Welcome to our new website! If this is the first time you are logging in on the new site, you will need to reset your password. Please contact us at email@example.com if you need assistance.
Your membership opens the door to free learning resources on demand. Check out the Member Knowledge Center for free webcasts, publications and online courses.
The highly-anticipated fifth edition is here! Get the must-have resource for achieving compliance with medical device regulations.
Hear from leaders around the globe as they share insights about their experiences and lessons learned throughout their certification journey.
As the anger over Martin Shkreli’s infamously steep and entirely arbitrary price hike of a rare disease drug has subsided, Congress has begun to turn its attention to other companies, such as Valeant Pharmaceuticals, which rely on price gouging as a foundation of their business models.
On Wednesday, the Senate’s Special Committee on Aging grilled not only Valeant’s outgoing CEO, J. Michael Pearson, but its former chief financial officer, Howard Schiller, and one of the company’s top investors, Bill Ackman, whose hedge fund owns a 9% stake in the Canadian company.
As Pearson acknowledged in his written testimony ahead of the panel (he will be replaced by Joseph Papa, former CEO of Perrigo, possibly as early as next Monday), the company was “too aggressive – and I, as its leader, was too aggressive – in pursuing price increases on certain drugs.”
He also makes clear that Valeant only acquired the heart medications Nitropress (nitroprusside) and Isuprel (isoproterenol) from Marathon Pharmaceuticals, both of which saw their list prices increase by between 200% and 525% once the drugs were acquired, to hike the prices of the drugs and make money.
At Wednesday’s hearing, Ackman recommended that Valeant make a 30% price reduction on Nitropress and Isuprel. Pearson on Wednesday also could not name a single drug offered by Valeant that has not seen a price increase in the US.
Pearson added in his testimony: “Let me state plainly that it was a mistake to pursue, and in hindsight I regret pursuing, transactions where a central premise was a planned increase in the prices of the medicines, such as our acquisition of Nitropress and Isuprel … In retrospect, we relied too heavily on the industry practice of increasing the price of brand name drugs in the months before generic entry.”
The company now claims that, although it hasn’t lowered the prices for any of these drugs, it has established ways to ensure discounts and rebates for hospitals and patients.
Sen. Claire McCaskill (D-MO) contended that hospitals she’s spoken with have not received any discounts on Nitropress or Isuprel.
For prescription products purchased by consumers at retail pharmacies, Pearson also claimed that Valeant launched a 20-year program with Walgreens that will provide savings, including “an average 10% list price reduction for a majority of our branded dermatology, ophthalmology, and women’s health products, and up to a 95% reduction on certain branded
In addition to requesting numerous documents from Valeant and other pharmaceutical price gougers, the Senate committee also questioned Shkreli’s former company, Turing Pharmaceuticals and others with regard to the foundations of their businesses.
Many of the allegations against the likes of Turing and Valeant stress the fact that these companies do not actually conduct research and develop medical products, but instead acquire drugs, raise the prices and profit off the price increases.
In Valeant’s defense, Pearson said that the company spent about 8% of US branded pharmaceutical revenue last year on research and development (R&D), while most large pharmaceutical companies like Pfizer, Roche and Johnson & Johnson spend somewhere between 11% and 20% of annual revenue on R&D.
And for 2016, Pearson said the company will spend about $400 million on R&D, which means that if the company hits its target of nearly $11 billion in revenue, that would mean it’s spending about 3.6% of revenue on R&D, or about half of its R&D spend last year.
But this claim made by both Pearson and Ackman that Valeant is done with its price gouging tactics does not seem to jibe with what has occurred most recently.
Wells Fargo's analyst David Maris estimated that even in the first quarter of 2016, the average price of Valeant's top 30 products increased by 78% year over year.
“As for turning over a new leaf, I remain skeptical,” Sen. Claire McCaskill (D-MO) said in Wednesday’s hearing, citing Maris’ statistics. “I think it’s misleading to pretend as if this is an issue with four drugs. This is [Valeant’s] business model.”
And if Valeant does what it says and halts such price increases, the company will still have to do something new to battle against the debt it’s accrued, which recently has amounted to more than double the company’s worth.
Statement of J. Michael Pearson Chief Executive Officer and Director, Valeant Pharmaceuticals International, Inc. before the Special Committee on Aging United States Senate
Tags: Shkreli, Valeant, Ackman, Pershing, Walgreens