As Joe Papa begins the difficult task this week of reviving Valeant Pharmaceuticals, he may want to start by repairing relations with hospitals.
The drug maker angered many hospital officials early last year by suddenly boosting prices for a pair of important heart drugs for which few good alternatives are available. On the day that Valeant bought the drugs — Nitropress and Isuprel — from another drug maker, prices rose by 525 percent and 212 percent, respectively.
The company had regularly made such price hikes a central part of its growth strategy, but this particular move prompted an onslaught of negative publicity that, in turn, led to congressional hearings. In response to the fracas, the company last October told the Senate Special Committee on Aging that it would reach out to hospitals that were affected by its pricing.
To some hospitals, this suggested Valeant may soon offer discounts. But nothing ever came of this.
“We did have discussions with Valeant about a discount, but never received one,” said Scott Knoer, the chief pharmacy officer at the Cleveland Clinic, a nonprofit network of 11 hospitals and 17 outpatient centers, primarily in Ohio. “We’re still waiting.”
In fact, Valeant last year raised the prices twice more for those drugs, according to Knoer. At the start of the year, a vial of Nitropress was priced at $215, but that jumped to $881 by the end of 2015. This amounted to a 310 percent increase. During that time, a vial of Isuprel went from $180 to $1,472, a whopping 718 percent increase.
As a result, Cleveland Clinic spent nearly $5.4 million on these two drugs last year, according to a letter the hospital network sent to the Senate Special Committee on Aging, which used the information to grill Valeant executives during a hearing last week.
Cleveland Clinic was not the only hospital network that Valeant stonewalled.
When Erin Fox learned last October that Valeant signaled it would reach out to hospitals that were affected by the price hikes, she called the company to find better prices for the heart drugs.
But the director of the Drug Information Service at the University of Utah Health Care, a four-hospital network in Salt Lake City, got nowhere. The same thing happened when she tried again last month.
“In all cases, Valeant refused to talk to me about better contracted prices,” she wrote the Senate last week. “Instead, Valeant directed me to discuss the price with our wholesaler.” But her wholesaler did not provide discounts. Meanwhile, the Utah hospitals spent more than $644,000 on the two heart drugs between March 2015 and February 2016, which amounted to roughly 2 percent of its inpatient pharmacy budget, she wrote the Senate committee.
During the Senate hearing last week, Valeant board member Bill Ackman, who also heads Pershing Square Capital Management and has played a pivotal role in guiding the company in recent weeks, appeared contrite. The price hikes, he said, were “horrible.”
And he indicated that the drug maker would attempt to make amends by offering 30 percent discounts for Nitropress and Isuprel. But hospital officials say they have heard this song before.
“That would be nice,” said Fox. “But I hope it’s not lip service.”
And Cleveland Clinic’s Knoer was similarly cautious. “A 30 percent reduction off what has been egregious? We’d be happy to pay less than the ridiculous price we’re paying now,” he told us. “But we still don’t think that’s a fair price. And it would have to depend on the terms.”
[UPDATE: A day after this post ran, a Valeant spokesman wrote us this: “Our goal in offering bulk discounts on Nitropress and Isuprel through group purchasing organizations was to ensure that those hospitals most impacted by the change in price received discounts of up to 30 percent, based on the amount they use.
The Senate hearing last week revealed that there may be gaps in that process, and we’re working to identify those gaps now as well as develop solutions so any hospital that is eligible for discounts on Nitropress and Isuprel receives them. We have offered the discounts through two group purchasing organizations that together service the vast majority of hospitals in the US: MedAssets, which serves 4,500 hospitals, and Premier, which serves 3,600 hospitals.”]
When a retail store raises its prices so it can ‘discount them’ for a sale, we call it fraud. When Valeant raises prices an average of 500% and then offers to take 30% off … why is that supposed to be a meaningful gesture?
(Using the lower raise, Nitropress: $215 to $881, then 30% off leaves it at $617, about $400 over the original $215.)
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