Cummings Releases Memos on Valeant, Turing Drug Prices

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By Bronwyn Mixter

Feb. 2 — Rep. Elijah E. Cummings (D-Md.), ranking member of the House Committee on Oversight and Government Reform, Feb. 2 sent two supplemental memos to Democratic committee members in preparation for a hearing he requested on skyrocketing prescription drug prices this Thursday.

The memos summarize findings from more than 300,000 pages of new documents obtained from Turing Pharmaceuticals and Valeant Pharmaceuticals, including e-mails to and from company executives, including CEOs Martin Shkreli and J. Michael Pearson; corporate projections and analyses on revenues and profits; communications with angry hospital officials and other health-care providers; and various public relations strategy documents.

“These new documents provide a rare, inside look at the motivations and tactics of drug company executives,” Cummings said. “They confirm what Americans across the country have experienced firsthand for years—that many drug companies are lining their pockets at the expense of some of the most vulnerable families in our nation. The documents show that these tactics are not limited to a few ‘bad apples,’ but are prominent throughout the industry.”

The House Oversight and Government Reform Committee plans to hold the Feb. 4 hearing to examine drug pricing. The committee has said it will tackle three areas during the hearing: methods and reasoning behind recent drug price increases; the role of pharmacy benefit managers in negotiating drug prices, as well as concerns about a lack of transparency in their contracts; and impediments to timely review and approval of cheaper generic drugs and how the government can improve efficiency.

Turing Memo

The memo on Turing Pharmaceuticals said that before the drug Daraprim was acquired by Turing, it “was affordable, readily available, and very effective at treating toxoplasmosis in people with HIV/AIDS, cancer, and other conditions that cause compromised immune systems.” Toxoplasmosis is a parasitic infection.

Turing purchased Daraprim in 2015 and increased the price from $13.50 to $750 per tablet. Shkreli was the chief executive officer of Turing at the time the drug was purchased.

The memo said that as a direct result of Shkreli's actions, “Daraprim has now become prohibitively expensive, hospital budgets are straining under the huge cost increases, patients are being forced to pay thousands of dollars in co-pays and are experiencing major challenges in obtaining access to the drug, and physicians are considering using alternative therapies.”

While Shkreli spent no money on developing Daraprim, “he purchased it for the purpose of increasing the price dramatically and making hundreds of millions of dollars by exploiting its existing monopoly before any competitors could enter the market, which Mr. Shkreli expected would not occur for a number of years,” the memo said. In response to objections to the price increase, Shkreli didn't “decrease the price of Daraprim as he promised, but employed a public relations strategy used by other drug companies to distract public attention away from price increases and focus instead on patient assistance programs and research and development efforts.”

Turing's Response

Turing said in a Feb. 2 statement provided to Bloomberg BNA that it is “committed to ensuring that no patient will ever be denied access to Daraprim because of cost and to investing net profits in groundbreaking research.”

“Daraprim has been on the market for more than 60 years; to date, no other company has had the incentive to invest in new, improved treatments,” the company said. “The revenues generated from the price increase fund both research and development and patient access programs. All of Turing’s net profit and 60 percent of net revenues is reinvested in research and development—a percentage far higher than most pharmaceutical companies.”

Turing said its current research projects include potential new therapies for the treatment of toxoplasmosis.

“The WAC [wholesale acquisition cost] or wholesale list price does not reflect the actual price paid by patients, hospitals, health plans or government programs,” Turing said. “The factors Turing considered in developing its wholesale list price were: the life-saving value of the medication, the very small patient population (approximately 3000), mandatory statutory rebates (for example, those for Medicaid) and the need for innovation.”

Turing said it funds a patient assistance program “that offers Daraprim free of charge to patients with incomes at or below 500 percent of the poverty level, provides co-pay support to insured patients, funds a bridge program to offer a supply of Daraprim to commercially insured patients at no charge during delays in coverage and contributes to an independent charity that provides patients financial support to cover the cost of treatment.”

“Given all of these factors, net profits fall far below projections based on the WAC price,” Turing said.

Turing is based in New York.

Valeant Investigation

Like Turing, Valeant also raised the price of older drugs. The company tripled the cost for the heart treatment Nitropress and raised the price of another heart drug, Isuprel, by 525 percent.

“The documents obtained by the committee demonstrate that Valeant identified goals for revenues first, and then set drug prices to reach those goals,” the memo on Valeant said. “Valeant employed this strategy for both Isuprel and Nitropress, generating gross revenues of more than $547 million and profits of approximately $351 million in 2015 alone.”

The memo said Valeant also used its patient assistance programs “to justify raising prices and to generate increased revenues by driving patients into closed distribution systems.”

Valeant's Response

Valeant said in a statement provided to Bloomberg BNA Feb. 2 that before it purchased Nitropress and Isuprel, “it commissioned outside consultants to review the drug's pricing.”

“Those consultants concluded that, given the significant reimbursements hospitals received under bundled rates for procedures, the prices of both drugs did not reflect their true value to hospitals and patients,” Valeant said “We try to set our prices at the appropriate levels, but we also listen to the market. In this case, we’ve heard from hospitals, as well as from Congress, that we set the price for these two drugs too high, and we’ve responded by offering volume-based discounts of up to 30 percent for each of them.”

The company also said it is making overall changes in how it runs its business and “going forward, we expect our growth to be driven more by volume than by price.”

Valeant said that under its recent partnership with Walgreens, it will be offering 10 percent price reductions on some of its most popular drugs and up to 95 percent reductions for a large number of its branded drugs.

“When we set the price of any one drug, we do it in the overall context of our portfolio of approximately 1,800 products, including more than 200 prescription drugs in the United States, and the need to fund our robust company-wide research and development programs, our expanding U.S. manufacturing base, and our patient assistance programs,” Valeant said. “In 2016, we expect to invest approximately $400 million on R&D, $484 million in expanding manufacturing in Rochester, N.Y., and $1 billion in our patient assistance programs that seek to ensure that out-of-pocket expenses do not prevent eligible patients from receiving medicines they need.”

Valeant is based in Canada.

To contact the reporter on this story: Bronwyn Mixter in Washington at bmixter@bna.com

To contact the editor responsible for this story: Nancy Simmons at nsimmons@bna.com

For More Information

The memo on Turing documents is at http://src.bna.com/cmt and the memo on Valeant documents is at http://src.bna.com/cmu.