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Can Anything Be Done About Prescription Drug Costs?

The ever-rising cost of prescription drugs is a cause of great concern in the United States.

The ever-rising cost of prescription drugs is a cause of great concern in the United States.

Pharmaceutical companies, already under fire for unexplained — and possibly unexplainable — increases in the prices of the drugs they produce, came under even greater scrutiny this fall when the price of a 62-year-old drug jumped 5,000 percent overnight.

Giving Big Pharma the very kind of bad publicity it seeks to avoid was Martin Shkreli, a hedge fund manager who is also the founder and CEO of New York-based Turing Pharmaceuticals AG, which was founded in February 2015. In August 2015, Turing acquired the marketing rights to Daraprim, the only FDA-approved medication for the treatment of toxoplasmosis, a parasitic infection that targets AIDS patients, among others.

Daraprim Price Jacked Up

A bit more than a month after Turing acquired the marketing rights to Daraprim, Shkreli announced that the drug’s price would be increased from $13.50 to $750 a pill, setting off a storm of protest about predatory pricing policies in the drug industry. At the eye of the storm, not surprisingly, were Shkreli and Turing.

The shocking Daraprim price hike, coupled with the steady uptrend in prescription drug prices overall, raises questions about what, if anything, can be done to keep desperately needed medications available at prices affordable to average Americans.

Setting aside for a moment the very sensational Daraprim price hike, it should be noted that U.S. spending for prescription drugs rose a whopping 13 percent in 2014, according to data provided by IMS Health Holdings Inc. Total spending on prescription medications hit $374 billion. Helping to fuel the sharpest percentage increase in drug prices since 2001 were new drug therapies for hepatitis C, cancer, and multiple sclerosis.

Democrats Offer Solutions

Among the first to seize upon runaway prescription drug prices as fodder for their campaigns were the two leading candidates for the Democratic presidential nomination.

Even before the Daraprim price hike, presidential candidate Bernie Sanders, a U.S. senator from Vermont, vowed to introduce legislation that would counter the steep rise in drug prices. Sanders said, “People should not have to go without the medication they need just because their elected officials aren’t willing to challenge the drug and health care industry lobby.” He pointed out that in 2014 the pharmaceutical industry spent $230 million lobbying Congress, roughly $65 million more than the lobbying tab of any other industry.

Setting off the latest storm of protest over soaring drug prices was hedge fund manager Martin Shkreli, who is also the co-founder and CEO of Turing Pharmaceuticals AG.

Setting off the latest storm of protest over soaring drug prices was hedge fund manager Martin Shkreli, who is also the co-founder and CEO of Turing Pharmaceuticals AG.

Sanders’ Proposals

Among other measures, Sanders proposed that the federal government lower barriers to the importation of lower-cost drugs from abroad and prohibit some of Big Pharma’s behind-the-scenes horse-trading that keeps cheaper generics off the market.

Sen. Sanders also called upon Congress to authorize the Department of Health and Human Services to negotiate with pharmaceutical companies to lower the costs of prescription medications provided under Medicare drug benefits. “We should use our buying power to get better deals for the American people,” he said. “Other countries do it. Why don’t we?”

Clinton Seeks Cap on Drug Expenses

In the immediate wake of the Daraprim price hike, Democratic presidential candidate Hillary Clinton called for imposition of a $250 monthly cap on out-of-pocket drug expenses. Such a cap would ensure that no American would have to pay more than $3,000 annually out of pocket to obtain the drugs that he or she needs to stay healthy.

Undoubtedly targeting Turing’s price hike on Daraprim, Clinton said, “It has gotten to the point where people are being asked to pay not just hundreds but thousands of dollars for a single pill. That is not the way the market is supposed to work. That is bad actors making a fortune off of people’s misfortune.”

Predictably less outspoken about prescription drug prices were the Republican candidates for president. The GOP generally opposes interference with the drug industry, preferring to let market forces sort out pricing and other industry issues. However, the Turing price move didn’t escape the attention of GOP candidate Donald Trump, who called Shkreli “a spoiled brat,” adding that he thought the price move was “disgusting.”

Turing Backs Down

Bowing to the outrage over Turing’s Daraprim price hike, CEO Shkreli vowed to roll back the increase, although a full two weeks after that pledge, Daraprim’s price tag remained at $750 a pill. Taking him at his word, it is hoped that Daraprim’s price will soon return to earlier levels.

U.S. spending for prescription drugs rose 13 percent in 2014, the largest percentage increase since 2001.

U.S. spending for prescription drugs rose 13 percent in 2014, the largest percentage increase since 2001.

All the outcry over soaring drug prices didn’t escape the attention of state and federal prosecutors who in October launched investigations into the pricing strategies of both Turing and Canadian-based Valeant Pharmaceuticals. The latter came under the scrutiny of prosecutors after sharp 2015 price hikes on two of its brand-name drugs. In February 2015, Valeant raised the price of a vial of Isuprel — used to treat cardiac arrest — from $215 to $1,346. That same month, Valeant also hiked the price of Nitropress — a blood pressure drug — from $257 to $805 per vial.

Valeant was the target of federal prosecutors who sent the drugmaker two subpoenas seeking information on the company’s distribution, pricing, and patient support practices. The company said it was studying the subpoenas and intended to cooperate with federal investigators.

NY State Probe into Turing

The New York State Attorney General’s office launched a probe into Turing, focused not so much on its pricing practices but on possible antitrust violations that discourage competitors from selling generic versions of Turing drugs. In its letter to Turing, the office’s antitrust bureau chief wrote that “while competition might ordinarily be expected to deter such a massive price increase, it appears that Turing may have taken steps to prevent that competition from arising.”

In an Economic Intelligence column posted at the website of U.S. News & World Report, David Brodwin, co-founder and board member of the American Sustainable Business Council, says global competition may offer a solution to the problem of soaring drug prices. Looking specifically at the Daraprim case, Brodwin points out that generic pyrimethamine, the active ingredient in Daraprim, is available in overseas markets for as little as two cents a pill in Brazil, 10 cents in India, and 66 cents in the United Kingdom.

Import Controls Suggested

Anticipating Big Pharma arguments that allowing the import of these drugs from abroad would bring on a flood of counterfeits, Brodwin proposes restricting imports to proven manufacturers in countries that maintain strong licensing and inspection programs. He also suggests closing down all distribution channels that don’t have batch controls strong enough to keep out counterfeit products.

“If limiting imports to proven companies, countries, and channels isn’t safe enough,” write Brodwin, “we can always inspect. A small tax on imported drugs could support a squad of inspectors without burdening the general taxpaying public.”

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Photo credits: Seth Anderson, teddy winslow, Chris Potter

Don Amerman is a freelance author who writes extensively about a wide array of nutrition and health-related topics.

Don Amerman has spent more than three decades in the business of writing and editing. During the last 15 years, his focus has been on freelance writing. For almost all of his writing, He has done all of his own research, both online and off, including telephone and face-to-face interviews where possible. Don Amerman on Google+