NEW YORK – A New York Times article excoriated Valeant Pharmaceuticals International, Inc. (VRX) for the amount the company spends on research and development versus the amount it spends on mergers and acquisitions after the Quebec-based company quadrupled the price on a 55-year-old drug that treats Wilson Disease, a genetic disorder.

 

The Times highlights a 66-year-old retiree on Medicare who will now have to pay more than $1,800 out of pocket each month for the medication. Before the price increase he had to pay about $366 per month for the half-century old Cuprimine. After the price increase, the price per pill is about $260, the Times said.

According to a Deutsche Bank (DB) report, Valeant increased prices on its brand-name drugs an average of 66 percent, about five times more than its other competitors, the Times said. Valeant, the article says, spends only about 3 percent of sales generated revenue on research and development, “which it views as risky and inefficient compared with buying existing drugs.” That amount was about $246 million in 2014. The article compares that amount to 15 to 20 percent other companies spend on research and development.

However, a Forbes rebuttal argued that acquiring existing research is also costly and in one lump sum is similar to financing research, which the Times ignores.

“…spending $36 billion on buying drugs that have been developed is economically similar to spending $36 billion on developing drugs. For who ends up with the money? The people who have developed the drugs? Therefore it’s the same thing, isn’t it,” the Forbes piece said.

Drugmakers argue that the price increases are not directly felt by the majority of consumers due to the price negotiations of insurance companies. Michael Pearson, Valeant’s chief executive officer, said standard practices are to increase the price of drugs as it nears the end of its patent protection and faces the cost of generic competition, the Times reported.

Valeant has a reputation as a “serial acquirer” that often elects to increase the cost of drugs following an acquisition. Earlier in 2015, Valeant acquired Salix Pharmaceuticals, Ltd. (SLXP) and the deal included rights to two cardiac drugs, Nitropress and Isuprel, After the deal, Valeant increased the price of the medications by 212 percent and 525 percent, respectively. Another drug that saw a price increase from that deal was the diabetes pill Glumetza, which saw an 800 percent price increase, the Times said.

But Valeant isn’t the only company to increase the price points of its drugs. Pfizer Inc. (PFE) has raised the price of 133 of its drugs, including two 9.4 percent increases for its blockbuster pain medication Lyrica. Additionally, Merck & Co. (MRK), has increased the prices of 38 of its medications, according to Bloomberg. Both companies raised the prices of some of their drugs by up to 10 percent, Bloomberg said.

Under Pearson’s leadership, Valeant has seen massive growth, although there has been some criticism of its practices. Recently, company stock dropped 20 percent, prompting Pearson to pen a note to employees explaining company strategy.

Valeant’s Pearson, as well as Martin Shkreli’s Turing Pharmaceuticals’ chief Martin Shkreli have both been mentioned as possible subjects of a Congressional investigation of pharmaceutical pricing. In August, Turing acquired a drug used to treat toxoplasmosis and increased the price 5,000 percent, which prompted former U.S. Secretary of State Hillary Clinton, a candidate for the Democratic presidential nomination, to call for price caps on medications. Others have picked up the call, including U.S. Sen. Bernie Sanders of Vermont, who is also seeking the Democratic nomination for president, and U.S. Rep. Elijah Cummings, a Maryland Democrat, to call for an investigation. Sanders and Cummings requested Pearson and Valeant release business data related to the price increases, but the company refused, saying the information was “highly proprietary and confidential.”

 

Valeant Pharmaceuticals Under Fire Again Following New York Times Report
October 5, 2015
By Alex Keown, BioSpace.com Breaking News Staff

Source: BioSpace