Senators Criticize Generic Drug Price Hikes

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By Nathaniel Weixel

Dec. 9 — A bipartisan Senate panel Dec. 9 criticized massive price spikes on generic drugs, as experts said the pricing schemes hurt patients and the supply of drugs in the U.S.

Following the hearing, Sen. Susan Collins (R-Maine), who is leading the Senate Special Committee on Aging investigation, told reporters she thinks the Food and Drug Administration can play a role in fixing the pricing issue. Collins said she would like to include proposals related to how the FDA approves generic drugs that are in competition with monopoly drugs as part of a larger FDA reform bill in the Senate Health, Education, Labor and Pensions Committee next year.

“There’s clearly a role for FDA here, and that role is probably going to require legislative changes,” Collins said.

During the hearing, which addressed the pricing of off-patent generic drugs, Collins said there's a balance between legitimate innovation and pure profit-seeking. However, “that balance we have struck never anticipated companies acquiring off-patent drugs and then jacking up their prices to enormous heights,” she said.

Regulators have been scrutinizing the cost of prescription drugs recently after drug and biotechnology companies have developed treatments for diseases like hepatitis C and cancer that can cost tens of thousands of dollars.

More Hearings

The hearing was the first in what Collins anticipates is a series, which will review recent price increases in off-patent drugs that have been recently acquired by Valeant Pharmaceuticals, Turing Pharmaceuticals, Retrophin Inc. and Rodelis Therapeutics. 

The panel also plans to look into the FDA's process for approving new generic drugs, as well as the recent spate of pharmaceutical mergers and acquisitions.

Executives from the four generic drug companies weren't called to testify, but Collins and Sen. Claire McCaskill (D-Mo.), the committee's ranking Democrat, had previously asked the companies for pricing data.

Collins said she plans to call the executives to testify at a future hearing.

“It’s imperative that we find out if that system is being taken advantage of by companies or individuals that seek deep profits while contributing little or nothing to advances in medical treatment,” McCaskill said during the hearing. “To me, there’s a line at which these huge price increases on prescription drugs go from rewarding innovation to price gouging.”

After the hearing, Collins said the investigation isn't a partisan issue. “I think these price increases on monopoly drugs, acquired by companies that did not develop the drugs, so are not recovering their R&D, is an issue that stretches across party lines.”

Massive Price Increases 

Erin R. Fox, director, drug information service at the University of Utah, told lawmakers it's “impossible” for a medical center to predict double-digit or triple-digit price increases in off-patent medicines.

“We have a system of contract manufacturing in the United States, where one company makes a product or a medicine and one company just puts their sticker on it and that's exactly what we have going on with those two products, Isuprel and Nitropress,” Fox said.

Valeant increased the price of a recently purchased cardiac arrest drug (Isuprel) by 820 percent, and increased the price of another recently purchased cardiac arrest drug (Nitropress) by 625 percent on the same day it purchased the drug.

“Isuprel and Nitropress are not manufactured by Valeant. Valeant is not reinvesting in a factory. They are not spending that money to have a high quality manufacturing system. They are simply putting their sticker on somebody else's manufactured item,” Fox said.

Companies Respond

Another drug subject to pricing scrutiny is Daraprim, from Turing. In a statement e-mailed to Bloomberg BNA Dec. 9, Nancy Retzlaff, chief commercial officer of Turing Pharmaceuticals, said the company is committed to patient access “and to developing our pipeline of innovative therapies for rare and neglected diseases. We pledge that no patient will be denied access to Daraprim and currently more than 60 percent of Daraprim is provided to patients at $1 per prescription or less and our assistance programs ensure that the vast majority of others are able to get it at a low out-of-pocket cost.”

Daraprim treats an infection called toxoplasmosis. Turing acquired the rights to the decades-old medicine in August and immediately raised the price to $750 a pill, from $13.50, and implemented a closed distribution system.

Valeant in a Dec. 9 statement also defended the costs of Nitropress and Isuprel. “Because these drugs are typically administered in hospital settings, patients generally do not pay for them directly. Instead, hospitals are reimbursed by insurance carriers based on fixed bundled rates for the overall procedures in which the drugs are used,” the company said. “Because most hospitals use a small amount, if any, of these drugs, Valeant’s increase in the list price has had a limited impact on the average hospital’s cost.”


The main solution to the problem of pricing, witnesses said, is to introduce competition to the market.

One way to do so would be for the FDA to establish a priority review process for generic drugs when there is little price competition for that generic drug. The process would be similar to the process the FDA offers to brand name drug companies, Gerard Anderson, director of the Center for Hospital Finance and Management at the Johns Hopkins Bloomberg School of Public Health, said.

Anderson also suggested forcing drug companies to disclose how much they sell their drugs for after discounts and rebates, and to allow payers like Medicaid to set their payments based on the figure. He said lawmakers should also consider restricting mergers of companies that make generic drugs.

Mark Merritt, president and chief executive officer of the Pharmaceutical Care Management Association, said the companies he represents, pharmaceutical benefit managers, play an important role by negotiating rebates from manufacturers. One PBM, Express Scripts, said earlier this month it will partner with Imprimis Pharmaceuticals to provide a $1 alternative to Daraprim.

VA Pricing 

The Department of Veterans Affairs, which is allowed to negotiate prices and establish a formulary, already provides access to Daraprim through a Federal Supply Schedule contract with Turing Pharmaceuticals for $7.13 per pill.

When questioned by Bloomberg BNA how the VA could negotiate such a low price compared with other PBMs, a representative of the agency said Dec. 9 that they leaned on “past procurement history and buying power to seek most favored pricing terms.” When asked by Bloomberg BNA why other PBMs are unable to obtain similar prices, the PCMA had no response.

Medicare Part D plans depend on PBMs to negotiate prices because Medicare is prohibited from negotiating prices.

—With assistance from Llewellyn Hinkes-Jones

To contact the reporter on this story: Nathaniel Weixel in Washington at

To contact the editor responsible for this story: Brian Broderick at

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