Valeant Pharmaceuticals, one of the drugmakers in the eye of the storm over rising prescription medicine prices, says two federal prosecutors have subpoenaed documents on its drug pricing and other policies.
The federal subpoenas sent to the Canadian drugmaker, disclosed late Wednesday, likely won’t be the last to hit the industry, according to one analyst.
They come amid rising criticism of sky-high prices for new prescription drugs for cancer, hepatitis C and other illnesses, which carry list prices in the range of $100,000 a year. Condemnation by patients, doctors and insurers has been mounting steadily for a couple of years, then escalated recently over news that Valeant and a handful of other drugmakers have been hiking prices of old drugs many times over their prior cost.
The issue reached critical mass in late September. That’s when former hedge fund manager Martin Shkreli’s Turing Pharmaceuticals came under fire for increasing the price of Daraprim, the only approved treatment for a life-threatening parasitic infection, to $750 from $13.50 after buying rights to sell the drug.
Shkreli initially said the higher price was necessary to fund future research on the 60-year-old drug, which some doctors said wasn’t needed. After a firestorm of criticism, Shkreli backed down and said he would reduce the price. A Turing spokesman on Thursday told The Associated Press the company is still determining the “most appropriate price for Daraprim,” but has capped per-prescription co-payments at $10 for patients with commercial insurance and $1 for Medicaid beneficiaries. It’s also offering Daraprim free for patients who can’t afford it, according to Edward Painter, head of communications and investor relations.
Democratic front-runners Hillary Clinton and Bernie Sanders have recently made unaffordable drug prices a 2016 presidential campaign issue and pledged to take on drugmakers during Tuesday’s Democratic candidate debate. Some members of Congress have been demanding drugmakers explain their actions.
“This is not going to be the last time you see subpoenas for documents” on drug pricing, predicted analyst Steve Brozak, president of WBB Securities.
Brozak and Edward Jones analyst Ashtyn Evans couldn’t recall any similar subpoenas over the last decade.
But Brozak expects top pharmaceutical and biotech companies, which rake in billions a year, will be future targets of federal prosecutors.
“I can’t see how this doesn’t become a major political issue,” he added, because patients are upset about how much more they’re paying for drugs and medical treatment.
That’s due to higher prices, many people switching to high-deductible insurance plans and those in traditional plans being saddled with a higher percentage of costs.
Valeant drew Congress’ interest following its purchase of the life-saving heart drugs Nitropress and Isuprel. The company, known for gobbling up smaller drugmakers to get their products and then slashing jobs and research programs, jacked up the drugs’ prices shortly after buying them from Marathon Pharmaceuticals in February, tripling one and raising the other sixfold.
The company said it received one subpoena recently from the U.S. Attorney’s Office for the District of Massachusetts and another from the U.S. Attorney’s Office for the Southern District of New York. They’re among several U.S. Attorney offices known for prosecuting drugmakers for crimes such as overcharging government health programs and marketing medicines for unapproved uses.
In a statement, Valeant Chairman and CEO J. Michael Pearson said his company will cooperate with the federal inquiries, adding we “believe we have operated our business in a fully compliant manner.”
Valeant shares fell more than 4 percent in trading Thursday, to $168.87, and are down 30 percent over the last four weeks.
In September, Democrats on the House Committee on Oversight and Government Reform wrote to the committee’s Republican chairman seeking a subpoena forcing Valeant to turn over pricing information.
That move came after Sanders and fellow Democrat Rep. Elijah Cummings of Maryland, who have been investigating rising drug prices for a year, were rebuffed by Valeant when they requested documents about the drugs’ price hikes. Valeant then claimed that information was “highly proprietary and confidential.”
In a July hearing, Sen. Claire McCaskill of Missouri, the ranking Democrat on the Senate’s Permanent Subcommittee on Investigations and the Senate Aging Committee, questioned Valeant’s then-chief financial officer, Howard B. Schiller, about Valeant’s justification for raising Isuprel’s price from $215 to $1, 346 per vial and Nitropress from $257.80 to $805.61 per vial. Unsatisfied with Schiller’s explanation that the drugs had been underpriced, McCaskill sent Valeant 22 questions about its pricing for and revenue from the drugs, costs of production, other drugs for which it has hiked prices and additional details.
McCaskill said Thursday that she didn’t receive a response until Wednesday night — after the subpoenas were issued. The rambling eight-page letter from Pearson didn’t answer most of the questions, but said Valeant “implemented these increases in list prices to ensure that the prices reflected the value of the drugs to” hospitals and patients.
By Linda Johnson