UPDATED: Senate proposes incentivizing generic drugmakers to help control price hikes

Martin Shkreli
U.S. Senators are suggesting several strategies for preventing huge price increases such as those from companies started by Martin Shkreli.

After a yearlong investigation into rising drug prices, the U.S. Senate Special Committee on Aging has released a report that seeks to provide solutions to a tough conundrum: Legislators don’t want the government to intervene in pharmaceutical pricing, but they do want to prevent pharma companies from buying old drugs and then reaping huge profits from them by charging outrageous prices. The report lays out a variety of strategies, many of which center around incentivizing generic drugmakers to produce their own versions of old but essential medicines, in order to prevent monopolies that drive up prices.

Boosting competition is also central to a separate effort by a group of Senators who are urging incoming President Donald Trump to work with Congress to put a lid on drug prices.

“The answer is to figure out how we can revitalize the market so that generic drug producers have incentives to compete with companies that are buying up drugs and jacking up prices to make quick, exorbitant profits,” said Sen. Susan Collins (R-ME), chair of the Senate Special Committee on Aging, in an interview with the New York Times. 

The Committee on Aging’s investigation centered on four companies accused of said jack-ups, including two founded by the now notorious “pharma bro” Martin Shkreli: Turing Pharmaceuticals, which raised the price of Daraprim to treat toxoplasmosis, and Retrophin, seller of a specialty kidney drug called Thiola. Also included were Rodelis Therapeutics, which briefly held the rights to market Seromycin to treat tuberculosis, and Valeant Pharmaceuticals, which has been assailed for it’s pricing of drugs to treat the inherited disorder Wilson’s disease.

All four received letters last November from Collins and Sen. Claire McCaskill (D-MO) requesting documents about the drugs. The two were particularly concerned about Valeant’s Isuprel and Nitropress, which saw price hikes of 525% and 212% respectively.

The Senate report suggests encouraging generic competition by passing the Increasing Competition in Pharmaceuticals Act, introduced by Collins and McCaskill, which is designed to speed up the FDA review process for generic drugs. It also proposes that the government award vouchers for some of those products that would guarantee priority review by the FDA. Furthermore, the committee says, the Senate should pass another bill that would allow generic drugmakers to “commence expedited legislation” so they can obtain the samples of the branded drug that they would need to apply for approval for a generic version.

In a press release, Collins and McCaskill likened the pricing practices of the four companies they investigated to a “hedge fund model,” which McCaskill called “predatory, and immoral for the patients and taxpayers who ultimately foot the bill—especially for generic drugs that can be made for pennies per dose. We’ve got to find ways to increase competition for medicines and ensure that patients and their families aren’t being gouged.”

Valeant’s CEO spoke at a hearing in April and admitted the price hikes were “too aggressive.” In a statement issued after this week's Senate report, a Valeant spokesperson pointed out that the company has hired a new executive team, established a committee to look at patient access and pricing, and made other "tangible improvements" that "give us great confidence in our ability to advance our bold mission to improve patient's lives with our healthcare products."

Shkreli, who is fighting unrelated fraud allegations and is no longer involved with Retrophin or Turing, invoked his fifth amendment rights at one Congressional hearing early this year and did not appear at subsequent hearings. In March, interim Turing CEO Ronald Tilles said during a Senate hearing that virtually no patients pay the full price of Daraprim. In a statement issued in response to the Senate report, the company said "Turing has taken numerous steps to ensure access to Daraprim for every patient that needs it."

A spokesperson for Retrophin told Fierce that the Committee on Aging acknowledges in the new report that the company has abandoned Shkreli's business model and "has made significant investments to improve support for patients who use Thiola."

The new Senate report comes just a day after 20 Senators sent a letter to Trump asking him to take certain steps to help Congress rein in drug prices. The letter, spearheaded by Senators Sherrod Brown (D-OH) and Al Franken (D-MN) suggests allowing Health and Human Services to negotiate Medicare drug prices, forcing drug companies to be more transparent about how they set prices, and taking steps to boost competition. “The American public is fed up, with roughly 8-in-10 Americans reporting that drug prices are unreasonable, and that we must take action to lower costs,” they said in the letter. Bernie Sanders (I-VT), a frequent critic of the drug industry, was among the co-signers.

Just how Trump will respond to all of these pleas remains to be seen. Initially investors perceived him to be the business-friendly pick who wouldn’t interfere in drug pricing practices. But then, earlier this month, he vowed to Time magazine “I'm going to bring down drug prices."

Editor's note: This story has been updated to include comments from Valeant, Retrophin and Turing.