CLSA in San Francisco Business Times: Drug pricing controversy lights up California ballot measure
By Ron Leuty San Francisco Business Times
Oct 2, 2015
Turing Pharma, a New York company controlled by former hedge fund manager Martin Shkreli, bumped up the price of the parasitic infection treatment Daraprim from $13.50 to $750 per tablet shortly after buying it from Hayward-based Impax Laboratories.
A 5,455 percent overnight increase in the cost of a parasitic infection-fighting drug has fed signature gathering efforts to put a California price-control initiative on the November 2016 ballot.
The California Drug Price Relief Initiative, sponsored by the AIDS Healthcare Foundation, would tie the cost that state programs pay for drugs to that paid by the U.S. Department of Veterans Affairs.
VA prices, said AIDS Healthcare Foundation President Michael Weinstein, are about 20 percent lower than prevailing free-market prices.
AHF is required to get 366,880 valid signatures to move the measure to next year’s presidential election ballot, and it said in August that it had hit that target. Now it looks like backers will gather more than a half-billion signatures by the state’s mid-October deadline.
“We’ll probably have 175,000 to 200,000 more signatures than we need,” said AHF spokesman Ged Kenslea.
The price-jacking story of former hedge fund manager Martin Shkreli‘s Turing Pharmaceuticals set off a national debate last month. The company, which in August bought the drug Daraprim from Hayward-based Impax Laboratories Inc. (NASDAQ: IPXL) for about $55 million, raised the price from $13.50 to $750 per pill.
Guest Opinion: Insurance companies shouldn’t limit access to care
In one fell swoop, Shkreli was cast as “Lex Luthor in a polo,” as one blogger put it. Presidential candidate Hillary Clinton released a monthly drug price cap proposal that sent drug company stocks sharply lower and drug industry executives denounced Shkreli and Turing, saying the price boost was an abnormal action. What’s more, the Biotechnology Industry Organization, which holds its annual convention in San Francisco next June, booted Turing from its membership.
Sara Radcliffe, president and CEO of the California Life Sciences Association, said the pricing decision by New York-based Turing is “not representative” of the industry’s commitment to patient care.
Price controls, however, are a whole different story.
“While pricing controls may look appealing on paper, they are bad medicine and do not put the interest of patients first either,” Radcliffe said in a statement. “Government-imposed price controls can limit access to quality care and can keep life-saving medications out of the hands of those who need them most.”
But AHF’s Weinstein said Turing’s increase is just the latest excessive drug price hike, sending specialty drug prices soaring in recent years. The biggest offender isn’t Turing, according to Weinstein, but Foster City-based Gilead Sciences Inc.
Gilead (NASDAQ: GILD) and the AHF are longtime sparring partners — at least AHF has swung and Gilead, for the most part, has bobbed and weaved. AHF sponsored a November 2013 referendum in San Francisco that initially was fueled by the company’s $28,500-a-year price of the four-in-one HIV-fighting pill Stribild.
But then Gilead neared Food and Drug Administration approval of a groundbreaking treatment for hepatitis C, called Sovaldi. The drug, initially priced at $1,000 a pill, reduced treatment from 48 weeks to 12 weeks, replacing injections that were often ineffective because patients couldn’t withstand nearly a year of nasty side effects.
Gilead acquired the drug in its January 2011 buyout of Pharmasset Inc. for $11 billion. It sold $10.3 billion of Sovaldi in 2014, its first year on the market.
“It’s like drug companies have become hedge funds,” said AHF’s Kenslea. “They aren’t developing new drugs; they’re buying and selling each other.”
AHF, which distributes several Gilead drugs through its own pharmacies, and its allies tried (and failed) to get Gilead shareholders to approve a measure requiring detailed pricing disclosures for any drug that costs more than $10,000 over the course of treatment.
But where the San Francisco measure was a referendum that really couldn’t force city leaders to pay a lower price for city programs, Weinstein said the California Drug Price Relief Act “has teeth.”
“It is a policy directive,” he said. “This will require prices to be lowered.”
The measure would require state departments to pay the same or less than the lowest price paid by the VA for the same drug, even if the state agency didn’t buy the drug directly. The price ceiling would apply to California’s Medi-Cal fee-for-service outpatient drug program and the AIDS Drug Assistance Program but would not apply to Medi-Cal managed care programs.