Developments in the Prescription Drug Market: Oversight

TAKEAWAYS:

• Former CEO of Turing Pharmaceuticals, Martin Shkreli, refused to answer questions from Committee Members, opting instead to invoke his Fifth Amendment right.
• The Food and Drug Administration’s (FDA) lengthy review process for generic drug applications is causing a massive backlog of more than 3,700 applications.
• In the absence of generic competition, pharmaceutical companies like Valeant Pharmaceuticals and Turing Pharmaceuticals to increase drug-manufacturing prices.
• Current Turing CEO Nancy Retzlaff testified that the company is losing money, yet confirmed the company spends on lavish items.
• In the aftermath of the Patient Protection and Affordable Care Act (PPACA) the cost of prescription drugs continues to drain Americans’ pocketbooks.

PURPOSE:

• To discuss methods and reasoning behind recent drug price increases.
• To discuss the role of pharmacy benefit managers in negotiating drug prices, and address concerns about the lack of transparency in pricing contracts. 
• To discuss impediments to a timely review and approval of generic drug applications, and how the government can improve the efficiency and competitiveness in the market. 

BACKGROUND:

• The wholesale price for thirty of the top-selling U.S. drugs increased 76 percent between 2010 and 2014, which represents eight times the general inflation rate.
• Pharmaceutical companies cite, among other things, shareholder accountability and high research and development costs as reasons for price increases.
• Industry analysts have cited “declining market competition” as one of the factors driving recent drug price increases.  
• Generic drugs, which can cost eighty to eighty-five percent less than their brand equivalents, historically have played an important role in the health care marketplace by offering a lower-cost alternative to brand drugs.
• However, the number of generic drug applications submitted to the U.S. Food and Drug Administration (FDA) is outpacing approved applications by a three to one margin with approximately 3,800 applications still awaiting action.  
• Under the Generic Drug User Fee Amendments of 2012, the FDA will receive approximately $1.5 billion over five years from industry fees to speed the public’s access to safe and effective generic drugs.

KEY VIDEOS:

Chairman Jason Chaffetz (R-UT): “Did you spend money on fireworks?”
Ms. Retzlaff: “Yes”
Chaffetz: “Did you spend money on a cigar roller for the yacht night, $800?”
Ms. Retzlaff: “Yes”
Chaffetz: “Ok, so don’t tell me that you’re losing money. Don’t try to pretend and tell us that this $750 is justified, when you got a woman whose got AIDS. And what is she supposed to do, is she supposed to tweet Martin and try to get that for a penny?”

Rep. Jody Hice (R-GA): “We are requesting (that) something be done. And that’s the problem. You have these targeted dates but … the backlog is not getting any better. It is getting worse.”

Rep. Blake Farenthold (R-TX): “You’re saying you’re getting down to 10 and 15 months, but you’ve basically created a 10 and 15 month monopoly for anybody who’s a single source of a generic drug who do that kind of price increase and name their price for that drug.”