The backlash over prescription drug prices shows no sign of abating. Just take a look at a few developments over the past several days.
Hillary Clinton wrote letters to different government agencies about the matter. In one, she asked the Food and Drug Administration to find ways to speed generic drug approvals. And in the other, she asked the Federal Trade Commission to combat antitrust practices among drug makers, in response to what she called the “egregious actions of Turing Pharmaceuticals,” according to Reuters.
Turing, you may recall, is run by Martin Shkreli, a 32-year-old former hedge fund manager who sparked outrage with his unapologetic social media defense of a decision to buy a decades-old, life-saving medicine and raise the price by more than 5,000 percent. A Turing executive later explained to us how the company works to thwart generic competition, prompting concerns about anti-competitive practices.
Separately, Republican presidential candidate Marco Rubio said in a speech last week that some pricing practices amount to “pure profiteering,” according to a Bloomberg News report. “It’s a new issue that’s emerged over the last few years but it’s a significant one, because it threatens to bankrupt our system,” Rubio told an audience member. “It’s a complex issue, but it’s one we have to confront.”
These remarks follow sustained pharmaceutical industry bashing by Bernie Sanders, the Vermont Senator who has made rising prescription drug prices a rallying cry during his presidential campaign. Over the past year, he has begun different investigations into price increases taken by numerous drug makers. And both he and Clinton cited drug makers as foes during the recent Democratic debate.
Such remarks are starting to have an effect.
Valeant Pharmaceuticals, which has been lambasted for buying medicines and then jacking up prices to sky-high levels, plans to find a buyer for one business unit that has depended on price hikes for growth. And Valeant’s 2016 outlook is based on expectations where prices on its drugs are not raised more than 10 percent. This comes after a growing number of lawmakers have begun probing its practices.
“Given the evolution of our product mix, coupled with the recent events, it is likely that we will pursue fewer, if any, transactions that are focused on mispriced products,” Michael Pearson, the Valeant chief executive, told investors, according to The Wall Street Journal. He was referring to a long-running practice of buying drugs believed to be undervalued and then raising their prices, a tactic detailed in this story.
Given the political climate, the change of heart is hardly surprising. In fact, Wall Street has increasingly wondered how Valeant can eschew R&D investments and, instead, rely on buying companies or products and then substantially raising prices. To continually ‘move the needle’ and generate profits, Valeant has to continually make acquisitions.
Valeant “will have to drive organic growth the old-fashioned way, mainly through approvals, new launches, and commercial execution,” wrote Piper Jaffray analyst David Amsellem in an investor note.
Valeant plans to sell its US neurology unit, which should account for around 10 percent of revenue next year and has mainly been driven by price, Amsellem explained. As examples, he noted that Valeant increased the price of the Xenazine treatment for Huntington’s disease by almost 50% since the beginning of 2014, and increased the price of the Wellbutrin XL antidepressant more than three-fold since February 2014.
Not surprisingly, biotech investors are worried. For instance, when a Bain Capital hedge fund invested in Spark Therapeutics last year, the bet was the company would win approval of the first gene therapy in the US and then command a premium price, The Boston Globe wrote. Now, though, charging hundreds of thousands of dollars per patient, as investors expected, may no longer be a sure thing.
“We are in a scrutinized environment for drug prices,” Matthew McPherron, managing director of Bain’s Brookside Capital fund, told the paper. “Will they be able to get half a million dollars? It’s something we’re following closely.”
The Globe goes on to point out that biotech stocks have fallen more than 10 percent since mid-September, while shares of some pre-commercial biotechs dropped more than 20 percent. By contrast, a benchmark index for the sector surged in 2013 and 2014.
Whether more drug makers will pull back on aggressive pricing strategies remains to be seen. Skepticism remains high that the noise on the campaign trail will amount to anything. And most industry watchers are dubious Congress will gather the political will to pass legislation – such as allowing the federal government to negotiate for drugs in the Medicare Part D program.
But some remain optimistic. “I think this is the beginning of a change,” Jamie Love, director of Knowledge Ecology International, an advocacy group that focuses on patient access and patents, told the Globe. “It’s been a long time since I’ve heard candidates talk about drug prices.”Print This Post