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FDA aims to curb price gouging with list of off-patent medicines without generic competition

  • The Food and Drug Administration published a list of off-patent medicines without generic competition.
  • The list is aimed at spurring development and controlling drug costs.
  • Valeant is most exposed, should the list trigger more development.
Martin Shkreli arrives to federal court in Brooklyn on June 27th, 2017.
Justin Solomon | CNBC
Martin Shkreli arrives to federal court in Brooklyn on June 27th, 2017.

The Food and Drug Administration released a list Tuesday of medicines at most risk for price hiking of the Martin Shkreli variety: those that have lost patent protection but have no generic competition.

That list includes Daraprim, or pyrimethamine, the anti-parasitic drug whose price Shkreli hiked 5,000 percent as CEO of Turing Pharmaceuticals in 2015, vaulting him to international infamy that's even affecting jury selection in his just-started fraud trial.

But the FDA's new list — designed to spur generic competition to bring down prices or deter gougers in the first place — may hold a bigger risk for another company, according to Wells Fargo analyst David Maris: Valeant.

"While the list encompasses a large number of branded products from many manufacturers, our review shows no company in our coverage universe is more exposed to this new FDA effort than Valeant," Maris wrote in a research note Tuesday.

He estimates, citing data from industry researcher IMS Health, that products included on the FDA's list generated $713 million in 2016 revenue for Valeant. That's out of a total $9.67 billion in sales last year.

"We note that some of these products are listed by Valeant as at risk of facing potential competition in the coming years," Maris wrote. "However, what is new is the FDA's focus on expediting competition on these products. We believe this is a risk factor for investors to be aware."

Those drugs include Lotemax, an eye product from Valeant-owned Bausch + Lomb that drew $218.6 million in sales last year, as well as Syprine and Cuprimine, medicines for Wilson's disease that were highlighted in a congressional hearing last year on Valeant's price hikes. Those medicines drew $147.4 million and $170.6 million in 2016 sales, respectively, according to Maris' note.

"If generics [companies] are not already working on these, they will now," Maris told CNBC in an email. "It is a shopping list. For the generic companies already working on these, the FDA news is great for them as it shows their filings, if early, will get priority."

Valeant didn't immediately respond to a request for comment. The company's new CEO, Joe Papa, has repeatedly said the troubled drugmaker is turning over a new leaf, moving on from its acquisition-fueled, price-hiking strategies that cast it in the same light as Shkreli's Turing.

Some industry watchers responded with skepticism that the FDA's list would be used to promote competition to bring down prices, rather than as a blueprint for which drugs are ripe for that kind of exploitation.

As for the so-called pharma bro, Shkreli is facing eight counts of securities fraud, conspiracy to commit securities fraud and conspiracy to commit wire fraud in a federal court case taking place in Brooklyn, New York.

Though the charges have nothing to do with his price hike on Daraprim, a number of potential jurors were dismissed because they associate Shkreli with those actions. One called him "the face of corporate greed."

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