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Price gouging row: how much should those drugs cost?

economy

Price gouging row: how much should those drugs cost?

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The debate over high prices for medical treatments is heating up in the United States with Canadian firm Valeant Pharmaceuticals being sued in a New York court.

Buyers of its drugs, and health insurance companies, are accusing Valeant of using various schemes to force them to pay exorbitant prices.

The company could also face criminal charges with US prosecutors looking into whether Valeant defrauded insurers.

This all comes as another drugmaker, Mylan, tries to head off accusations of overcharging for its allergy auto-injector EpiPen.

It Is doing that by releasing a generic version selling for $300 – half the price of it own branded product.

Analyst Ronny Gal with Bernstein said Mylan is trying to avoid criticism over the steep price: “They really ran a little bit of a Valeant risk, which was people would just not want to do business with them. And by defusing this essentially in a way that reduced the burden for the patient, they’re probably in a much better position from a public perception.”

He concluded that the financial hit from launching a cheaper product in competition to itself would be minimal: “In the end of the day, for them, they’ll probably lose about a quarter of their revenue for the product. EpiPen was about 20 percent of the operating profit. So the hit here will obviously be bigger than just five percent. It might be somewhere between five and 10 percent of earnings.”

Consumer watchdog group Public Citizen said Mylan’s latest move was another “convoluted mechanism to avoid plain talk, admit to price gouging and just cut the price of EpiPen”.

“We would like the company to drop the price to $100 for two EpiPens,” said Public Citizen spokeswoman Angela Bradbery, adding that was about the price charged in France.

Politicians have also seized on huge price increases by drugmakers as a campaign issue, playing to growing public outrage.

Hillary Clinton and former Democratic presidential hopeful Bernie Sanders have both spoken out.

Sanders tweeted: “At $300 generic EpiPens will still cost three times more than they did in 2007. This isn’t a discount. It’s a PR move.”

Mylan has defended EpiPen’s high price, saying it had spent hundreds of millions of dollars to improve the product since acquiring it in 2007.

It has said it recoups less than half the list price as pharmacy benefit managers (PBM), which often require discounted prices or rebates from drugmakers, are involved, along with insurers and others.

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