Four Companies - Including Criminal Valeant - Raked Over the Coals for Staggering Price Hikes by Senate Report | Pharmaguy's Insights Into Drug Industry News |

Staggering hikes — in some cases higher than 5000%— in prices of prescription drugs threaten the health and economic stability of Americans who can't afford vital medicines, a congressional report warned Wednesday.


The findings by the Senate Special on Aging summarize the panel's 2016 investigation of records from four pharmaceutical companies and public hearings that focused on sudden price spikes in decades-old medications and the pricing decisions imposed by drug industry entrepreneur Martin Shkreli and other industry executives.


Turing Pharmaceuticals and Retrophin (RTRX), two firms once headed by Shkreli, embattled drugmaker Valeant Pharmaceuticals International (VRX) and Rodelis Therapeutics are among companies that dramatically raised prices on some decades-old, off-patent drugs they acquired and controlled through monopoly business models, the report said.


The Committee discovered that each of the four companies followed a business model (with some variation) that enabled them to identify and acquire off-patent sole-source drugs over which they could exercise de facto monopoly pricing power, and then impose and protect astronomical price increases. The business model consists of five central elements:


  • Sole-Source. The company acquired a sole-source drug, for which there was only one manufacturer, and therefore faces no immediate competition, maintaining monopoly power over its pricing.
  • Gold Standard. The company ensured the drug was considered the gold standard—the best drug available for the condition it treats, ensuring that physicians would continue to prescribe the drug, even if the price increased.
  • Small Market. The company selected a drug that served a small market, which were not attractive to competitors and which had dependent patient populations that were too small to organize effective opposition, giving the companies more latitude on pricing.
  • Closed Distribution. The company controlled access to the drug through a closed distribution system or specialty pharmacy where a drug could not be obtained through normal channels, or the company used another means to make it difficult for competitors to enter the market.
  • Price Gouging. Lastly, the company engaged in price gouging, maximizing profits by jacking up prices as high as possible. All of the drugs investigated had been off-patent for decades, and none of the four companies had invested a penny in research and development to create or to significantly improve the drugs. Further, the Committee found that the companies faced no meaningful increases in production or distribution costs.


Find the Senate report here.