Senate committee holds hearing on Daraprim price increase, distribution agreements

Issue: April 2016

Members of the Senate Special Committee on Aging conducted a hearing today investigating the recent market price increase and distribution arrangements of the generic first-line toxoplasmosis drug Daraprim.

Witnesses called to testify by the committee included former and current representatives of Turing Pharmaceuticals, parents of a child affected by the price increase, and Adaora Adimora, MD, MPH, FIDSA, professor of medicine and epidemiology at the University of North Carolina, Chapel Hill, and immediate past chair of the HIV Medicine Association. In addition, some witnesses and a representative of Broadfin Capital, an investment firm active in the pharmaceutical sector, were asked to address previous affiliations with the pharmaceutical company Retrophin and its role in acquiring and marketing existing treatments.

Adaora Adimora

“Last fall, this committee launched a bipartisan investigation into the sudden, enormous price increases on decades-old prescription drugs,” Committee Chairwoman and Sen. Susan M. Collins, R-Maine, said during the hearing. “Our focus today is on two companies in particular that operate more like hedge funds than they do traditional pharmaceutical companies: Turing Pharmaceuticals and Retrophin.”

Both companies — founded by Martin Shkreli in 2011 and 2014 — follow a business model designed to maximize profits at the expense of patients, Collins said. Referencing documents obtained during the committee’s ongoing investigation, the chairwoman described the model’s structure in five parts:

identification of an off-patent treatment with no generic competitor;
confirmation of the treatment’s position as the gold-standard;
assurance of a small patient population to reduce scrutiny and incentive for generic competition;
establishment of a closed distribution system or specialty pharmacy to control drug components and ensure an effective monopoly; and
enactment of a substantial market price increase to maximize revenue.

“If this new breed of pharmaceutical companies is where our pharmaceutical industry is headed, we are in big trouble,” Sen. Claire McCaskill, D-Missouri, committee ranking member, said. “Let me speak very clearly to the folks who believe they can participate in this sick game of acquiring drugs, raising prices to ridiculous heights and sticking it to patients: we will not stop this investigation until we find the right prescription of public policy to end this practice.”

Susan Collins

Howard Dorfman, senior vice president and general counsel at Turing Pharmaceuticals until Aug. 13, 2015, spoke critically of his former employer’s actions. Although he admitted that pricing in the pharmaceutical industry is often justly increased due to drug development expenses, Turing had no ongoing expenditures that would justify the price hike.

“I and other members of the Turing management committee repeatedly raised business objections to ... aspects of the commercialization plans under discussion in anticipation of the finalization of the acquisition of Daraprim [pyrimethamine],” Dorfman said during his testimony. “The objections against an immediate and precipitous rise in the cost of Daraprim included concern as to the availability of the drug for a particularly vulnerable and vocal HIV and AIDS patient community, the lack of any formal study protocol in place to implement research to develop a ‘next-generation’ toxoplasmosis therapy, and the failure to develop any of the educational materials for health care professionals and patients, all of which were announced as components of the rationale for an immediate price increase.”

In contrast, Ronald Tilles, interim CEO and chairman of Turing’s Board of Directors, said during his testimony that Turing is “fulfilling its commitment to invest in research into new and improved drug treatments” for toxoplasmosis and other illnesses. He also noted his company’s efforts to enact discounts and support programs to reduce patients’ barriers to access.

“Two-thirds of Daraprim sales are to federal and state health programs that pay Turing one penny per pill,” he said. “In addition, we fund a patient assistance program that offers Daraprim free of charge to qualified, uninsured patients. For insured patients, we provide co-pay support and fund a bridge program to provide a supply of Daraprim at no charge if there are delays in coverage.”

Claire McCaskill

McCaskill objected to this rationale, arguing that these actions delay care and still force many patients to foot the bill.

“They want to somehow float this notion that these costs are somehow going to insurance companies or hospitals,” McCaskill said. “Make no mistake about it — every greedy grab of profit in this space lands in the lap of hardworking Americans. Every single dime.”

To illustrate this point, the committee heard testimony from Shannon Weston, a mother from North Carolina whose infant daughter was diagnosed with congenital toxoplasmosis. Weston explained that her family faced $360,000 of medical expenses when her insurance claim was denied, and would have been unable to treat the infant had the local pharmacy not been able to obtain pyrimethamine and compound it into serum at reduced cost.

“I was hopeless and depressed at the thought of what would happen to my perfect little girl if I was not able to help her,” Weston said. “I truly felt like I had failed her in the worst possible way.”

Such circumstances are not uncommon.

Speaking on behalf of infectious diseases and HIV providers, Adimora explained that many institutions and pharmacies have been unable to reliably and affordably obtain pyrimethamine for patients, and urged the senators to consider policy interventions to circumvent the complex assistance programs many currently rely on.

“Many providers and institutions, including the University of North Carolina at Chapel Hill where I practice, have turned to alternative treatment options for toxoplasmosis, such as compounding the drug in the hospital pharmacy, prescribing Bactrim [sulfamethoxazole-trimethoprim, Mutual Pharmaceutical] or contracting with a compounding pharmacy,” Adimora said. “However, they should not be required to do so when there is a 60-year-old medication to treat toxoplasmosis that remains available in other developed countries for as low as $2.50 per pill or even as low as $1.00 per pill.”

Questioning of Tilles and Michael Smith, senior director of business development at Turing, primarily focused on justifications for increasing drug prices at Turing and Retrophin as well as intentions to monopolize orphan drug markets through the use of a closed distribution system, which Dorfman, Adimora and some of committee members argued could prevent a second generic drug from being used in bioequivalence studies, which are necessary for FDA approval. The hearing concluded with a statement from Collins reminding the representatives that these practices harm patients and place a strain on institutions forced to accommodate “egregious and unacceptable price increases.” – by Dave Muoio

Disclosures: Adimora reports receiving research funding from ViiV Healthcare and Gilead through her institution. Dorfman, Shkreli, Smith and Tilles are former or current employees of Turing Pharmaceuticals, and Shkreli and Tilles were formerly associated with Retrophin.