Outraged by Spiking Drug Prices, Congress Tiptoes Around Price Controls
Squeezing Consumers

Outraged by Spiking Drug Prices, Congress Tiptoes Around Price Controls


A bipartisan Senate Aging Committee report on predatory drug pricing released on Wednesday highlights a now familiar rogue’s gallery of pharmaceutical companies --including Turing and Valeant –- that have shamelessly jacked up the prices of life-saving drugs that they exclusively control.

These companies engaged in marketing and pricing strategies worthy of the most cutthroat private equity firms, the committee found. They typically purchased decades-old, off-patent and previously affordable drugs and then abruptly raised the prices by staggering amounts. They have raked in billions in revenues at the expense of shocked consumers, insurers and government health agencies that purchase large quantities of drugs.

Related: Want to Pay Less than Half for Your Meds? Join the Throngs and Try Canada

By now it’s an old story: Turing, once headed by bad-boy hedge fund businessman Martin Shkreli, raised the price of Darprim, used in treating a dangerous parasitic infection, by 5,000 percent – from $13.50 a pill to $750 per pill. Valeant, meanwhile, spiked the prices of two off-patent drugs, Cuprimine and Syprine, used to treat a rare genetic disease, from about $500 to about $24,000 for a 30-day supply.

Retrophine Inc. and Rodelis Therapeutics, the two other drug companies that came under the Senate committee’s scrutiny during a year-long investigation, engaged in similar practices and drove up the prices of some of their drugs by 2,000 percent or more. 

Each of the companies acquired a sole-sourced “gold standard” drug for which there is a small but desperate market. In most cases, the companies did nothing to improve on the drug or invest in further development. They also created a “closed distribution system” to block competition, while they jacked up their prices, according to the report on drug pricing

In some instances, investors actively encouraged company executives to pursue this hard-nosed strategy despite the unwelcome attention it received from the media, politicians and even federal investigators. And some of the companies were headed by senior managers “hailing from the hedge fund world” who lacked experience in the drug industry, the report said.

Related: Prescription Drug Prices Headed for Double-Digit Increases in 2017

"The skyrocketing prices of prescription drugs affect every American family, particularly our seniors," Collins said in a statement. “We must work to stop the bad actors who are driving up the prices of drugs that they did nothing to develop at the expense of patients just because, as one executive essentially said, ‘because I can.’"

Sen. Claire McCaskill of Missouri, the ranking Democrat on the committee, said the business model of many drug companies are predatory and “immoral” for the patients and taxpayers who ultimately foot the bill. This is especially galling, she said, because generic drug substitutes can be made for pennies per dose. 

“We've got to find ways to increase competition for medicines and ensure that patients and their families aren't being gouged,” she said. 

Drug Prices - Canada v. US

Drug price gouging and other predatory practices have triggered angry calls for congressional action from consumer advocates, insurers, politicians and others staggering under the weight of mounting health care costs. High-cost specialty drug prices are projected to increase 18.7 percent next year, after growing 18.9 percent in 2016, according to HR Consultancy Segal. At the same time, the overall cost of all drugs prescribed for employees under age 65 is expected to grow 11.6 percent next year, on top of an 11.3 percent hike this year.

Slideshow: The 10 Most Frequently Prescribed Drugs in America 

During the campaign, Republican President-elect Donald Trump and Democratic nominee Hillary Clinton repeatedly raised the issue of soaring drug prices and outlined possible solutions.

Trump told Time magazine recently after being chosen the “Person of the Year,” “I’m going to bring down drug prices. I don’t like what’s happened with drug prices.”

But the nagging question is what can be done in a practical way to halt the unscrupulous drug pricing practices of the industry? And here, the Senate committee sidestepped the most obvious answer: government controls.

Canada, which boasts some of the lowest drug prices in the world, pioneered federal and provincial level measures for containing drug prices, including a national drug formulary to set prices and the creation of a semi-judicial body that controls factory-gate prices. Governments across the globe impose tough limitations on drug prices, and multi-national pharmaceutical companies have learned to live with them and still thrive economically. 

“The problem with the Senate report is that the issue is so complicated that there are no simple solutions,” Joseph Antos, a health care expert with the conservative-leaning American Enterprise Institute, said in an interview today. “If they wanted to say they did something, then this idea of essentially imposing price controls would certainly be popular with Democrats and some Republicans, especially in this space of older drugs that have a limited market.” 

Related: Trump Jolts the Pharmaceutical Industry with Vow to ‘Bring Down Drug Prices’ 

“The risk there is that if you do that, then maybe the company that has a monopoly on that drug might say, ‘Well, it’s not worth it anymore,’” Antos added. “And then, how do you get somebody else to go in?”

Instead of risking a head-on confrontation with Big PhRMA by calling for government price controls, Collins, McCaskill and other senators have urged a more back door approach. It is one that would help shake up and revitalize the market so that generic drug manufacturers would be more inclined to compete with producers of brand-name drugs. 

The report provides a laundry list of ideas for spurring competition and putting heat on unscrupulous drug manufacturers like Turing and Valeant.

One approach, which already has been blessed by Trump and Sen. Bernie Sanders (I-VT), is to remove legal barriers to the re-importation of certain drugs to this country from Canada and overseas, in order to put competitive pressure on U.S. manufacturers that currently have a lock on certain drugs. Millions of Americans have for years quietly purchased drugs from Canada and overseas to save money, and this proposal would make it legal in many cases.

Related: How Big Pharma Lobbyists Keep Medicare Drug Prices High

However, there would be numerous safety issues to deal with, including whether the government can sanction the sale of drugs in this country that have not been approved by the Food and Drug Administration (FDA). And Trump and his campaign staff have not provided further details on the extent of their support for this idea.

“The Committee believes the temporary importation may be a viable short-term solution to combat sudden price spikes,” the report states, “but notes that while this approach is favored by a number of academic professionals, many caution that are must be taken in structuring such a regime to avoid unintended consequences.”

The committee also recommended ways to speed up FDA approval of generic alternatives to high-priced brand drugs, including limiting the review process to five months and requiring manufacturers of newly introduced brand drugs to share samples of their drugs with potential rivals. That would enable generic manufactures to conduct tests on the samples to prove that their drugs are as effective as the brand name drug.

Related: Two Big Reasons Prescription Drug Prices Are So Much Higher in the US

Finally, the committee report takes a swipe at “patient assistance programs” offered by major drug companies to help low-income consumers pay for their drugs. While on the face of it, drug companies appear altruistic in offering generous rebates and discounts, these activities are self-serving because they “subsidize the purchase of their own products” and frequently steer patients towards exceedingly expensive drugs.