Last month, Turing Pharmaceuticals CEO Martin Shkreli sparked outrage in the HIV community -- and beyond -- by hiking the price of a generic drug used to treat an opportunistic infection by more than 5,500 percent to $750 a pill. Daraprim was approved by the FDA more than 60 years ago to treat toxoplasmosis, a common parasitic infection that can cause severe symptoms in people with HIV or otherwise suppressed immune systems, but was only acquired by Turing in August. Although the price increase was legal, the outcry was loud and Turning's CEO agreed to lower the price. The debate has escalated to Democratic presidential candidate Hillary Clinton, who has asked the FDA to investigate.
While the Daraprim example does not fully represent the story of why so many HIV and hepatitis C drugs carry such high price tags, the case brings up complicated, and controversial, questions of how drugs are priced. Why do Americans and their insurers pay more for some drugs and less for others? And who decides what a fair price for a drug should be, and how can manufacturers and health plans be compelled to improve access and affordability?
To unwrap some of these issues, BETA asked two experts for input: Courtney Mulhern-Pearson, director of state and local affairs for San Francisco AIDS Foundation, and David Evans, a member of the HIV and hepatitis C drug advocacy group Fair Pricing Coalition.
I'd like to hear your thoughts about the purchase and price hike of Daraprim. Is it common practice for companies to hike the cost of a drug so dramatically?
Courtney: Although this has happened before, I wouldn't say it's common practice for a company to acquire then dramatically raise the price of a generic drug. But, it does help spur this conversation about the cost of HIV and hepatitis C medications. HIV medications have been costly for a long time, but the costs now are getting so astronomical that the issue is really getting more attention. It's just not the full story.
David: I agree. While this isn't the first time a company bought a generic drug, became the exclusive provider of it, and jacked up its price by tens or hundreds of percent, this instance really struck a chord. I think it was because the CEO was so brazenly unapologetic and not at all deferential. He claimed [the profit] would be shuffled back into research and development, but that's something every company says they're doing with their profit. It's unverifiable so we can't trust that this is the case.
How do pharmaceutical companies set the price for a new medication? Are there any limits on the price they can ask -- and get -- for it?
Courtney: We don't have any national price control in the U.S. That means that there's no cap on drug prices. We're a market driven system -- so what brings drug prices down is competition. For example, take the two newer hepatitis C drugs Harvoni and Sovaldi. They were priced extremely high for a few reasons. First, they were marketed as a cure, so Gilead Sciences [the manufacturer of Harvoni and Sovaldi] was able to claim that the treatment would be "one and done." These aren't maintenance drugs that people will have to take for the rest of their lives so Gilead only profits from an individual person for a short amount of time. Also, there wasn't any competition from other manufacturers -- Gilead was the only company producing and selling a medication cure for hepatitis C. So Gilead was able to set high prices knowing that people would pay it.
This excerpt was cross-posted with the permission of BETAblog.org.