
After public reports emerged that Turing had spiked the price of Daraprim, executives discussed ways to contain the problem. An outside consultant e-mailed Turing’s board of directors Oct. 8, suggesting they remove Shkreli as chief executive the next week and drop the price of Daraprim.
“What I’d be looking for is something along the lines of Turing lowers the price by xx% and announces a package of assistance programs for patients that guarantees no patient will be denied access nor will they pay anymore,” the consultant said in the e-mail cited by the memo. “This will force reporters to focus on the byzantine nature of drug pricing and health care and ensure the patient message gets out.”
Shkreli didn’t resign his top spot at Turing until after he was arrested for securities fraud in December. The charges against him related to several of his past businesses, which include hedge funds and the drug company Retrophin Inc.