In October of 2015, Massachusetts General Hospital examined the impact on its inpatient pharmacy budget of Turing Pharmaceuticals' 5,000% price increase for the toxoplasmosis treatment Daraprim. The hospital concluded Turing had made the drug "prohibitively expensive," and decided to switch patients to another antibiotic, according to documents released by the House Committee on Oversight and Government and Reform on Tuesday.

A week after making the switch, Mass General sent a complaint to Turing demanding immediate assistance after receiving what it claimed was "inaccurate/misleading information by the dedicated Daraprim team." The head of investor relations at Turing shared the complaint internally, saying "I think we are acting a little like a deer in the headlights, and need to take some action steps now. If a hospital like Mass General is having issues we are in trouble."

Glimpse into Turing and Valeant

In advance of Thursday’s much-anticipated hearing on drug pricing, the House Oversight Committee reviewed 250,000 pages of documents from Turing and 75,000 pages of documents from Valeant Pharmaceuticals, including emails, internal company projections, and communications with hospitals and pharmacies. Representative Elijah Cummings, ranking member of the committee, released two memos on Tuesday summarizing the committee’s potentially damaging findings.

The memos open a window into the pricing strategies of Turing and Valeant Pharmaceuticals and their subsequent internal discussions on blowback from patients, hospitals, and advocacy groups.

The two memos detail the calculated profit-seeking strategy at Turing and Valeant by increasing the price of off-patent drugs, often dramatically. At the same time, Turing and Valeant sought to diminish negative publicity by blunting the impact of price hikes through patient assistance programs. It should be noted, however, the excerpted findings from the original documents were selected by the Committee as illustrative of its overall criticism.

Both companies have come under intense scrutiny recently after hiking the price of relied-upon older drugs, like Turing's Daraprim or Valeant's heart meds Isuprel and Nitropress. Turing's former CEO, Martin Shkreli, was kicked out following his arrest for securities fraud related to his actions as MSMB capital and the pharma company Retrophin. Valeant has had leadership turmoil of its own, stemming from CEO Michael Pearson’s hospitalization for severe pneumonia. The company first appointed a three-person executive team to temporarily take his place before appointing its CFO, Howard Schiller, as interim CEO.

Nitropress and Isuprel

In particular, the excerpts from the documents suggest Valeant bought two heart medications, Isuprel and Nitropress, specifically because of the opportunity to significantly increase the price. Valeant purchased the drugs in February 2015 and increased their prices by 525% and 212%, respectively, according to the memo.

Valeant purchased Isuprel and Nitropress, increasing their prices by 525% and 212%, respectively.

auto image + link

In an email to Pearson in December 2014, an outside consulting firm wrote, "In a nutshell, most of the products [including Nitropress and Isuprel] reviewed...are not on the radar and have material pricing potential...Products have been in the system for so long that reviews are practically rubber stamped."

Other presentations expanded upon the pricing potential, indicating the drugs could be increased by several orders of magnitude. Following the acquisition of the drugs and sharp price hikes, then-CFO Howard Schiller told Pearson that price (opposed to volume) represented about 80% of Valeant's growth in the first quarter of 2015.

Valeant increased the price of 20 other prescription drugs in the U.S. by 200% between 2014 and 2015, according to the memo. In order to lessen the impact of these price increases, the memo alleges Valeant used patient assistance programs to lower the cost seen by patients. “The documents obtained by the Committee suggest that Valeant focused on developing a public relations strategy to try to divert attention away from its price increases to its patient assistance programs.”

In response to the release of these documents, Valeant said it had tried to “set [its] prices at the appropriate levels” and conceded that the price it decided on for Nitropress and Isuprel was “too high.” Valeant has also pledged 30% volume based discounts for each drug and, under its new distribution partnership with Walgreeens, will offer 10% price reductions on some of its more popular drugs.

A $16,000 co-pay

The committee’s memo on Turing accuses Shkreli of purchasing Daraprim for “the purpose of increasing the price dramatically and making hundreds of millions of dollars by exploiting its existing monopoly before any competitors could enter the market.”

As Turing worked toward buying Daraprim, Shkreli emailed saying, “Nice work as usual.$1bn here we come.”

auto image + link

As Turing made progress toward buying Daraprim, Shkreli sent an email to the Chairman of the Board of Directors saying, “Very good. Nice work as usual. $1bn here we come.” Daraprim sales had totaled less than $10 million a year the four years prior to Turing’s acquisition.

After increasing the price to $750 a tablet from $13.50, Turing anticipated criticism and planned how to manage it. A July 2015 presentation concluded “many people feel the number of toxoplasmosis patients is too small to stimulate a significant lobbying effort were the cost of therapy to become an issue.”

However, costs did become an issue for patients with some co-pays skyrocketing to $6000 or more. The director of specialty pharmacy development at Walgreens in August 2015 emailed Turing’s director of business analytics to report a patient in North Carolina with a co-payment of $16,380.

Hospitals, like Mass General, also contacted Turing to complain about the price increases as they switched patients to other antibiotics.

PR strategy?

Turing turned to patient assistance programs to help reduce the cost of Daraprim to patients and attempt to prevent physicians from switching drugs. The chief commercial officer at Turing sent an internal email saying, “If the patient declined to accept the treatment due to a high co-pay then that would force substitution and build experience. We want to avoid that situation. The need to address co-pay assistance is a key success factor.”

Other internal emails show senior staff at Turing decided against committing to price reductions that could “potentially debilitate the business and risk future revenues.”

Overall, the impression from the emails highlighted by the committee suggests Turing aimed to emphasis its patient assistance programs as a PR strategy to lessen the negative publicity of price increases.

For its part, Turing has continued to assert that it is “committed to ensuring patient access and affordability for Daraprim,” and has pledged no patient will be denied access to the drug.