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Biotech Company Marks Up Drug Cost by 5,000 Percent, Because It Can

Politicians have plenty of ideas to rein in the ever-growing cost of prescription drugs, but for now, the law still favors biotech companies.
Martin Shkreli. (Photo: Martin Shkreli/Twitter)

Martin Shkreli. (Photo: Martin Shkreli/Twitter)

Drug prices are totally arbitrary. Case in point: The start-up Turing Pharmaceuticals, which, in August, bought the rights to a 62-year-old antiparasitic drug and immediately increased the price by 5,000 percent. The drug, called Daraprim, retailed for $13.50 a pill until Turing got hold of it. Now each pill costs $750, USA Today reported last week. The company's CEO, Martin Shkreli, defended the price hike on Bloomberg Markets, arguing that "we needed to turn a profit on the drug,"—which costs only around $1 to make. "You only need less than 100 pills, so at the end of the day the price per course of treatment—to save your life—was only $1,000," he said. (Now it could cost you as much as $634,500 for a full course of treatment.) Outrage ensued among infectious disease specialists and the general public. Shkreli responded to the backlash on Twitter—with Eminem lyrics. Shkreli is currently fighting a $65 million lawsuit brought against him by Retrophin, another company he founded, and has also been accused of harassing a former employee and his family members. With CEOs like Shkreli, legislative change may be necessary to keep drug companies from prioritizing profits over patients.

This is hardly the first time price hikes for old drugs have made headlines. In 2011, the Food and Drug Administration approved a drug called Makena, made by KV Pharmaceutical Company, used to prevent premature birth. Unbranded versions of the medication had been around for decades, available to expecting mothers for around $10 a dose. Upon purchaseKV Pharmaceuticals planned to sell each dose of Makena for $1,500. Given the 20-dose regimen for high-risk pregnancies (and thus a potential $30,000 bill), the backlash was swift and absolute. In response, the FDA allowed compounding pharmacies to continue selling unbranded versions of the drug, despite the fact that by their own regulatory standards, pharmacists typically must cease making drugs for which there are FDA-approved versions available from manufacturers. KV cut the cost of Makena down to $690, and sued the FDA to try to force the agency to go after their competitors, the compounding pharmacies. KV lost, but in the end, a meningitis outbreak traced back to the compounders may have rescued the financially troubled pharmaceutical company, the Wall Street Journal reported in 2013, by finally boosting sales of the FDA-approved drug.

More than 70 percent of Americans found the price of prescription drugs to be unreasonable.

Now, some good news: According to a 2015 survey from the Kaiser Family Foundation, there is broad, cross-party support among Americans for the government to rein in the skyrocketing costs of prescription drugs. While only 54 percent of Americans reported currently taking a prescription medication, more than 70 percent found the price of prescription drugs to be unreasonable. Further, 86 percent supported legislation to require pharmaceutical companies to disclose how they settle on drug prices, and at least 72 percent support laws that allow consumers to fill prescriptions at pharmacies in Canada.

But public outrage can only go so far. More recently, the price of a tuberculosis drug called Cycloserine jumped up 2,000 percent after the rights to the pharmaceutical were purchased by Rodelis Therapeutics, from $15 a pill up to $360. Following public backlash, the price dropped back down to $35 per pill—still more than double what it was originally.

That's why political change is probably the best route for bringing down prices. The Obama Administration has attempted to lower the swelling costs of brand name meds with a proposal to allow Medicare to negotiate with drug companies on the price of "high-cost drugs" and biologics, Jason Millman reported earlier this year for the Washington Post. But unfortunately for Obama, the Medicare Prescription Drug, Improvement, and Modernization Act has barred the federal government from bargaining with drug manufacturers since it was signed into law in 2003, and the administration's proposal has made little progress on the road toward reversing that policy.

On Monday, Hillary Clinton took to Twitter to rail against high drug prices, promising to deliver a plan to reduce "runaway" costs. (After her tweet, biotech stocks fell.)

Earlier today, Clinton revealed a plan in Des Moines, Iowa, to cap out-of-pocket costs for patients taking specialty drugs at just $250 a month, Reuters reports. And by preventing drug companies from writing off the money they spend marketing their products, the government could get back billions in tax revenue, Clinton said at the campaign event. In addition, she has previously expressed support for various measures to reduce drug costs, including allowing Americans to fill their prescriptions abroad, shortening the monopoly marketing periods that drug manufacturers currently enjoy, and requiring companies that benefit from federal spending on basic research to re-invest a certain amount of revenue in research and development. Clinton's campaign estimates that allowing Medicare to negotiate with drug companies could save an estimated $100 billion, according to Politico.

Vermont senator and presidential hopeful Bernie Sanders has voiced his intention to allow the Department of Health and Human Services to bargain with drug companies on prices, implement harsher punishments for companies that commit fraud, and block pharmaceutical companies from paying competitors to keep generic versions of drugs off the market. Massachusetts, Pennsylvania, New York, and North Carolina are all considering laws that would allow state officials to put price caps on the most expensive meds on the market.

But in the end, proposed legislation is meaningless to the consumers struggling to pay for their medications until it is signed into law.