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This Is How Drug Companies Jack Up Their Prices and Hurt Patients

Prescription drug prices are higher than ever, forcing patients to make tough decisions and sparking growing public outcry.
Photo via Wikimieda Commons

This story is part of a partnership between MedPage Today and VICE News.

Worldwide outrage has followed the recent dizzying increase in the price of Daraprim, a drug that treats potentially fatal parasitic infections, by its new owner Turing Pharmaceuticals, a startup founded by a defiant 32-year-old former hedge fund manager named Martin Shkreli. But it's not the only drug whose ballooning price has public health experts and legislators concerned. Patients' wallets have lately been hard hit by sharply increasing costs for drugs that treat everything from cancer to gout to Crohn's disease.


In 2014, about 35 million Americans between the ages of 19 and 64 did not fill their prescriptions because they couldn't afford them, according to the Commonwealth Fund. That's one in five.

"When you're charging tens of thousands or several thousand dollars for one infusion of a particular medication, now we're getting to the point where you wonder, 'How greedy can drug companies get?'" said Dr. Frank Esper, an infectious diseases expert at University Hospitals Case Medical Center in Cleveland, Ohio. "Then you're really pricing out certain individuals."

About 72 percent of Americans say that prescription drug prices are unreasonable, and 74 percent of them believe that drug manufacturers put "profit before people," according to a Kaiser Family Foundation poll of 1,200 respondents that was published last month.

High pharmaceutical prices can result from a number of situations. The skyrocketing cost of the 62-year-old drug Daraprim under Shkreli illustrates how companies like Turing Pharmaceuticals can acquire essential medications and attempt to squeeze as much revenue as possible from them.

Shkreli has answered his critics with a series of dismissive tweets and interviews in which he suggests that the pills were unprofitable for his company despite costing about a dollar to produce. Marketing and distribution costs were too cumbersome, he has claimed.

Related: Pharmaceutical Company CEO Defends 5,000% Price Hike of Drug on Twitter


Although Daraprim was developed to treat malaria, it is now used to treat toxoplasmosis, a life-threatening parasite that tends to strike people with compromised immune systems, such as those with cancer or HIV/AIDS.

Shkreli has argued that Daraprim is used so infrequently that the price increase won't have much of an impact, and has suggested that the new profits will go back into research and development for a better toxoplasmosis drug, though the need for one isn't immediately clear.

The Infectious Diseases Society of America (IDSA) and the HIV Medicine Association (HIVMA), which each represent thousands of doctors and scientists, wrote to Turing on September 8 to urge it to reconsider the inflated price, noting that Daraprim, which was approved by the Food and Drug Administration in 1953, is a crucial element of the only FDA-approved treatment for toxoplasmosis.

"Under the current pricing structure, it is estimated that the annual cost of treatment for toxoplasmosis, for the pyrimethamine component [Daraprim] alone, will be $336,000 for patients who weigh less than 60 kilograms and $634,500 for patients who weigh more than 60 kilograms," IDSA and HIVMA wrote to Turing. "This cost is unjustifiable for the medically vulnerable patient population in need of this medication and unsustainable for the health care system."

Turing Pharmaceuticals did not respond to requests for comment.


Similarly, Rodelis Therapeutics acquired a tuberculosis drug called Cycloserine three weeks ago and raised the price of 30 pills from $480 to $10,800. On Monday, Rodelis returned the Cycloserine rights to the Purdue Research Foundation's Chao Center amid public outcry that has been compounded by the furor over the new cost of Daraprim.

Three basic scenarios can lead to big jumps in drug prices, according Allan Coukell, senior director for health programs at the Pew Charitable Trusts. Daraprim and Cycloserine, he said, highlight how a small number of companies have developed a business model in which they buy up niche drugs, become the sole source manufacturer for those drugs, increase prices, and collect the profits.

It's this sole-source manufacturing that has prompted the Michigan health center UP Health System – Marquette to reduce its use of nitroprusside, whose brand name is Nitropress, after its cost jumped from $40 to $615 a vial, according to a March newsletter published by the Michigan health system. Doctors use nitroprusside to reduce bleeding during surgery, treat congestive heart failure, and lower blood pressure. The health system is also concerned about other common drugs such as phytonadione, flucytosine, vasopressin, isoproterenol, and glycopyrrolate, whose prices have swelled to between four and 40 times their previous levels.

"Many of these price increases have forced institutions to re-evaluate drug utilization," the newsletter reads.


In another price-increase scenario, companies will eye drugs that have been on the market since before the FDA had authority over them, meaning they've never been given formal approval. Coukell described how a company will take one of these drugs through the approval and regulatory process in exchange for market exclusivity granted by the FDA, allowing it to charge more.

The 54-year-old Los Angeles filmmaker Glenn Spann knows the effects of such a gambit all too well. When he was initially diagnosed with gout, a painful form of inflammatory arthritis, his colchicine pills cost just pennies per pill. When the company URL Pharma decided to take colchicine through the FDA approval process, Spann said, the price jumped to nearly $5 a pill a few years ago.

