The University’s prescription drug plan currently supports more than 100,000 beneficiaries, including faculty, staff and retirees. And the price has been climbing, increasing about 11 percent in 2014 and about 17 percent in 2015.
Keith Bruhnsen, manager of the University’s prescription drug plan, said the increase in the cost reflects multiple factors, such as inflation, increased new products and utilization.
This rise, however, rests close to the national average, which was 13.1 percent in 2014, evidence of the impact that national trends in drug pricing can have on a regional level.
Among these factors, Bruhnsen pointed to specialty drugs as those most responsible for the rise in the cost. The cost of specialty drugs for University’s drug plan rose more than 37 percent in 2015.
Specialty drugs are ones designed to treat complex and chronic conditions. One specialty drug, Sovaldi, treats hepatitis C and cures more than 90 percent of those who are treated with it. But the 12-week course treatment costs $84,000 in the United States, averaging to about $1,000 a pill.
Sovaldi is just one example, however.
Daraprim: A case study
Earlier this year, controversy over the anti-parasite drug Daraprim prompted political proposals from 2016 presidential candidates like Hillary Clinton and Bernie Sanders, and debate over the current healthcare system and antitrust laws.
In September, Martin Shkreli, the CEO of Turing Pharmaceuticals, which acquired the rights to Daparim for $55 million, raised the price of the drug from $13.50 to $750 a tablet overnight — a 5,500-percent increase.
Daraprim is an FDA-approved drug used to treat toxoplasmosis, a disease resulting from parasitic infections that can cause serious complications for immune-compromised patients, such as those who have gone through chemotherapy or have AIDS, pregnant women and children. According to Centers for Disease Control and Prevention, toxoplasmosis is a leading cause of death from foodborne illnesses.
Unlike many medications like allergy or heartburn medicine, there are no generic alternatives for Daraprim. When the drug’s patent expires — usually 20 years after filing — other companies can produce the generic version using the same active ingredient found in the original drug.
Since Daraprim first came to market in 1953, its patent has long expired. But Daraprim is not widely used — only 8,000 to 12,000 prescriptions in the United States each year compared to 25 million for statins, drugs that lower cholesterol — and it is unattractive for new pharmaceutical companies to invest in developing a generic drug because it may not be as profitable as investing in a bigger market.
Robert Winfield, chief health officer and director of University Health Service, said this creates no competition in smaller markets for companies like Turing Pharmaceuticals, allowing the companies to set the price “as high as the market will bear” while abiding to the law.
He saw an opportunity to take advantage to make profit, added Public Health Prof. Richard Hirth. He also said unfortunately there is not much that can be done under the current regulations, but implementing changes to help companies pursue generic drug research can help create competitions to prevent such exploitations in the future.
“(Shkreli) realized there is an opportunity to be exploited,” Hirth said. “There really isn’t a lot that can be done under the current regulations.”
Marianne Udow-Phillips, director of the Center for Healthcare Research & Transformation, said raising prices of drugs like Daraprim probably will not cause a significant increase in the healthcare cost by itself because of the small market, and that is how many companies like Turing Pharmaceuticals get away with an exorbitant price.
However, Udow-Phillips added that this controversy has brought the issue to Congress, generating discussions.
“(The controversy) has brought considerable federal scrutiny and discussions in Congress whether there should be more price controls and limits for older drugs with expired patent,” Udow-Phillips said.
Amid the controversy, Shkreli appeared on multiple news platforms and was active on social media to explain his actions. On CBS News, he said the price raise was to generate reasonable, not excessive, amount of profit.
Shkreli furthermore said the higher profit earned from the price raise could help with developing a new drug to treat toxoplasmosis.
Erik Gordon, clinical assistant professor of business, questioned why Turing Pharmaceuticals should be “rewarded” with the profit since the company was not involved with the initial research and development of Daraprim.
Gordon said drug companies that actually do the high-risk drug research should be rewarded, but Turing Pharmaceuticals and other similar companies are not “entitled” to them. One such company called Valeant Pharmaceuticals also raised price for its cancer-related dermatology drug by about 1700 percent over the last six years.
“If we don’t let (companies that do high-risk research) make enough money, they can’t keep doing the research,” Gordon said.
Hirth noted, however, that Shkreli’s statement about using Daraprim’s profits toward new drug research had little credibility, as Turing Pharmaceuticals is not a research company, and Shkreli has little background in pharmaceutical research (he is a hedge fund manager).
Last week, Turing Pharmaceuticals announced that the company would offer a 50 percent discount on Daraprim for hospitals, bringing down the cost to $375 per tablet. The company also announced that it would provide the drug free of charge for uninsured, low-income patients, contribute to Patient Services Inc., a charity that financially assists Medicare patients, and participate in federal and state drug price discount programs.
In a statement, Nancy Retzlaff, the company’s chief commercial officer, attempted to easy the concerns of some patients: “We pledge that no patient needing Daraprim will ever be denied access.”