Over the past few days, social media has erupted in uncommon outrage (even by Internet standards) over Turing Pharma's decision to hike the price of a 62-year-old toxoplasmosis drug (used mostly by HIV/AIDS and cancer patients), Daraprim, by 5,000%. Turing CEO Martin Shkreli has since backtracked on that decision following massive public outcry, although he has yet to announce what the drug's new, lower price will be.
But the issue won't be leaving the media and political spotlight anytime soon. The extreme nature of the initial price hike, combined with the specific circumstances of Daraprim's therapeutic value, chronically sick target population, and age—not to mention Shkreli's often bombastic style of responding to criticism—have turned this into a bona fide viral scandal for biopharma. It's invited the wrath of politicians such as Democratic presidential candidates Hillary Clinton and Sen. Bernie Sanders (I-VT), both of whom condemned the hike as "price-gouging." Clinton even released a plan on Tuesday aimed at curbing high drug prices that includes rolling back patent exclusivity for medications and calling for direct price negotiations with Medicare.
The political outrage isn't exactly surprising. Big corporate interests in the healthcare industry have long been piñatas for Democrats, and the strikingly populist, anti-establishment tone of the ongoing 2016 presidential election cycle (on both sides of the aisle) has sown fertile ground for anti-pharma sentiments.
But what's more concerning for the industry, at least from a public relations standpoint, is that Shkreli is inadvertently shining a 1,000-megawatt spotlight on a practice that hasn't exactly been uncommon in biopharma. And now that the conversation over that practice has entered the public, political consciousness, many companies—including those with reasonable explanations for their own price hikes—may find themselves on the defensive and in need of an easily communicable justification for their actions.
This isn't to say that Shkreli is a representative ambassador for the biotech or pharmaceutical industries (after all, how many CEOs in the space call respected journalists morons and tweet out Eminem songs as a way of explaining their actions?). Many biopharma CEOs have already rushed to distance themselves from the likes of Shkreli and Turing, one even going so far as to call the 32-year-old former hedge fund manager the "Donald Trump of drug development." The biggest trade groups representing the sector's interests, BIO and PhRMA, have also released statements on the matter that range from cautiously neutral with a generally disapproving tone (BIO) to outright condemnation (PhRMA).
But the fact remains that in recent years, the prices of many common biopharmaceutical products, generics and branded alike, have seen steep rises.
For instance, there's the matter of massive recent hikes in the prices of generic drugs and drugs acquired from other companies. This tactic had already caught the eye of media outlets and the ire of lawmakers before the Shkreli debacle—not to mention attention from the federal government.
A Wall Street Journal piece bluntly titled, "Pharmaceutical Companies Buy Rivals’ Drugs, Then Jack Up the Prices" delineated some of these recent price increases by companies like Valeant, which snapped up the heart drugs Nitropress and Isuprel before raising their prices by 525% and 212%, respectively.
With generic drugs, recent price hikes could potentially lead to a Justice Department lawsuit if evidence of collusion emerges. Last fall, the U.S. DOJ issued subpeonas to two major generic drug makers, Lannett and Impax Labs, as part of an investigation into a potential antitrust scheme by such companies.
It isn't hard to see why enforcement entities are paying attention to generics prices. In 2014, half of all generic medications saw their prices hiked with 1 in 11 seeing their prices more than double, according to an analysis by Pembroke Consulting. Some of these meds, such as the common albuterol sulfate, increased 40-fold in cost; others have risen by a staggering 17,000% (although it should also be noted that some major meds, such as Lipitor, have actually gotten cheaper). All told, 14 generic drug makers were asked to provide data on what justified these price jumps by members of Congress.
As mentioned above, the generic hikes are not uniform throughout therapeutic categories. Express Scripts, the pharmacy benefits giant that's been a perennial gadfly for the industry, addresses recent generic cost increases in its latest drug trends report in more detail:
"The wave of billions of dollars’ worth of brand blockbuster medications losing patent protection in the past few years has led to unprecedented availability of generic drugs, while the resulting competition among manufacturers and suppliers of new generic medications drove down drug costs substantially in most of the top therapy classes.
"But, the pace of price reductions has begun to slow: generic prices for the most commonly used drugs decreased 20% from 2013 to 2014, compared to the 30% drop seen from 2012 to 2013. And some generic drugs, for example, doxycycline and oxycodone, available generically for many years, experienced considerable price increases in 2014."
It's not just generic manufacturers raising drug prices. In fact, a Bloomberg piece from earlier this year contends that there seems to be a "shadow market" for certain medications in the diabetes field (there are no insulin generics available on the market) and huge price increases for other older, branded medications. For instance, Novo Nordisk's insulin product Levemir has been rising in price in striking confluence with Sanofi's flagship Lantus:
The same Bloomberg piece reported that 27 branded drugs showed "price gains of at least 20 percent in typical dosages since the first quarter of 2014," and that over the past five years, "prices of dozens of drugs doubled or more while the Consumer Price Index rose only 9 percent." These include ADHD, epilepsy, stroke, allergy, and blood pressure medications from companies like Daiichi Sankyo, Pfizer, Boehringer Ingelheim, Eli Lilly, and others.
All told, there seems to be a perfect storm of major biopharma companies pricing new (and exciting) drugs at exorbitant rates; hiking the prices of generic drugs by unprecedented amounts; and branded manufacturers pursuing major increases for older drugs, sometimes in lockstep. Combined, these moves—accompanied by the human siren that is Shkreli—are making the industry an easy target for a coalition of critics that includes politicians, patient advocates, payers (public and private alike), and physicians.
The industry often defends high drug prices—including the controversial practice of acquiring older drugs and hiking their prices—by citing the importance of providing shareholders with value and funding major R&D initiatives which will lead to more advanced drugs that will, in the end, serve the interests of all stakeholders, including patients. Many also cite the need to remain competitive, and argue that list prices aren't a fair barometer of pharmaceutical value since they do not take payer discounts into consideration.
Those may all be fair points. Unfortunately, they may not be enough for critics in the media and the public in a post-Shkreli, pre-2016 election environment—especially as insurance deductibles and out-of-pocket costs skyrocket even as premiums remain relatively flat.
Even before the Daraprim news broke, patient surveys had suggested that consumers aren't particularly sympathetic to biopharma's arguments for the need for high drug costs. For instance, the group PatientView recently surveyed 76 patient groups around the world, including in the U.S., and found that the corporate reputation of pharmaceuticals was downright abysmal.
The reason? "Everything seems to come down to pricing," said Dr. Alex Wyke, CEO of PatientView, in an interview with BioPharma Dive.
"Patient groups don’t care how much companies spend on R&D," she added. "They only want results. So the argument of high redundancy in R&D as a driver of price increases falls on deaf ears among consumers and patients. I suspect their view is, Why should failure be rewarded?"
There's always bound to be controversy surrounding drug prices. After all, access to these products often boils down to a matter of life and death, which makes medication costs both an emotional and financial issue.
But so far, there's evidence that the industry's explanations and justifications for its prices have been falling on deaf ears and being met with skepticism by a powerful coalition of players. And now that politicians and the media have seized on Shkreli as an entry point into taking on the industry's pricing practices at large, biopharma companies are going to have to find a good way to explain themselves and communicate value.
