Staggering hikes in some cases higher than 5000% in prices of prescription drugs threaten the health of Americans who can’t afford vital medicines as well as the broader economic stability of households across the U.S., a new congressional report warned Wednesday.
The findings by the Senate Special on Aging summarize the panel’s 2016 investigation of records from four pharmaceutical companies and public hearings that focused on sudden price spikes in decades-old medications and the pricing decisions imposed by drug industry entrepreneur Martin Shkreli and other industry executives.
Turing Pharmaceuticals and Retrophin (RTRX), two firms once headed by Shkreli, embattled drugmaker Valeant Pharmaceuticals International (VRX) and Rodelis Therapeutics are among companies that dramatically raised prices on some decades-old, off-patent drugs they acquired and controlled through monopoly business models, the report said.
Shkreli has gained widespread criticism from healthcare professionals, patients and even some 2016 presidential candidates for his role in directing drug price increases at Turing and Retrophin.
Valeant’s shares have lost roughly 94% of their value since Aug. 2015 amid multiple investigations and criticism of the company’s drug pricing and distribution policies. Rodelis acquired the rights to distribute a drug used to treat multi-drug resistant tuberculosis and later imposed a 2060% price increase. However, the acquisition was rescinded weeks after the hike.
“The skyrocketing prices of prescription drugs affect every American family, particularly our seniors,” said Sen. Susan Collins, R-Maine, who chairs the committee. “We must work to stop the bad actors who are driving up the prices of drugs that they did nothing to develop … just because, as one executive essentially said, ‘because I can.'”
Sen. Claire McCaskill, D-Mo., the panel’s ranking minority member, criticized what she termed the “predatory” hedge fund model of drug pricing. She called it “immoral for the patients and taxpayers who ultimately foot the bill — especially for generic drugs that can be made for pennies a dose.”
Retrophin stressed that the Senate report focused on Shkreli’s tenure and concluded the firm appeared to have renounced his business model. “Today, Retrophin is a fully integrated biopharmaceutical company dedicated to delivering life-changing therapies to people living with rare diseases who have few, if any, treatment options,” the company said.
The other firms and Shkreli did not immediately respond to messages seeking comment on the report, which focused on the health and economic impact spiraling drug prices can have on ordinary Americans.
One was Isla Weston, a North Carolina infant who was diagnosed with a life-threatening parasitic infection called toxoplamosis in May 2015.
Doctors prescribed Daraprim, a drug that has been available since 1953 and is considered the standard treatment for the infection. But Shannon and Joshua Weston, the baby’s parents, discovered that Turing Pharmaceuticals had raised the per-tablet price of the medication by more than 5000% — from $13.50 to $750 — shortly after acquiring the drug’s rights from another company.
“I was hopeless and depressed at the thought of what would happen to my perfect little girl if I was not able to help her,” Shannon Weston said during a March hearing held by the Senate committee. “I looked into any way I could think of to come up with the almost $360,000 necessary to treat my daughter for a year with a drug that she needed.”
The baby ultimately received at least a year’s supply of the drug for $200 a month from the University of North Carolina Medical Center’s pharmacy, Weston testified.
Isla’s story is a familiar one for thousands of U.S. families. Americans are expected to spend more than $328 billion on prescription drugs in 2016, with more than $50 billion of the total out of pocket rather than from health insurance providers, the report estimated. The federal government will pay an estimated $126 billion of the cost through Medicare, Medicaid and the Department of Veterans Affairs, the report said.
The four companies used variations of a business model that identified and acquired off-patent, sole-source drugs for which “they could exercise de facto monopoly pricing power, and then impose and protect astronomical price increases,” the report said.
Some senior managers of the companies lacked pharmaceutical industry background and, like Shkreli, had hedge fund experience, the report said. Outside iInvestors in some cases helped drive the cost hikes.
“Funny that these small companies still haven’t realized you can raise price aggressively and nobody gets too upset?” the report quotes Dan Wichman, an investor from Broadfin Capital, as telling Shkreli when the pharma entrepreneur was Retrophin’s CEO.
Shkreli himself “was remarkably candid” about his drug-pricing philosophy, the report said.
“The next generation of pharma guys (or the smart ones) understand the inelasticity of certain products. The insurers really don’t care,” Shkreli wrote in an email to a Retrophin investor. “I figure this dynamic may not last forever, you need to maximize opportunities while you can.”
Separately, Shkreli faces a scheduled Brooklyn federal court trial next year on unrelated charges that he illegally used Retrophin as a personal piggy bank by taking company stock and using it to pay investors who’d lost money in hedge fund investments he handled. He has pleaded not guilty in that case.
The Senate panel recommended potential solutions to the drug price spikes, including congressional approval of a Collins-McCaskill bill that would give the Food and Drug Administration 150 days to expedite review of approval of generic drugs. The procedure could speed the U.S. market introduction of generics as competitors for off-patent, brand name medications controlled by one company.
The committee called for increased transparency in U.S. drug prices and recommended federal approval of targeted and temporary drug importation “to combat major price increases in off-patent drugs.”
Kevin McCoy, USA TODAY