‘Hedge-Fund Model’ Drug Pricing Needs New Law, Senators Sayby
Bipartisan report investigates four drug companies’ pricing
Senators suggest incentives to increase generic competition
A U.S. Senate committee is calling for the government to stop the “monopoly business model” employed by some drug companies to exorbitantly raise the price of decades-old treatments in a report that could preview legislation next year.
After a yearlong investigation, the Senate Special Committee on Aging, Chairwoman Susan Collins, a Republican from Maine, and Senator Claire McCaskill, a Democrat from Missouri, said that four drugmakers they looked at act more like hedge funds than pharmaceutical companies. The drugmakers in the report include Valeant Pharmaceuticals International Inc. and Turing Pharmaceuticals AG, which have both attracted criticism for price increases on older drugs that lack competition.
“The hedge-fund model of drug pricing is predatory, and immoral for the patients and taxpayers who ultimately foot the bill -- especially for generic drugs that can be made for pennies per dose,” McCaskill said in a statement. “We’ve got to find ways to increase competition for medicines and ensure that patients and their families aren’t being gouged.”
President-elect Donald Trump has said U.S. drug prices are too high, but put forth little in the way of detailed policy suggestions. If the Republican-controlled Congress does take up the issue, it could be attached to coming health care legislation like the promised repeal and replacement of the Affordable Care Act, or a bill reauthorizing many programs at the Food and Drug Administration that must be completed in 2017. Generic drugmakers are also under investigation by the U.S. for alleged collusion and price fixing.
One solution may be for the FDA to temporarily allow the import of drugs from abroad as a response to price increases, the senators wrote in the 130-page report. The report also calls for the passage of legislation by Collins and McCaskill that sets a 150-day deadline for the FDA to review certain generic drug applications and another bill that would help generic drug companies gain access to samples of brand-name drugs for testing to bring a low-cost competitor to market.
The committee held three hearings on drug prices, including one in April that featured Valeant executives who were asked why the company raised the price of two heart drugs by 525 percent and 212 percent almost immediately after buying them. The company’s share price has fallen 94 percent since its August 2015 peak, partly because of pushback against its prices.
Turing, under founder Martin Shkreli, raised more than 50 fold the price of an anti-infective for a sometimes-deadly parasitic infection.
“It seems like this is the first time they’ve heard of capitalism,” Shkreli said in a telephone interview. “They’re shocked that companies make money. We have investors, shareholders, Wall Street, that wants to us to make as much as possible. Shareholders will kick us out if we don’t make as much money as possible.”
Shkreli, who also led Retrophin Inc., became the defiant face of aggressive price increases and what the lawmakers called the hedge-fund approach to pharmaceutical management. He called the Senate report “more of the same faux-moralistic” posturing he says the country rejected when Americans elected Trump, particularly because drug companies haven’t cut prices despite congressional anger.
Representatives for Valeant and Turing didn’t respond to requests for comment on the Senate report, where Shkreli is also quoted during his time at Retrophin talking about raising prices.
“Funny that these small companies still haven’t realized you can raise price aggressively and nobody gets too upset?” Shkreli said in an e-mail to Dan Wichman, an investor from Broadfin Capital, according to the report. Shkreli has left both companies and is facing federal charges unrelated to the drug price increases.
The report also made note that decades old drugs aren’t the only ones undergoing price hikes and suggests more study be done on the role of pharmacy benefit managers and how they might contribute to high prices.