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02/15/2016

Turing Pharma and the drug price debate

In September 2015, Turing Pharmaceuticals raised the price of Daraprim® (pyrimethamine) from $13.50 per tablet to $750.    The 5,000 % price increase put the national spotlight on the practice of rising drug prices, including for generics such as Daraprim, which is used to treat toxoplasmosis infections.  The company’s CEO, Martin Shkreli, has been vilified in the press and in social media, which has kept the subject in the public consciousness.  The price hike by Turing, which had only acquired the drug that August, was seen by many as price gouging.  Shkreli’s action has heightened scrutiny of drug pricing policies, and raised public awareness of the arbitrariness of pricing in the US market.

Shkreli defended the move, contending that the higher profitability means more funding will be available for toxoplasmosis research.  If the market size is limited, then profitability would come through higher margins.  The higher margins, Shkreli’s camp argues, compel manufacturers to produce enough of the drug to meet demand.  No one who needed the drug has been unable to get it due to price, the company has claimed, and Turing provides support for those who are unable to afford it.

Turing also argues that it has been singled out for media attention for the practice of acquiring a drug and raising its price.  Older drugs, such as Cycloserine®, a tuberculosis drug, and Doxycycline®, an antibiotic, have had their prices raised after acquisition.  Valeant purchased Isuprel® and Nitropress® and subsequently raised the price for both.  CBS News reported that a Bloomberg News study found that 20 prescription medications have had their prices quadrupled since 2014, and 60 drugs have had their drug prices at least doubled.  The same study found that Novum Pharma raised the price of two anti-inflammatory steroids, Alcortin A® and Novacort®, by 2,000 and 3,000 percent respectively during that period.  In this light, Turing’s move was not completely out of the norm.

Critics counter that such dramatic price increases are dangerous.  The Infection Disease Society of America (IDSA) and the HIV Medicine Association (HMA) sent a letter to Turing warning that the practice was “unsustainable for the health care system”  and posed a risk to public health.  Social media has lambasted Shkreli for exploiting people with serious illnesses for the sake of profitability.  Shkreli, his critics contend, is behaving more like a hedge fund manager than as a steward of the public health.

Since this story broke, more attention has been given to the practice of hiking drug prices such as at Gilead.  The company is facing scrutiny for the cost of two hepatitis C medications, Sovaldi® and Harvoni®, which cost $84,000 and $94,500 respectively for each regimen.  The attorney general of Massachussetts wrote a letter to Gilead,  saying she was looking at whether drugs are overpriced, and whether to invoke consumer protection laws in that effort, which would be a first.   Pfizer has faced criticism for hiking the prices of 100 drugs in the beginning of January 2016 and its planned merger with Allergan has emerged as an issue for Democratic presidential candidates Hillary Clinton and Bernie Sanders.  Truveris, a research firm, found that drug prices had gone up by 10.4% since 2014, and that brand names have gone up by fifteen percent.

While Shkreli and Turing’s move was jarring, the public now knows that price increase are not extraordinary.  New specialty drugs entering the approved drug market are further driving up prices.  BY contributing to higher healthcare costs, price increases for existing drugs reduce the apparent effectiveness of health care spending. Prescription drugs make up a substantial portion of US national healthcare costs, which are highest in the world.   The price increases lead to higher insurance payments and copays.

An investigation has been opened by the House Committee on Oversight and Government Reform.  Ranking member, Rep. Elijah Cummings, released memos from a preliminary investigation which appeared to show that the price moves by Turing were purely for increasing profits, and that R&D costs were minimal.  Shkreli testified before the House Oversight and Government Reform Committee on February 4, 2016, where he repeatedly invoked his Fifth Amendment right not to self-incriminate.

Shkreli was arrested in December 2015 for allegations of securities fraud prior to his takeover of Turing and has continued to draw public notoriety for his actions.  He has, through his public defiance, caused the discussion to persist.  It is notable that national vilification of Shkreli has contributed to the debate, demonstrating that personalities can impact policy as much as raw numbers.

Affordable medications are a crucial part of public health.  Likewise, the profit motive provides an incentive for pharmaceutical companies to produce sufficient quantities of a particular drug.  In the current system, a balance is needed.  Turing’s price hike of Daraprim has heightened the scrutiny of a perceived imbalance towards profitability and away from affordability.  With drug prices entering the presidential elections, it is likely that pricing will continue to be a major political issue.

Magdi Stino, PhD Candidate, Health Policy

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