Monday, April 27, 2015
The Wall Street Journal
April 26, 2015
Pharmaceutical Companies Buy Rivals' Drugs, Then Jack Up the Prices
By Jonathan D. Rockoff and Ed Silverman
On Feb. 10, Valeant Pharmaceuticals International Inc. bought the rights
to a pair of life-saving heart drugs. The same day, their list prices
rose by 525% and 212%.
Neither of the drugs, Nitropress or Isuprel, was improved as a result of
costly investment in lab work and human testing, Valeant said. Nor was
manufacture of the medicines shifted to an expensive new plant. The big
change: the drugs' ownership.
"Our duty is to our shareholders and to maximize the value" of the
products that Valeant sells, said Laurie Little, a company spokeswoman.
More pharmaceutical companies are buying drugs that they see as
undervalued, then raising the prices. It is one of a number of industry
tactics, along with companies regularly upping the prices of their own
older medicines and launching new treatments at once unheard of sums,
driving up the cost of drugs.
Since 2008, branded-drug prices have increased 127%, compared with an
11% rise in the consumer price index, according to drug-benefits manager
Express Scripts Holding Co.
Early last year, Mallinckrodt PLC paid $1.4 billion for Cadence
Pharmaceuticals, though the Ofirmev pain injections that were the crown
jewel of the deal were projected to have just $110.5 million in 2013
revenue, according to a Mallinckrodt conference call with analysts
discussing the deal. Three months later, the list price for a package of
24 Ofirmev vials jumped almost 2½ times to $1,019.52, according to
health-care data firm Truven Health Analytics.
"It seemed like highway robbery," said Erin Fox, who directs the
drug-information service at University of Utah Health Care.
The price increases can be very lucrative for companies. Horizon Pharma
PLC upped the price of Vimovo pain tablets after buying the rights from
AstraZeneca in late 2013. On Jan. 1, 2014, its first day selling Vimovo,
Horizon raised the list price for 60 tablets to $959.04, a 597%
increase. Horizon raised the price again on Jan. 1 this year to
$1,678.32 for the tablets.
After Valeant agreed to buy the drugs in early January, the company
hired a consultant to look at their prices. The consultant found the
prices didn't reflect the benefits of the drugs to patients and the
costs that hospitals save by using the medicines, the person said.
Valeant decided to raise the price. The list price of a one-milliliter
vial of Isuprel, a treatment for abnormal heart rhythms, jumped to
$1,346.62, up from $215.46, according to Truven. Meantime, a
two-milliliter vial of Nitropress, which combats dangerously high blood
pressure and acute heart failure, increased from $257.80 to $805.61.
Comment by Don McCanne
It seems that everywhere you turn these days there are articles covering
the skyrocketing prices of pharmaceuticals.
One factor used by the pharmaceutical firms to explain their price
increases is the benefit patients receive from the drugs - benefits that
the pharmaceutical firms claim are so valuable that the prices should be
much higher than their costs of doing business. When you have a superior
product, you sell it at a higher price, with the financial benefits
accruing to the owners of the firm. That's the way markets work.
This WSJ article describes an even more nefarious process of market
manipulations of drug prices. Pharmaceutical firms are buying the rights
to the products of other firms, often buying the firms themselves,
paying very high prices for these rights. There are several examples in
thus article, but an even more egregious example is the action of Gilead
Sciences in buying up the rights to the newer, more effective Hepatitis
C drugs, again paying outrageous prices for those rights. They are
recovering this capital cost by charging $1,000 or more for each pill
sold, when a course of treatment may be 84 pills.
Think about that. A massive amount of capital is paid out, requiring the
purchasing firm to charge much higher prices for those drugs to recover
the funds paid to acquire the drug rights. Who receives the capital paid
out? The wealthiest tier - the tier that holds by far the largest
percentage of shares in public and private corporations. Who is paying
higher prices to compensate for the capital purchase of the drug rights
at inflated prices? It is predominantly middle-income Americans in the
form of direct drug purchases or indirectly through insurance premiums,
taxes for public programs, or forgone wages to pay for
Thus the pharmaceutical firms are compounding the inequitable shift of
capital from the workers to the wealthy (described by Piketty, Saez and
others). This is being done through financial constructs for which Wall
Street is so infamous. As patients, we are powerless to impede this
process. It is the responsibility of government to provide the
appropriate oversight to correct these injustices. Yet what did they do?
Through the Affordable Care Act they handed more power and control over
to the insurers and the pharmaceutical firms, leaving us at their mercy,
even though mercy is not a quality found in amoral corporations.
These injustices would not be tolerated in a single payer system.
at 1:59 PM