Martin Shkreli’s shocking Daraprim price increase is part of a prescription drug trend

Thirty-two-year-old former hedge fund manager Martin Shkreli is having a bad week.

He’s being pilloried on social media, called out for “price gouging” by presidential candidate Hillary Clinton and grilled by reporters on why his new drug company, Turing Pharmaceuticals, raised the price of a life-saving drug called Daraprim from $13.50 to $750 per pill virtually overnight.

The New York Times reported the price increase on Sunday.

By Monday, Shkreli was the new poster boy for greed – which is why locally the story might recall the case of former Kansas City pharmacist Robert Courtney, who was sent to federal prison in 2002 for dispensing diluted cancer drugs.

“Well, we needed to turn a profit on this drug,” Shkreli told a Bloomberg TV reporter to explain why he upped the cost of a 62-year-old drug used to treat toxoplasmosis, a parasitic infection that can hit people with HIV/AIDS and cancer.

Shkreli is now the face of an issue that lawmakers and federal officials have been investigating for a few years: the worrisome and rapid rise in prescription drug prices.

Federal lawmakers want to know why the cost of some drugs, specifically generics that are typically cheaper than name brand, have risen more than 1,000 percent in recent years.

Democratic presidential candidate U.S. Sen. Bernie Sanders and U.S. Rep. Elijah E. Cummings of Maryland launched an investigation into drug prices after hearing complaints from pharmacists and constituents and seeing media accounts.

Last summer they sent letters asking 14 companies that make or distribute 10 generic drugs to explain how much it costs to make the drugs compared with the prices charged for them, according to The New York Times.

“The first thing we need to understand is why these drug companies are raising their prices so dramatically in such a short period of time,” Cummings told the Times.

Ralph G. Neas, president and chief executive of the Generic Pharmaceutical Association, has said that facts about generic drug prices have been “mischaracterized” by focusing on only a handful of drugs with large price increases among thousands of “safe, affordable” generic drugs.

The scrutiny bore fruit this week when a near-overnight, 2,000 percent price spike for a tuberculosis drug called cycloserine was rescinded over the weekend, according to The Wall Street Journal.

The cost of the drug went up from about $500 for 30 pills to $10,800 after the company that makes it was bought by Rodelis Therapeutics just three weeks ago.

After an outcry, Rodelis agreed over the weekend to return the drug to its former owner, an Indiana nonprofit organization affiliated with Purdue University.

The Purdue Research Foundation asked Rodelis to give up its rights to the drug after it learned the price had been dramatically raised.

On Saturday, Rodelis announced on its website that it had relinquished the drug. The foundation plans to double the price to $1,050 for 30 capsules, which officials said would help cover the $1 million it loses every year making it.

Shkreli told Bloomberg that he knew he was going to raise the price of Daraprim when he bought the rights to it last month.

“We paid a very, very large amount to buy an unprofitable medicine,” he said. “We can’t continue to lose money on the drug at that price. So we took it to a price where we can make a comfortable profit but not any kind of ridiculous profit.”

He said that many patients use the drug for less than a year and that the new price is more in line with other drugs used to treat rare diseases.

Before the price hike, a six-week, two-pills-a-day regimen cost about $1,130.

Now, that same treatment costs $63,000.

For patients such as those with HIV who have to take the drug longer-term, the annual cost could go as high as $634,000, said a joint statement from the Infectious Diseases Society of America and the HIV Medicine Association.

Earlier this month the two groups sent a letter to Turing calling the price increase “unjustifiable for the medically vulnerable patient population” and “unsustainable for the health care system.”

Shkrel told The New York Times that the drug is so rarely used that the impact on the health system would be minor. “This isn’t the greedy drug company trying to gouge patients, it is us trying to stay in business,” he said.

“This is still one of the smallest pharmaceutical products in the world. It really doesn’t make sense to get any criticism for this.”

Add Daraprim to the growing list of drugs already being scrutinized by lawmakers and state officials. Other scenarios in their crosshairs – the effects of which often get passed on to patients – include:

▪ The price to hospitals and pharmacies for a bottle of the antibiotic doxycycline increased from $20 in October 2013 to $1,849 by April 2014, according to federal lawmakers.

▪ In the same time period, a bottle of the cholesterol-lowering drug pravastatin rose from $27 to $196.

▪ The cost of heart drugs Isuprel and Nitropress went up by 525 percent and 212 percent respectively in the hands of a new owner.

▪ The single-pill price of the cardiac drug digoxin rose to $1.10 this summer from 11 cents in 2012.

Drug prices can go up for several reasons, supply shortages for one. Companies leaving the market can cause decreased supply and less competition.

But state and federal lawmakers are investigating what they consider questionable business practices, such as companies buying older, sometimes generic, drugs and selling them as high-priced “specialty” drugs.

Some state attorneys are investigating a practice called “pay for delay” in which manufacturers pay generic drug makers to delay their entry into the market.

With words like “predatory” and “inappropriate” hurled at him over the last two days, Shkreli remains steadfast in saying that the new price for Daraprim is appropriate.

“There’s no doubt, I’m a capitalist. I'm trying to create a big drug company, a successful drug company, a profitable drug company,” he told CBS.

“We’re trying to flourish, but we’re also – our first and primary stakeholders are patients, there’s no doubt about that.”

He added that his company has created special payment-assistance programs for people who can’t afford it now, and will even donate it to some people.

But no, he told Bloomberg, he’s not lowering the price.

This story was originally published September 22, 2015 at 3:51 PM with the headline "Martin Shkreli’s shocking Daraprim price increase is part of a prescription drug trend."