Turing, Valeant hiked prices for max profits, then scrambled to quash the bad PR: Documents

Former Turing CEO Martin Shkreli

Later this week, former Turing Pharmaceuticals CEO Martin Shkreli and interim Valeant ($VRX) CEO Howard Schiller will appear before Congress to answer for their companies' mammoth price increases. They'll also have to answer for the methods they used to draw attention away from those hikes.

According to a pair of memos released Tuesday by the House Committee on Oversight and Government Reform--the committee conducting this week's hearing--both companies purchased the treatments with the intention to raise prices and reap profits.

In one email from Shkreli to Turing's chairman, the former skipper responded to news of progress toward acquiring Daraprim, a drug used by AIDS patients, with "$1bn here we come." And in another, he called the company's jack-up on the med's price--to $75,000 per bottle from just $1,700--a "handsome investment for all of us."

In Valeant's case, emails before the purchase of Marathon Pharmaceutical heart drugs Isuprel and Nitropress show the company indicated that any deal for the therapies "would also have to be a price play." One email from an outside consulting firm's analyst to company CEO J. Michael Pearson outlines how "select manufacturers … have pick(ed) up these types of old products and raised prices dramatically," adding that "smaller/older products … are not reviewed on formulary" and that "products have been in the system for so long that reviews are practically rubber stamped."

Valeant CEO J. Michael Pearson

Beyond planning the pricing moves to maximize profits, both companies also developed public relations strategies to distract from the moves they made, according to the memos. In Turing's case, that involved plans to divert attention to patient assistance programs and purported R&D efforts, the memo says, pointing out that "internal communications show that Turing officials joked about this strategy and did not in fact intend to lower the price of Daraprim" in response to public outcry.

As one outside consultant wrote to a Turing director in early October, "What I'd be looking for is something along the lines of Turing lowers the price by xx% and announces a package of assistance programs for patients that guarantees no patient will be denied access nor will they pay anymore. … This will force reporters to focus on the byzantine nature of drug pricing and healthcare and ensure the patient message gets out."

Valeant also sought to get its price increases out of the public eye by focusing on patient assistance programs--particularly for meds it could claim were orphan drugs. One undated internal company presentation identified "critical risks" to Valeant's Coverage Plus Program. It listed minimizing media coverage of the price increases and privately addressing concerns from patients, insurers and managed care providers as ways to mitigate its PR risk. The presentation also contained a section titled "Payor Risk … At What Price (Per Patient Per Year) Does an Orphan Drug 'Hit Your Radar Screen'?"

But price increases--and efforts to keep them quiet--aren't limited to Turing and Valeant, and the committee knows it. Big Pharma players and smaller specialty companies alike--from Pfizer ($PFE) and Amgen ($AMGN), to Horizon Pharma ($HZNP) and Vanda Pharmaceuticals ($VNDA)--have all taken recent price increases, according to analysts, and they haven't gone unnoticed.

"The documents show that these tactics are not limited to a few 'bad apples,' but are prominent throughout the industry," Rep. Elijah Cummings (D-MD) said in a statement.

- read the release
- read the Turing memo (PDF)
- read the Valeant memo (PDF)

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