Turing Pharmaceuticals CEO Martin Shkreli may have made a lot of mistakes, but it turns out that he got one thing right: He has lots of company in excessively hiking drug prices.
About 20 brand-name prescription drugs have at least quadrupled since December 2014, while another 60 medications have seen their prices more than double in the same time period, Bloomberg News reports, citing a report from price-comparison software company DRX.
Shkreli's Turing Pharmaceuticals may represent an egregious example of what has become a norm in the drug industry: pharmaceutical manufacturers pushing across significant price increases without any changes to the medication. While drug companies argue that they must raise prices to fund development of new medicines, documents released by federal lawmakers on Tuesday suggest that the practice was simply designed to boost profits.
As Turing was nearing its acquisition of Daraprim, Shkreli wrote in an email, "$1 billion here we come." Later in the year, another Turing executive wrote about a single purchase order of Daraprim that was almost equal to an entire year's revenue for the drug's previous owner. "Pow!" the executive wrote.
Excerpts from more than 300,000 pages of documents obtained from Turing and Valeant Pharmaceuticals (VRX) paint a dismal view of the industry's standard operating procedures of employing public relations strategies geared to deflect attention from price increases. The documents were released by Rep. Elijah Cummings (D-Maryland) before a hearing on Thursday.
"These new documents provide a rare, inside look at the motivations and tactics of drug company executives," 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."
The price increases have an impact far beyond fattening drugmakers' bottom line. Consumers and health care providers are bearing the brunt of the higher costs, leading to higher co-pays and insurance payments.
Patients who needed Daraprim faced co-pays of as much as $16,000 following the price hike, according to the documents. In Valeant's case, it boosted prices of drugs sold primarily to hospitals, which are less sensitive to rising costs than consumers.
Valeant's strategy, however, wasn't all that different than Turing's, according to the documents. In early 2015, the company bought Isuprel and Nitropress, which treat issues such as irregular heart rhythms and hypertension, and quickly boosted their prices by 525 percent and 212 percent, respectively.
"The documents indicate that (CEO) Michael Pearson purchased Isuprel and Nitropress in order to dramatically increase their prices and drive up his company's revenues and profits," a memo from the Committee on Oversight and Government Reform said. The expenses Valeant incurred for R&D for the drugs were "nominal."
The second part of Valeant's strategy was allegedly to create a public relations distraction from the price increase by promoting its patient assistance programs, the memo said. One objective was to "prevent public displays of negative sentiment," according to an internal Valeant presentation.
Valeant said in a statement that it had "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." It added that its future growth should be "driven more by volume than by price."
That said, consumers are increasingly aware of the higher cost of prescription drugs, thanks to bigger co-pays and their own struggles to keep up with the pace of price hikes. At the start of 2016, drugmakers including Pfizer (PFE) and Allergan (AGN) boosted prices on brand-name medications, with one drug getting a 42.3 percent increase.
Daraprim's huge price increase isn't all that extraordinary. The price of Novum Pharma's Alcortin A, a treatment for eczema and skin infections, rose almost 2,000 percent since 2014, according to the DRX data cited by Bloomberg. Novacort, another Novum Pharma skin medication, has undergone an almost 3,000 percent price increase during the same time period.