"I had no insurance coverage of it at all of any kind, which was just maddening," Spann said. "If I'm taking 30-something pills a month plus attacks at $5 a pill, that's $150 to $200 a month from $10 a year."

Despite the cost, Spann said the pain was so debilitating that forgoing the pills was not an option.

"If I had no drugs to help me out, it would be to the point within an hour two after [an attack starts], it feels like broken bone," he said, describing the pain he experiences. "You cannot put pressure on it. You cannot touch it."

When he ran out of the cheap pills he'd stockpiled, he said he went online and ordered them from Canada and paid $50 for 100 pills. He did that for three years. Now that URL Pharma no longer has exclusivity, the pills have fallen to about the same price domestically.


Related: Users Say the 'Smart Drug' Modafinil Is the New Adderall — Only Better

But if a company has a new and innovative drug, Coukell noted, it can come to market at whatever price point its manufacturer thinks people are willing to pay. The sky-high prices used to be seen more in biologics used to treat rare conditions, but in recent years drugs for hepatitis, high cholesterol, and other more widespread ailments like cancer are entering the market at historically high prices. Gilead Sciences, for example, introduced a $1,000-a-pill hepatitis C drug in 2013 that requires a 12-week course.

Those prices eventually fall as much as 80 percent once patents run out and generic drugs enter the market, but that's not always the case.

"For people who don't have health insurance, they very frequently can't afford the medication," Coukell said. "And with some of these drugs, even with the insurance, they are unaffordable for some people."

Amanda Oppenheimer, a 27-year-old who lives in Olympia, Washington, was diagnosed with Crohn's disease last year and soon found herself in the middle of an 18-day hospital stay. Her mother came to visit and suggested that she file for bankruptcy. She was supposed to start regular infusions of an $18,000 drug called Remicade in November, but she knew she couldn't afford the infusions until she sorted out her health insurance and got financial aid.

So she went without the infusions.


"I was very, very anxious just being away from home that long, and it was scary having this infection," Oppenheimer said. "I still had a drain in my abdomen from the abscess… and I was worried about the future."

She began the infusions in January, but she still owes the hospital another $14,000 for her extended stay and treatment even though financial aid covered most of it.

"No one is saying if you spend money to invent, discover, and bring to market a new drug that is a significant advancement, that you shouldn't be able to recoup your investment and make a profit on it," Coukell said. "The question from the public point of view is whether they are paying more than the drug is worth."

Americans shouldn't live in fear they will go bankrupt if they get sick. Read Sanders' plan to lower drug prices: — Bernie Sanders (@SenSanders)September 21, 2015

Legislators have taken notice. After working on this issue for a number of years, Democratic presidential candidate Sen. Bernie Sanders (I-Vt.) introduced the Prescription Drug Affordability Act of 2015 on September 10. The bill would instruct the Department of Health and Human Services to negotiate Medicare prices, allow wholesalers to import drugs from Canada, require more transparency around pharmaceutical prices, and prohibit anti-competitive deals in which brand-name drug manufacturers pay generic drug makers for them to delay bringing a cheaper alternative to market.


"When we talk about healthcare, we are talking about the need of the American people to be able to afford the medicine their doctors prescribe," Sanders, a presidential candidate, said in a statement the day he introduced the bill. "A life-saving drug does no good if the American people cannot afford that drug."

He and Rep. Elijah Cummings (D-Md.) wrote to Valeant Pharmaceuticals International last month to ask why Valeant raised the price of Isuprel and Nitropress, which are both heart drugs, by about 525 percent and 212 percent.

Valeant's senior vice president of investor relations, Laurie Little, told VICE News that the company determined that Isuprel and Nitropress were underpriced before it acquired them in February.

"These are drugs that are only used by hospitals — they are not sold in pharmacies — in accordance with specific surgical procedures," she said. "This means that whenever the protocol calls for use of these drugs, they are used. Patients are never denied these drugs when the protocols call for their use."

Hillary Clinton, who is also pursuing the Democratic nomination for president, tweeted Monday night that she would also introduce a plan to combat high drug prices.

"Price gouging like this in the specialty drug market is outrageous," she wrote, joining her voice to the chorus of criticism over Daraprim's new price tag under Turing Pharmaceuticals. "Tomorrow I'll lay out a plan to take it on."

Price gouging like this in the specialty drug market is outrageous. Tomorrow I'll lay out a plan to take it on. -H — Hillary Clinton (@HillaryClinton)September 21, 2015

Her plan includes out-of-pocket cost caps, using America's "bargaining power" to demand lower prices and higher rebates, and increasing competition with proposals that would encourage the release of more generic drugs, such as clearing the FDA's generic drug approval backlog.

Follow Sydney Lupkin on Twitter: @slupkin Photo via Wikimedia Commons