[Ip-health] Forbes: ​How Mylan And Pfizer Could Cause A Major Biotech Backlash

Zack Struver zack.struver at keionline.org
Thu Aug 25 10:31:30 PDT 2016


AUG 25, 2016 @ 08:31 AM

How Mylan And Pfizer Could Cause A Major Biotech Backlash

Steve Brozak

You know you’re in the middle of a crisis when Martin Shkreli defends your
pharmaceutical company’s price hikes.

That’s exactly what happened to Heather Bresch, CEO of Mylan Inc., when
Martin Shkreli appeared on CNBC to affirm the legitimacy of the $600 price
for an EpiPen, an emergency treatment for people during a life-threatening
allergic reaction.  In 2011, Mylan’s EpiPen was just $164.  While there are
legitimate questions around Mylan’s individual pricing action, scrutiny
could become industry-wide very quickly after Labor Day when the political
campaign season goes into full gear and there could be far reaching
consequences for the biotech financial markets.

However Mylan is only one of the two bookends for the rising angst over
pharmaceutical drug prices.  The other is Pfizer with its $14 billion bid
for Medivation, which markets Xtandi, a drug for advanced prostate cancer.
Xtandi has become controversial in Washington, D.C. where it’s become
common knowledge the drug benefitted from generous amounts of U.S. taxpayer
dollars through grants and programs sponsored by the NIH and Department of
Defense.  Yet patients in the U.S. pay as much as four times as much for
Xtandi as patients in other countries.  In Japan and Sweden, Xtandi costs
$39,000 compared to the $129,000 Americans pay for the same drug.  The
effort to reduce the price of Xtandi has been led by two non profit groups,
including the Union for Affordable Cancer Treatment,which released this
comprehensive call for price controls for the drug.

Today patient copays for many lifesaving drugs cost end-users more than the
drug itself cost a few years ago.  Even with so-called “good insurance”
people are being swamped by the rising cost of drugs at a time when wages
have been stagnant for a decade or more.  Public dissatisfaction with high
drug prices became focused when Martin Shrkreli’s company, Turing
Pharmaceutical, raised the price of an old drug, Daraprim, from $13.50 a
pill to $750 overnight.  Around the same time the pricing and marketing
practices of Valeant came to light and Congressional hearings visited a
level of scrutiny never seen before.  These events heightened the
undercurrent of dissatisfaction with pharmaceutical price increases that
don’t make headlines.  Now with controversy around Xtandi and Mylan’s
EpiPen, there will be renewed calls for drug price controls.

It’s almost a forgone conclusion that Pfizer’s acquisition of Medivation
and the price of Xtandi will be scrutinized in Congressional hearings later
this fall.  At the top of minds will be the question of price:  Will Pfizer
continue to charge $129,000 for Xtandi, or will it increase the price,
which is what usually happens after a company is acquired.  Congress is
sure to hold at least one and possibly several inquiries into the purchase.
Whenever politicians investigate and threaten to take action to control an
industry, uncertainty and volatility ensue, and it is no less likely with
the pharmaceutical and biotechnology industry than with any other industry.

The debate is just getting heated with Mylan.  The price of the EpiPen
caught the attention of parents, faced with ever increasing copays, who are
preparing to send their children to school with the product in case of an
emergency situation.  In a twist of irony, a decade ago Mylan’s CEO Heather
Bresch testified to Congress: “Our country is facing a crisis in rising
healthcare costs, and the generic pharmaceutical industry represents one of
the few proven solutions to contain those costs.”  Ms. Bresch is probably
going to find herself back before a Congressional hearing, but this time to
explain the 600% increase in her compensation over the last nine years,
while parents can’t afford an EpiPen that could save their children’s lives.

It was inevitable that drug pricing would eventually become a political
issue again.  It was just last September that Hillary Clinton eviscerated
the biotech market with a single tweet heard around the world:  “Price
gouging like this in the specialty drug market is outrageous.  Tomorrow
I’ll lay out a plan to take it on.”  She was referencing Shkreli and
Daraprim.  In a heated election cycle where winning and losing may depend
on mobilizing your base, it may be hard for either candidate to resist
going after the pharma industry in pursuit of victory, regardless of the
short-term consequences to the biotech and pharmaceutical capital markets.

Last December, the Centers for Medicare and Medicaid Services annual report
on the most frequently used drugs by Medicare patients concluded that
spending on prescription drugs in the U.S. grew by 12% in 2014, faster than
in any year since 2002.  Many members of Congress have advocated for
government limits to pharmaceutical prices — especially drugs that received
critical financial and other support from U.S. government. The most vocal
among them are Congressman Lloyd Doggett and Senators Elizabeth Warren and
Bernie Sanders, who will surely speak out about Mylan and Pfizer.

With this as background, imagine Congress this fall with the entire House
of Representatives and one-third of the Senate up for election, using the
outrage over high drug prices as a platform to gain valuable air time.
Imagine the consequences if a child suffers serious injury because parents
couldn’t afford an expensive EpiPen, which would be unconscionable and

This is the worst kind of visibility for pharma and biotech companies and
it will surely cause more stock price volatility in the Fall.
Pharmaceutical and biotechnology companies need to do a better job in
assessing the reasonableness of product pricing.  Otherwise negative news
coverage of an industry, increasingly seen as greedy and insensitive to
human well-being, will surely bring new and unwanted regulation to the
industry.  And if a tweet from Hillary Clinton sent the biotech financial
markets spiraling downward, what will the real threat of price controls do?

Zack Struver, Communications and Research Associate
Knowledge Ecology International
zack.struver at keionline.org
Twitter: @zstruver <https://twitter.com/zstruver>
Office: +1 (202) 332-2670 Cell: +1 (914) 582-1428

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