Valiant Pharmaceuticals’ new strategy rewards investors and places new hardships on patients. Valeant’s hedge-fund approach has the company buying existing drugs and raising prices, avoiding any R&D costs. This year, Valiant raised prices on brand name drugs by an average of 66%. Valeant CEO Michael Pearson, indicates shareholder pressure in decisions to increase profit margins for old drugs. Valeant holds that price increases do not affect patients directly, as insurance, taxpayers, and hospitals will cover the price increases, yet some critics say that this leads to higher co-payments for everyone.
Conventional pharmaceutical companies invest profits into R&D, however these companies often increase prices year over year at a rate higher than inflation. Smaller price increases on widely used drugs have a larger impact on health care dollars than do larger increases on drugs with smaller sales.
“Mr. Mannes has been taking the same drug, Cuprimine, for 55 years to treat Wilson disease, an inherited disorder that can cause severe liver and nerve damage. This summer, Valeant more than quadrupled its price overnight. Medicare will now have to cover about $35,000 for the 120 capsules he takes each month, and he will have to pay about $1,800 a month out of pocket, compared with about $366 he paid in May.”
“Valeant defended itself, saying in a statement that it ‘prices its treatments based on a range of factors, including clinical benefits and the value they bring to patients, physicians, payers and society.’”
“If “products are sort of mispriced and there’s an opportunity, we will act appropriately in terms of doing what I assume our shareholders would like us to do,” he told analysts in a conference call in April.”
‘“How can they just do this?” said Gail Mayer, a retired computer systems analyst on Long Island, who said her monthly supply of Glumetza went from $519.92 in May to $4,643 in August. For now, her insurance is covering most of that increase, but she is worried that it will stop covering the drug altogether, as others have.“I’m sure it didn’t cost them $4,000 more to make,” Ms. Mayer said. “You don’t just go buy a bottle of milk and suddenly the supermarket charges you $100.”’
“Dr. Irl B. Hirsch, a diabetes specialist at the University of Washington School of Medicine in Seattle, said insulin prices had risen so much in recent years that some patients were scrimping on groceries to pay for it. The price of a package of five Lantus injectable pens from Sanofi has gone from about $179 in 2010 to $372 last year, he said, and insurance will often cover only one package at a time.”
Source: Pollack, A. & Tavernise, S. 2015. Valeant’s Drug Price Strategy Enriches It, but Infuriates Patients and Lawmakers. New York Times. Retrieved from: http://www.nytimes.com/2015/10/05/business/valeants-drug-price-strategy-enriches-it-but-infuriates-patients-and-lawmakers.html