Drug Price Hikes Attract National Attention, Resulting in Plummeting Biotech Stocks

Prescription Drug Use Up

The latest drug to skyrocket, Daraprim, has raised eyebrows around the nation, and brought another health care issue into the  national political debate. Daraprim, a 62-year old drug, was acquired in August by Turing Pharmaceuticals, a start-up run by a former hedge fund manager. Turing then raised the price to $750 a tablet from $13.50, making it 5,455% more expensive than it was only two months ago, bringing the annual cost of treatment for some patients to hundreds of thousands of dollars and kicking off a media firestorm.

Turing Pharmaceuticals, a privately held biotech company, shortly after it acquired the drug from Impax Laboratories in August for $55 million. The hike has since faced intense opposition from medical professionals, politicians, and patient-protection groups. “What is it that they are doing differently that has led to this dramatic increase?” said Dr. Judith Aberg, the chief of the division of infectious diseases at the Icahn School of Medicine at Mount Sinai in an interview with the New York Times. She said the price increase could force hospitals to use “alternative therapies that may not have the same efficacy.”

Turing Pharmaceuticals founder and CEO Martin Shkreli told the New York Times that the price increase of Daraprim would affect only a small number of people, given how rarely the drug is used. Shkreli said the price increase brings Daraprim more in line with other drugs for rare diseases and part of the profits would go towards developing better alternative treatments with fewer side effects, though some doctors questioned that logic.

To be sure, according to an article in Fortune, Daraprim is not the only fairly old drug that’s seen astronomical price increases recently. The price for cycloserine, a medicine used to treat drug-resistant tuberculosis, increased to $10,800 for 30 pills from $500 in August. after its acquisition by Rodelis Therapeutics. Scott Spencer, general manager of Rodelis, said the company needed to invest to make sure the supply of the drug remained reliable. He said the company provided the drug free to certain needy patients.

In August, two members of Congress investigating generic drug price increases wrote to Valeant Pharmaceuticals after that company acquired two heart drugs, Isuprel and Nitropress, from Marathon Pharmaceuticals and promptly raised their prices by 525 percent and 212 percent respectively. Marathon had acquired the drugs from another company in 2013 and had quintupled their prices, according to the lawmakers, Senator Bernie Sanders, the Vermont independent who is seeking the Democratic nomination for president, and Representative Elijah E. Cummings, Democrat of Maryland. Doxycycline, an antibiotic, went from $20 a bottle in October 2013 to $1,849 by April 2014, according to the two lawmakers.

Overall, brand-name drug prices have been on the rise, increasing by 14.8% in 2014, according to research firm Truveris. While price gains can be partially attributed to more effective new treatments as well as shortages for certain drugs, a portion of the increases are a credit to business strategies like Turing’s, which aim to buy low-profile, neglected drugs and re-market them as higher-value specialty medicines.

The Infectious Diseases Society of America and the HIV Medicine Association sent a joint letter to Turing earlier this month calling the price increase for Daraprim “unjustifiable for the medically vulnerable patient population” and “unsustainable for the health care system.” An organization representing the directors of state AIDS programs has also been looking into the price increase, according to doctors and patient advocates.

Daraprim, known generically as pyrimethamine, is used mainly to treat toxoplasmosis, a parasite infection that can cause serious or even life-threatening problems for babies born to women who become infected during pregnancy, malaria, and also for people with compromised immune systems, like AIDS patients and certain cancer patients.

The drug was approved by the F.D.A. in 1953 and has long been made by GlaxoSmithKline. Glaxo sold United States marketing rights to CorePharma in 2010. Last year, Impax Laboratories agreed to buy Core and affiliated companies for $700 million. In August, Impax sold Daraprim to Turing for $55 million, a deal announced the same day Turing said it had raised $90 million from Mr. Shkreli and other investors in its first round of financing.

Daraprim cost only about $1 a tablet several years ago, but the drug’s price rose sharply after CorePharma acquired it. According to IMS Health, which tracks prescriptions, sales of the drug jumped to $6.3 million in 2011 from $667,000 in 2010, even as prescriptions held steady at about 12,700. In 2014, after further price increases, sales were $9.9 million, as the number of prescriptions shrank to 8,821. The figures do not include inpatient use in hospitals.

Turing’s price increase could bring sales to tens or even hundreds of millions of dollars a year if use remains constant. Medicaid and certain hospitals will be able to get the drug inexpensively under federal rules for discounts and rebates. But private insurers, Medicare and hospitalized patients would have to pay an amount closer to the list price.

In response to the price increase Democratic Presidential candidate Hillary Clinton tweeted on Monday, “Price gouging like this in the specialty drug market is outrageous. Tomorrow I’ll lay out a plan to take it on.”

The tweet sent biotech stocks plummeting as many investors worry about how this could affect drugmakers’ profits. The Nasdaq Biotechnology Index fell as much as 5.26% after Clinton’s message and has slowly be bouncing back, down only 3.7% as of 1:30 p.m. on Tuesday.

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Lindsey McCoyLindsey McCoy MPA, is an Executive Medical Recruiter and former CEO in the not for profit sector.

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