9.23.15 | Forbes
By Steve Brozak
To read the entire article on Forbes, please click here.
All day Monday, on TV and Twitter you could hear investors, Big Pharma, biotech executives and politicians all saying the same thing: “What’s next?”
They were asking about the potential fallout from the sudden price hike–from $13.50 to $750, about 5,000% – of a critical AIDS drug by Turing Pharmaceuticals LLC.
We don’t have one answer for them; we have five:
First, a true healthcare issue has just exploded like a piñata in the middle of the 24/7 presidential campaign, scattering treats at the feet of (last count) 14 Republican and at least 5 Democratic contenders for their parties’ nomination. GOP candidates will scramble to find ways to denounce the price hike, while simultaneously praising the free market. Turing’s move has provided raw steak for Bernie Sanders and Hillary Rodham Clinton. Sen. Sanders, who has been inveighing for several years about pharmaceutical pricing, quickly wrote to Turing Pharmaceuticals asking them to explain the “dramatic price increase” and limits on distribution for the drug. Former Secretary of State Clinton jumped into the fray on Twitter, accusing Turing of “price gouging” and promising to unveil her plan to wrangle drug prices to the ground in the next few days. Immigration will have to take a back seat for a bit.
Second, the Obama administration – which came to the White House promising to find ways to manage healthcare costs – gets another chance to take on the medical industry and to add to (as Democrats see it) the president’s legacy. Turing’s CEO spoke to several news outlets saying he would not budge from the price jump. But we are seeing an extreme precedent for a price increase within the healthcare industry that looks like a corporate finance stratagem. Left unchecked and repeated, this is not just unsustainable, but potentially paralyzing to the industry.
Mr. Obama has little to lose and much to gain from taking on a company whose response to “Why are you raising the price so high?” is simply: “Because we can.” Mr. Obama might even dare the GOP-led Congress to not act. And if Joe Biden were wondering what issue he might ride into battle, he has it now. Mrs. Jill Biden–a healthcare initiative professional–would be a plus by his side.
One last item: the Pope is going to Washington to address Congress this week on, among many things, the role of rich countries and wealthy people in taking care of the poor. Wonder if wild pharmaceutical price hikes will merit a papal mention?
The third problem is, as a CNBC headline noted, Biotech’s “worst day of the year.” Biotech stocks were selling off rapidly and by the end of trading Monday they had lost more than $15 billion. The question over the next several weeks will be whether the biotech industry took just a hit, or a body blow. Ironically, Turing is a privately held company and wasn’t hit by the crisis it caused. Among dozens of biotech companies that did suffer collateral damage Monday was Allergan AGN +0.35% plc, which lost about 3.3%; the CEO specifically called the Turing price increase egregious in an on air interview.
Alexion Pharmaceuticals ALXN -1.92%, which developed Soliris, a drug that treats a life-threatening blood disease was also hurt seeing its shares drop by 3.6%. Alexion was mentioned in several discussions over the day about drug pricing given its more than $400,000 yearly price tag for its drug used in a rare disease.
Lastly, we’ve all seen the coverage of Gilead Sciences GILD -0.95% and Sovaldi, its $1,000 a day pill to treat Hepatitis C. At least Gilead invested money to finish Sovaldi’s development and push it through the regulatory approval process to market. Sovaldi has shown ability to cure Hepatitis C, a devastating infectious condition that can lead to liver cancer. Allergan, Alexion and Gilead have all been widely criticized for the high price of their drugs.
Turing, by comparison, simply bought Daraprim, acquiring it in August for $55 million. And then it jacked up the price fewer than 60 days later. Turing’s CEO said in interviews Monday that his company would use the profits to improve Daraprim, a 62-year-old product that treats a rare parasitic infection called toxoplasmosis, which can be fatal, particularly for AIDS patients and others with weak immune systems. The World Health Organization has put Daraprim on its list of essential medicines. The price hike provoked outrage from the Infectious Diseases Society of America and the HIV Medicine Association, which denounced the increase.
The political and media frenzy building around the drug industry isn’t likely to disappear quickly. In the atmosphere created by Turing’s move, investors and venture capitalists might shrink away from the biotech and pharmaceutical sector for a while; just as many biotech companies are starting to fulfill their potential.
Fourth, how long will it take the AIDS and HIV community to react? Daraprim is primarily a drug that that treats complications resulting from AIDS. In one study of toxoplasmosis 56% of death certificates listed AIDS as a co-diagnosis. This price hike is one of the few times in recent decades that a corporate decision explicitly affected the AIDS and immunocompromised patient population. Today’s paradigm for expedited approvals by the Food and Drug Administration and drug availability were directly attributable to the HIV activism of a previous generation of patients, doctors and supporters. Turing’s move directly tests the changes that were ushered by the need for new drug development. There’s much more that can be said about the impact on AIDS patients and the medical establishment.
Fifth, the one winner in this controversy is Twitter. The Daraprim price hike showed the importance of Twitter as a platform and a player in healthcare policy. The news stories on Daraprim and Turing went viral quickly, as did the reaction to Turing’s CEO in thousands of retweets of particularly negative comments. And then the stocks started to fall. While the internet broke biotech on Monday, it gave Twitter a new chance to flex its muscles.