Wednesday, November 11, 2015

Prescription For Disaster?

I did a little light reading this morning on what is happening in the world of prescription drugs. You can't turn on CNBC or read the Wall Street Journal of late without seeing some discussion.

The latest salvo is regarding Horizon Pharma (which has made a bid for my DEPO) and Express Scripts. EXpress Scripts is stopping sale of Horizon medicines and suing HZNP for $140 million. HZNP is down about 20% on that news (which is hurting my DEPO a bit).

While it is a murky world, the issue seems to be that HNZP allegedly violated agreement on how drugs were to be sold. My read is that HNZP had been selling some of their drugs in essence directly, cutting out Exoress Scripts.  Not sure who is right or wrong, though it seems these Pharma Benefit Mangers, as middle men, have amassed a lot of clout.

Reading furthe in to the articles, you can see the game that is being played by HNZP and the much larger VRX. They have been buying specialty drug companies, that have perhaps one major drug - then they take them off shore for tax benefit and then they jack up the drug prices significantly.

The WSJ gave an example of HZNP doing this. They bought rights to a drug from AZN. On January 1st, 2014 they raised the price for 60 tablets to $959, a 597% increase. Then a year later, they hiked the price again to $1,678.  I am a free market guy, but that does feel like price gouging to me.

Of course the issues are (1) patients don't like to change drugs as there are risks with that, (2) as the patient isn't usually directly paying for the drug, they don't care that much and (3) patents give protection to the drug companies.

I found a quote by HZNP to be quite disturbing, "one of the company's primary drivers is and always will be limited financial impact to the patient and about 97% of Vimovo patients don't pay any out of pocket costs due to the company's efforts".

I have to call BS on that. It seems to me that their primary driver is to maximize their profit by price gouging.  The fact that insurance companies end up footing the bill directly and then we all pay more indirectly through higher insurance costs does not make the gouging ok.

Ok, I am getting off my soap box now. I do wonder if DEPO is doing this as well, they did just buy the rights to NUCYNTA and are increasing their sales.  I think there is enough smoke here to make me not buy more DEPO in my November tranche.

1 comment:

ChrisO said...

I may be a sucker, but I do believe the argument that drugs have to be expensive to pay for all the research and failures. BUT when a company simply buys another company/drug and jacks up the price, there is no justification for it.

I really hate for the government to have to get involved in such things, but this kind of thing gives the people arguing for the government to step in the justification to do just that.