Even as public outrage over dramatic price increases on generic drugs is growing, a federal antitrust investigation is heating up. Grand jury subpoenas have been sent to Taro Pharmaceutical Industries and two of its senior execs.
On Friday, Taro ($TARO) issued a SEC filing saying that the company and two senior execs on the commercial side had received subpoenas from the Justice Department “seeking documents relating to corporate and employee records, generic pharmaceutical products and pricing, communications with competitors and others regarding the sale of generic pharmaceutical products,” and other matters. Taro, a unit of India’s Sun Pharmaceutical, is one of a growing list of generic drugmakers that have been subpoenaed by the DOJ.
A year ago, aggressive price hikes on generic drugs caught the public’s attention after then-CEO of Turing Pharma Martin Shkreli practically bragged about the 5,000% price hike the company had taken on daraprim, a standard-of-care drug for toxoplasmosis infections. While the drug is a generic, Turing was the sole producer at the time, giving it a monopoly position. It raised the price from $13.50 per pill to $750 a pill shortly after gaining ownership of the drug.
More recently, attention has shifted to generic producer Mylan ($MYLN) and its 400%-plus price jump for EpiPen, an injector for sometimes-fatal allergic reactions to things like peanuts. Because of a range of factors, Mylan also dominates the market, although epinephrine is also a generic.
But a recent look by the Los Angeles Times found that producers of generic drugs for several years now have been raising prices on some older generics significantly, even when there is lots of competition. Its review of Medicare data found that 8 of the 10 drugs that had the biggest percentage price hikes in 2014 were generic medicines made by multiple manufacturers.
One example it pointed to was ursodiol, a generic drug for gallstones produced by 8 drugmakers, including Mylan. It found that after Lannett ($LCI) bumped its price for ursodiol more than 1,000% to $5.10, from about 45 cents a capsule, competitors followed Lannett’s lead and priced their versions at about the same amount. Experts told the newspaper the same scenario has played out time and time again, with health insurers, federal health programs and consumers taking the financial hit.
Taro specializes in dermatology drugs, an area where prices have been going up significantly in recent years. In 2012, pharmacy benefit manager Express Scripts pointed out that spending on dermatology drugs was up more than 18% in a short time, primarily because of higher prices for individual drugs. Most of those are made by Taro, Perrigo ($PRGO) and Fougera, which Novartis ($NVS) now owns.
A study last year published in the Journal of the American Medical Association showed that prices for 19 brand-name dermatology meds, including two from Valeant Pharmaceuticals, had increased almost fivefold, on average, over 6 years. Price hikes on drugs from Big Pharma players Novartis and GlaxoSmithKline ($GSK) were also cited.
Like Taro, Lannett and Mylan are among a number of drugmakers that also have acknowledged receiving subpoenas from the DOJ. Others include Allergan ($AGN), which recently sold its generics unit to Teva ($TEVA), Par Pharmaceutical and Impax Laboratories ($IPXL). Some have said they have been asked to provide any communications they have had with competitors over drug prices.
Last week, New York Attorney General Eric T. Schneiderman said his office was investigating Mylan because it may have “inserted potentially anticompetitive terms” into contracts with New York local school systems. According to the agreement, schools must not buy competitor products for 12 months as a condition to receive free injectors from Mylan.
Keeping the issue front and center for the public have been congressional inquiries into the pricing by Turing, Valeant and Mylan. Additionally, presidential candidate Hillary Clinton has pointed to the price hikes as an example of one part of the healthcare system that needs to be reined in. Among proposals she rolled out after the EpiPen pricing issue caught fire is a drug price oversight group to ensure patient access to lifesaving drugs. The group would scour for “outlier” price increases, accounting for a treatment's production costs and its value to patients.
- here’s the SEC filing
Some generic drug prices soar despite heavy competition
Mylan probed for 'anticompetitive' EpiPen pricing as consumers pile on with lawsuits
Thanks, Turing. Your 5000% price hike puts pharma in the election hot seat
Amid still-raging EpiPen scandal, Clinton rolls out plan to fight drug price hikes
JAMA: Valeant's 18-fold price hikes top widespread increases in dermatology prices