Turing Pharmaceuticals and Valeant Pharmaceuticals made a series of cold calculations that raising prices to sky-high levels would meet brazen financial goals. And both companies cynically tried using public relations strategies to deflect criticism, according to documents obtained by a congressional committee investigating drug pricing.
The documents — more than 300,000 pages of emails and forecasts — capture moves made by executives at both drug makers as they sought to boost sales while avoiding the fallout that comes from high drug prices.
“I think it will be huge,” former Turing chief executive Martin Shkreli wrote in a Aug. 27, 2015 email after his company bought a decades-old drug and made plans to hike its price more than 5,000 percent. “Almost all of it is profit and I think we will get three years of that or more. Should be a very handsome investment for all of us. Let’s all cross our fingers that the estimates are accurate.”
The House Committee on Oversight and Government Reform released summaries of the documents in advance of Thursday’s hearing to review the companies’ pricing practices. Shkreli is scheduled to testify, as is the interim chief executive of Valeant.
Shkreli was fired from Turing after his recent arrest on an unrelated securities fraud charge.
Other internal Turing documents explain how the company anticipated — but felt confident it could manage — a potential backlash from physicians and AIDS activists after boosting the price of the drug, Daraprim, from $13.50 to $750 a tablet. For instance, a July 2015 presentation confidently noted that “many [physicians] feel the number of … patients is too small to stimulate a significant lobbying effort were the cost of therapy to become an issue.” The drug is used by people with HIV/AIDS.
As the money rolled in, Turing executives appeared ecstatic. On Sept. 17, Tina Ghorban, who was senior director of business analytics and customer insight, forwarded a single purchase order for 96 bottles of Daraprim at $75,000 per bottle. That’s nearly as much revenue as the company that previously owned Daraprim brought in during an entire year.
“Another $7.2 million. Pow!” she wrote.
Read the newly released congressional documents
But as the firestorm erupted, the drug maker increasingly sought outside advice about how to respond. Suggestions varied. For instance, on Sept. 21, 2015, a consultant optimistically wrote Turing executives that “we still come out ahead if we can frame this issue within the HIV/AIDS community as a fight between a drug company and insurance companies.”
There was no convincing some hospitals, though. On Sept. 30, a Turing sales manager sent an email after meeting with officials from Massachusetts General Hospital, where an internal analysis found the new Daraprim price was blowing the pharmacy budget. “Against their clinical convictions, they are currently switching patients to Bactrim,” another anti-infective, the manager wrote to Turing executives.
Less than three weeks later, on Oct. 8, another consultant urged Turing’s board to remove Shkreli as chief executive and take concrete steps to lower the price. “The price drop has to be significant and tied to something … This cannot be seen as something that appears to be as arbitrary as the price hike in the first place,” wrote the consultant.
The consultant was ignored, but another suggestion was adopted. Instead of lowering the price, Turing began touting a patient-assistance program for those who could not afford Daraprim. “This will force reporters to focus on the byzantine nature of drug pricing and health care and ensure the patient message gets out,” the consultant wrote. “Specifically, tie profits from Daraprim to the research and development of a new and more effective treatment for Daraprim patients.”
Even the few allies that Turing had began turning on the company. Initially, Dr. Rima McLeod of the University of Chicago was one of the few physicians who publicly supported the drug maker, but she backed away after questioning whether Turing was really planning to invest its profits in developing a new version of Daraprim. “This sounds like smoke and mirrors when someone’s sight and life are threatened and is not acceptable,” the infectious disease specialist wrote in an Oct. 9 email to a Turing executive.
The documents also show Turing officials dismissing a plea for financial assistance for a dog that had been prescribed Daraprim to treat toxoplasmosis, a parasitic infection. The dog was not covered by insurance and the cost of Daraprim would have been $5,000. But Turning’s head of patient access responded by saying another treatment could be bought from a veterinary medicine web site for $80.
A Turing spokeswoman sent us a statement saying the drug maker does, indeed, invest its net profits in R&D; the wholesale list price for Daraprim is not what many customers, notably hospitals, actually pay, since 50 percent discounts are offered; and patients can access an assistance program.
As for Valeant, in early 2015, the company bought the rights to a pair of heart drugs used by hospitals — Isuprel and Nitropress — from Marathon Pharmaceuticals and the next day jacked up prices by 525 percent and 212 percent, respectively. Ever since, the drug maker has been skewered, although the committee also noted that from 2014 to 2015, the company increased prices on 20 other drugs by more than 200 percent, in some cases by up to 800 percent, according to a committee summary.
The documents indicate how Valeant executives calculated the effect the deal had on financial results. In a May 21 email, interim chief executive Howard Schiller, who was chief financial officer at the time, wrote: “Last night, one of the investors asked about price vs. volume for (the first financial quarter). Excluding Marathon (drugs), price represented about 60 percent of our growth. If you include Marathon, price represents about 80 percent.”
An undated Valeant presentation noted that Isuprel generated $279.3 million in revenue in the 2015 fiscal year and contributed 14.5 percent of the neurology business unit sales. Nitropress generated $245.5 million and accounted for nearly 13 percent of the unit’s sales. The same presentation noted that 2014 revenues for Isuprel and Nitropress were $54.5 million and $98.7 million, respectively.
The big boost in sales was attributed to “aggressive pricing through consultant recommendation.” Moreover, the pricing was justified because Valeant and its consultants determined they would face generic competition during 2016 and 2017.
And like Turing, Valeant adopted a patient-assistance program that was used to “minimize media coverage of the pricing increase,” and assuage payers. The company also attempted to restrict distribution in hopes of boosting insurer reimbursement.
A Valeant spokeswoman sent us a statement saying the drug maker hired consultants to help with pricing decisions, and they advised that, “given the significant reimbursements hospitals received under bundled rates for procedures, the prices of both drugs did not reflect their true value to hospitals and patients.”
“We try to set our prices at the appropriate levels, but we also listen to the market. In this case, we’ve heard from hospitals, as well as from Congress, that we set the price for these two drugs too high, and we’ve responded by offering volume-based discounts of up to 30 percent for each of them.”
For some reason, today 30 MAY 2017, this post was listed as ‘trending.’ This brings to mind the question, did Turing (and Valeant, for that matter) ever truly lower the prices of the drugs mentioned above? Specifically – Daraprim and for Valeant – Isuprel and Nitropress?
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