Clinton calls drug price hike 'outrageous,' vows plan

Democratic presidential contender Hillary Clinton on Monday blasted a 5,500-percent overnight hike in the price of a drug used to treat malaria and dangerous parasitic disease, calling it "price gouging" and promising to announce a plan Tuesday to tackle that and other high prescription drug costs.

The former secretary of state's stance about the sky-high new price of the medication known as Daraprim, which was announced via Twitter, worried critics of drug-price controls, who warned that such "anti-industry populism" could badly hurt the pharmaceutical industry—and stock prices.

Clinton had already said on Sunday's edition of CBS's "Face the Nation" show that "I'm going to address" drug prices, "starting with how we're going to try to control the cost of skyrocketing prescription drugs."

"It's something I hear about everywhere I go," Clinton said.

Biotech stocks reacted to Hillary's tweet Monday, dropping by more than 4 percent industrywide.

Later in the day, a Capitol Hill source said that Rep. Elijah Cummings, D-Md., is planning to request information about Daraprim's "astronomical price increase" from drug's new owner, Turing Pharmaceuticals. Cummings has been conducting an investigation of recent drug price increases.

Sanford Bernstein analyst Ronny Gal said that if Clinton wins the White House, "I would say" that drug prices will take a hit.

"The entire argument that the government will begin to behave [as controller of prescription prices] is something the drug industry has been fighting tooth and nail," Gal said. "If that actually becomes a policy and looks like it's coming to a chance of passing you'll see drug company valuations cut 20 percent across the board."

Before Clinton tweeted her reaction to the news about Daraprim, Dr. Scott Gottlieb of the American Enterprise Institute said that a New York Times story about the drug's price hike comes a time where there already was "a lot of negative sentiment" about drug prices, and that "the industry is vulnerable" to those public feelings.

Earlier this month, the Kaiser Family Foundation said a survey had found that 72 percent of the public considered drug prices unreasonable. And Clinton's leading challenger for the Democratic presidential nomination, Sen. Bernie Sanders of Vermont, has already introduced a plan to deal with drug prices, which includes allowing Medicare to negotiate prices with pharmaceutical companies and allowing people to import drugs from Canada, where medication is less expensive.

Gottlieb said "anecdotes like" the huge price increase of Daraprim "hurt and can help drive bad legislation, and Clinton is sure to propose a basket of Obamacare 'fixes' this week that will include populist calls for drug price controls."

"The problem is that there is more anti-industry populism on both sides of the political divide now. I still don't think the votes are there to get anything through the House [of Representative] but the industry is very vulnerable to things like Medicaid 'best price,' " Gottlieb said. Medicaid's best price program is a rebate scheme that helps lower federal and state costs for covering prescription drug purchases for Medicaid enrollees.

"Ultimately anything that would extend drug price controls would have to come as a pay for on broader legislation that gave Republicans something in return. But I do think the drug industry should be much more worried than they are that they could be on the receiving end of adverse legislation."

Hillary Clinton
Getty Images
Hillary Clinton

In an investor's note, analyst Michael Yee of RBC Capital Markets, wrote that "Hillary and health-care pricing will get noisy ... be ready."

"We warn investors to prepare for this drug pricing volatility and noise as we go into 2016 and we have said that drug pricing noise could turn up in 2016 due to the election year," Yee wrote.

"While we are clear we don't think anything material would likely get through legislation, given it is still very early, this has been discussed before and isn't new, and Republicans control Congress, it is still a risk factor to 'money flow' in health care that we need to watch," Yee wrote.

Yee said that Clinton's imminent drug pricing plan, coupled with a New York Times article about Daraprim, along with other factors, has created "a perfect story" facing drug stocks.

The New York Times reported Sunday specialists in infectious diseases were "protesting" that Daraprim, a 62-year-old drug also known by its generic name, pyrimethamine, had had its price raised from $13.50 per tablet to $750" immediately after the medication was acquired in August by the start-up Turing Pharmaceuticals. Daraprim, which is often used to treat the parasitic infection known as toxoplasmosis, had sold for as little as $1 or less in recent years.

In a letter to Turing, the Infectious Diseases Society of America asked the company to drop the price of Daraprim, saying there is "no justification for an increase of this magnitude for a medication approved by the U.S. Food and Drug Administration in 1953."

"Under the current pricing structure, it is estimated that the annual cost of treatment for toxoplasmosis, for the pyrimethamine component alone, will be $336,000 for patients who weigh less than 60 kilograms and $634,500 for patients who weigh more than 60 kilograms. This cost is unjustifiable for the medically vulnerable patient population in need of this medication and unsustainable for the health-care system," the IDSA wrote.

The organization also said it was concerned that the price of the drug would preclude hospitals from stockpiling in anticipation of need.

Martin Shkreli, the founder and CEO of Turing, told the Times that the money it was making on Daraprim would be used to develop a better medication for toxoplasmosis, with less toxicity than Daraprim.

"This isn't the greedy drug company trying to gouge patients, it is us trying to stay in business," Shkreli told the Times. On Monday, he said that that about half the supply of Daraprim is sold for a dollar per pill, and that the company would not deny access to the drug based on need.

Shkreli, during an appearance on CNBC's Power Lunch, said "No," when asked if he would reduce the price of the drug in the face of calls to do so.

"We feel this is an appropriate price," said Shkreli. He later adding that when Turing purchased Daraprim "we definitely planned on raising the price, that's for sure."

He said that before the purchase, it was "pretty clear than Daraprim was not priced appropriately."

"We took it to a place where we can make a comfortable profit," Shkreli said.

He also argued that the drug is not excessively priced when compared to other specialty medications such as the hepatitis C drug Sovaldi, which costs $84,000 for a 12-week regimen.

"We're certainly not the first company in the country to raise drug prices," Shkreli said. "There have been much larger price increases by much large companies."

But Dr. Carlos del Rio, an AIDS expert who is a professor at Emory University's School of Medicine, disputed Shkreli's claim that there is need for a new drug to treat toxoplasmosis.

"This is a drug that has no major side effects ... it's usually very well tolerated," del Rio said. "It's not a patient population that is clamoring for a better drug."

Del Rio said Daraprim's price hike has made it "hard for hospitals and clinics to get access to the drug because their budgets were not prepared" for the increase.

He also said it is another example of a drug whose price should be low "defying the gravity of a free market."

"This is something that really Congress has to look into, and politicians have to look into," del Rio said.

The price increase of Daraprim is "is clearly hurting our patients and increasing the price that the health-care system has to pay," he said.

Del Rio said he would like, as Sanders has suggested, to allow consumers to important drugs from other countries. He said Daraprim is available in India "for a few cents," and sells in Mexico for "about 50 cents a tablet."