Turing Pharma’s Stunning Price Hike Casts Shadow on Entire Industry

In mid-September Martin Shkreli, CEO of little-known Turing Pharmaceuticals, attracted international attention for a stunning decision to hike the price of one of the company’s flagship products.

Shkreli announced that Turing was increasing the price of Daraprim, a drug that fights toxoplasmosis and is the standard of care for many AIDS and cancer patients, by more than 5000 per cent – from U.S. $13.50 a pill to $750. Daraprim had only become part of the Turing portfolio the previous month.

The public backlash to the pricing move was swift and emphatic. Pundits in the mainstream and social media characterized Turing as a predatory company looking to maximize profit at the expense of vulnerable and dependent patients.

Democratic Presidential candidate Bernie Sanders had a field day attacking the decision as yet another sign of malfeasance in the pharmaceutical industry. Fellow candidate Hillary Clinton took to Twitter to proclaim, “price gouging like this in the specialty drug market is outrageous”.

Shrekli was forced to quickly announce a reversal to the price hike and has virtually disappeared from public over the past month to escape public vitriol. While the scandal has directly implicated Shrekli and Turing, it also has broader implications for the international biopharmaceutical industry. Stepping back from this specific case, three key points come into sharp focus:

First, the actions of one company, no matter how small, can have a huge image on the reputation and business environment of the whole industry.
Seen through one lens, the Turing example can be seen as egregious but isolated. However, reaching this conclusion ignores the fact that the practice of sharply hiking the prices of late-market or post-LOE products is an increasingly common move for a wide range of companies – and not just smaller pipeline players like Turing. (Another headline-grabbing example is Valeant Pharmaceuticals, whose public profile and reputation was taking a hit for some of the same pricing policies even before the company became embroiled in its current specialty pharmacy scandal.)

Second, reputational damage cuts across national borders.
Even if the Turing price hike was a move aimed at U.S. markets, the PR consequences immediately transcended a single geography. Drug prices in the United States continue to lead the world, but any coverage of sky-high drug prices will resonate with payers, policymakers and the public well beyond the US, particularly if profiled in the international media.

Third, the pricing-based PR and market access challenges faced by industry will get worse before they better (IF they get better).
The media firestorm spurred by Turing’s decision has created a fertile environment for interest groups looking to fundamentally change how drugs are paid for and what they cost. For example, the Center for American Progress, A Washington D.C.-based think tank, capitalized on the Turing debate to release a proposal calling for a host of cost containment and pricing reforms, including the establishment of a national comparative effectiveness body. Whether a “NICE-for-America” model gets any traction remains to be seen, but the environment certainly seems conducive for reform.

Here in Canada, the Turing debacle played out against the backdrop of a federal election campaign and a discussion about National Pharmacare. The story gives further ammunition to those pushing for more government involvement in drug pricing setting and negotiation.

The long-term impact of Turing’s ill-considered price hike remains to be seen, but the fall of 2015 could well mark a turning point in how the United States – and, in turn, Canada – thinks about pharmaceutical pricing.

Ross Wallace