Bipartisan Report Seeks Steps to Halt Price Gouging of Sole Source Drugs

A bipartisan Senate report on Wednesday calls on Congress to stop huge price spikes in older, off-patent drugs, after a yearlong investigation into a string of such cases. The report wants a look at controversial policy remedies, including “targeted” drug importation and an empowered Federal Trade Commission (FTC).

Senators Susan Collins, R-Maine, and Claire McCaskill, D-Missouri, as chair and ranking member of the Senate’s Special Committee on Aging, issued findings from 4 case studies involving Turing Pharmaceuticals’ Daraprim, Retrophin’s Thiola, Rodelis Therapeutics’ Seromycin, and 4 drugs from Valeant Pharmaceuticals.

Daraprim, which treats toxoplasmosis, became the poster child for price gouging when its per-tablet cost soared from $13.50 to $750 in a single day—with no remorse from Turing’s CEO at the time, Martin Shkreli, then a 32-year-old former hedge fund manager who was later charged with securities fraud.

As the report found, Shkreli’s profile—one more Interested in Wall Street reactions than those of families ravaged by price increases—is a common thread in companies that engage in these practices. This new class of CEO, the report found, has little background in the pharmaceutical industry and seeks to exploit small populations of patients purely for profit. These CEOs price gouge, the report said, because they can.

Patients and family members testified about the effects of unexpected price hikes, the stress and uncertainty of whether they will have access to life-saving medication, and the tiresome process of applying for financial assistance. Many told the committee keeping up with the paperwork became a “part-time job.”

“Staggering increases in the price of some prescription drugs threaten not only the economic stability of American households, but also the health of individuals who discover the drugs they need are unaffordable and difficult to access,” the report stated.

Unlike expensive new drugs for cancer or hepatitis C virus—which have also drawn scrutiny—the drugs studied here mostly came on the market in the 1950s and 1960s. The report noted that the active ingredient in Valeant’s Nitropress—used in emergency room situations—was isolated in the 1800s; it was first used in medical settings in 1928. Thus, the report concluded, the price hikes have nothing to do with recovering dollars spent on research and development, which is cited when new drugs have high price tags.

The report outlined 5 elements of a business model that create chaos for users of these drugs, as well as hospitals and other healthcare providers:

1. The drugs had “sole source" manufacturers,
2. They were the gold standard for their clinical need,
3. The market for them was small, which limited users’ ability to fight price increases,
4. The drugs flowed through a closed distribution system that blunted the rise of generic competitors, and
5. With the first 4 elements in place, the owners engaged in price gouging, which forced users to seek help not only from their insurance but also from foundations and patient assistance programs.

The report digs into fallout at hospitals and especially in emergency rooms, where providers were often forced to abandon familiar drugs for less well-known choices. This would require development of new policies and protocols and retraining of staff, at considerable expense, the panel found. Sudden financial burdens on small hospitals struggling to cope with the nation’s opioid epidemic prove too steep for those rural providers that have closed.

Wednesday’s report includes policy ideas that its leaders acknowledge may not be acceptable to all, but at least merit discussion:

1. Boost incentives for generic choice through passage of the “Increasing Competition in Pharmaceuticals Act of 2016”
2. Simplify the Risk Evaluation and Mitigation Strategies (REMS) process and allow possible competitors to gain access to samples
3. Allow “highly targeted temporary drug importation,” to offer relief; the panel noted this could have unforeseen effects. As a candidate, President-elect Donald J. Trump called for allowing drug imports, but he has not discussed it during the transition
4. Boost the power of the FTC to step in when mergers or operational changes at drug companies threaten access
5. Raise transparency by releasing the Average Manufacturer Price

Later Wednesday, Turing issued a statement in response to the Senate report. The statement said the company has taken steps to ensure access to Daraprim, that 50% of its gross sales are with Medicaid or the 340B program, and that the drug is sold to these government programs at $1 per 100 tablet bottle. The company further stated that it is investing in research for therapies for toxoplasmosis patients who cannot take Daraprim. Turing found it "disappointing that the report takes out of context" information and comments "from past employees that are not reflective of Turing's current commitments."