J. Michael Pearson has become a billionaire from his tough tactics as the head of the fast-growing Valeant Pharmaceuticals International.
And consumers like Bruce Mannes, a 68-year-old retired carpenter from Grandville, Mich., are facing the consequences.
Mr. Mannes has been taking the same drug, Cuprimine, for 55 years to treat Wilson disease, an inherited disorder that can cause severe liver and nerve damage. This summer, Valeant more than quadrupled its price overnight.
Medicare will now have to cover about $35,000 for the 120 capsules he takes each month, and he will have to pay about $1,800 a month out of pocket, compared with about $366 he paid in May.
“My husband will die without the medicine,” said his wife, Susan, who is now working a second part-time job to help pay for health care. “We just can’t manage another two, three thousand dollars a month for pills.”
Cuprimine is just one of many Valeant drugs whose prices have spiked as part of the company’s concerted strategy, which has richly rewarded its investors and made it one of Wall Street’s most popular health stocks.
But Valeant’s habit of buying up existing drugs and raising prices aggressively, rather than trying to develop new drugs, has also drawn the ire of lawmakers and helped stoke public outrage against the growing trend of higher and higher drug prices imposed by big drug companies. This year alone, Valeant raised prices on its brand-name drugs an average of 66 percent, according to a Deutsche Bank analysis, about five times as much as its closest industry peers.
Some presidential candidates have also seized on the issue. Hillary Rodham Clinton, who is seeking the Democratic nomination, called for efforts to control “price gouging” after a public outcry over the actions of Turing Pharmaceuticals, which abruptly increased the price on a drug to $750 a tablet from $13.50.
And last week, Democrats on the House Committee on Oversight and Government Reform demanded that Valeant be subpoenaed for information about big price increases on two old heart drugs that the company acquired in February.
The threat of government action is making the pharmaceutical industry nervous. A big sell-off in biotechnology stocks over the last two weeks helped wipe out the sector’s gains for the entire year. Valeant’s stock has been among the hardest hit, losing about a quarter of its value since Sept. 18. Still, the stock is trading for about six times as much as it was five years ago, a meteoric rise that far outpaced most drug companies.
Valeant defended itself, saying in a statement that it “prices its treatments based on a range of factors, including clinical benefits and the value they bring to patients, physicians, payers and society.” It says patients are largely shielded from price increases by insurance and financial assistance programs the company offers, so that virtually no one is denied a drug they need.
But Mr. Pearson, a former McKinsey & Company consultant, has said he has a duty to shareholders to wring the maximum profit out of each drug. And in some cases old neglected drugs sell for far less than newer drugs for the same diseases.
(Click here to read the full article, written by Andrew Pollack and Sabrina Tavernise, NY Times)