The Senate just released a massive report on drug pricing -- here's what you need to know

The Senate’s year-long investigation into drug pricing wrapped up in the form of a 131-page report released Wednesday. 

The report details the instances of four drug companies that made headlines in September 2015 — including former pharmaceutical executive Martin Shkreli’s 5,000% price hike of the anti-parasitic drug Daraprim.

However, the committee was clear to make a distinction between these four companies and the business plans they followed and drug companies developing new drugs. Republican Senator Susan Collins told The New York Times that she didn’t think the solution would be for the government to set drug prices.

But at the same time, “I don’t think we can ignore the market failures that have occurred. The answer is to figure out how we can revitalize the market so that generic drug producers have incentives to compete with companies that are buying up drugs and jacking up prices to make quick, exorbitant profits,” she told The Times

Here’s what you need to know about the report:

It looked at the four companies that made headlines in September 2015 for drug price hikes: Turing Pharmaceuticals, Retrophin, Valeant Pharmaceuticals, and Rodelis Therapeutics. The report came to the conclusion that the four companies essentially all had the same business model. 

That business model centered around a few key factors:

  1. Making sure the company was the only drugmaker producing the drug.
  2. Setting that drug as the “gold standard” in the industry.
  3. Entering just a small market. 
  4. Selling the drug through a “closed distribution system” (those are the specialty pharmacies).
  5. Setting the price as high as possible.

Citing an email sent to former Turing CEO Martin Shkreli, the report summed up the sentiment before price hikes made headlines: “Funny that these small companies still haven’t realised you can raise price aggressively and nobody gets too upset?”

The report also listed out policy solutions to price gouging instances like this, including incentivizing generic competition, allowing for importation of drugs in some cases, prevent patients assistance programs and copay coupons for being misused (these systems often make the US spend more on prescription drugs), and increase transparency on drug prices so that consumers can see how much other groups in the drug supply chain spent on the drug. 

Where are they now

A year later, of the four companies, Rodelis Therapeutics was the only one to return its drug, cycloserine, back to its previous owner where the price returned to $500 per 30 pills, instead of $10,800

Retrophin, which owns Thiola, a drug that treats a rare kidney disease, raised the price of the drug by 2000% in 2014. That list price hasn’t gone down since

Valeant CEO Joseph Papa told the committee that the company had not reduced the prices on Cuprimine and Syprine, two drugs that are used to treat rare diseases that have shot up in price while owned by Valeant. Cuprimine in particular is one of the most expensive drugs in the US, costing $39,800 for a one-month supply. Papa told the committee that the company was focusing on its patient assistance programs for the drugs. 

The price of Daraprim, the drug infamous for its 5,000% price increase in September 2015 has not decreased in list price, though Turing, the company that sells it, did offer discounts to hospitals up to 50% off the list price of $750 per pill.

Drug pricing in 2017

Drug stocks were among the biggest gainers in the wake of Donald Trump’s election, with biotechnology stocks rallying 13.3%. Investors had been skittish about what a Hillary Clinton presidency would mean for regulation of drug development and pricing, and she often sent drugmakers’ stocks falling with her comments on Twitter.

But there is still uncertainty about what the Trump administration will do for the drug pricing debate, and that could be why biotech stocks have surrendered most of their post-election gains. 

In an interview with Time magazine in December the president-elect offered his thoughts on drug prices. 

“I’m going to bring down drug prices. I don’t like what’s happened with drug prices.”

Some analysts think that Republican control in Congress will shield pharma and biotech companies from any drug price legislation, but there’s still a lot of uncertainty about what will happen in January. 

 

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