Democrats slam price hikes for Valeant drugs; shares sink

28 Sep 2015 | Author: | No comments yet »

CompaniesValeant sinks as Democrats seek subpoena.

Democratic lawmakers are asking for a subpoena to force Valeant Pharmaceuticals (VRX) to turn over documents relating to “massive price increases” for two heart drugs.Valeant shares tumbled by as much as a fifth in turbulent trading on Monday after all Democratic members of the House Oversight and Government Reform Committee issued a letter urging the chairman to issue a subpoena into the “massive price increases” of a duo of drugs. They highlighted Valeant’s heart drugs Nitropress and Isuprel, whose prices increased by 212 percent and 525 percent the day that Valeant acquired the rights to sell them. Claire McCaskill (D-Mo.) has sent a detailed list of 22 questions to the company, probing its simple explanation that it increased the two heart drugs prices because they were “significantly underpriced.” “Valeant is using precisely the same business model as Martin Shkreli, the 32-year-old former hedge fund manager whose company recently purchased the life-saving drug Daraprim and increased the price from $13.50 to $750 per pill ‘overnight,'” the House Democrats wrote.

Valeant’s shares have fallen for three straight days after Democratic presidential candidate Hillary Clinton said last week that she would reform the drug industry to protect consumers from price hikes. Here’s a chart of today’s action–you can see the moment when the news about the letter hit at about 12:45 p.m.: Shares of Valeant have dropped 12% to $176.33 at 1:42 p.m. today, putting them down 24% in September.

Clinton outlined a plan that included a mandate on research and development spending, a proposal which could hurt companies like Valeant that rely on serial acquisitions to build a pipeline of drug candidates. In February, Valeant Pharmaceuticals bought Nitropress, a congestive heart failure and hypertension drug, and Isuprel, a drug used to treat abnormal heart rhythms.

Earlier Monday, Valeant chief executive Michael Pearson had looked to sooth frayed nerves with the company’s shares having a tough month even before today. The Wall Street Journal revealed that that same day, the company hiked the drug prices — tripling that of a 2-milliliter vial of Nitropress to $805.61 and jacking up that of a 1-millimeter vial of Isuprel from $215 to $1,346.62. Mike Pearson, Valeant’s CEO, told employees Monday that the drug company’s business model doesn’t rely on large price increases and that increased pressure from politicians to curb government reimbursements won’t hurt the company. “Valeant is well positioned for strong organic growth, even assuming little to no price increases,” Pearson said in a letter to employees on Monday before the Democrats made their letter public. Valeant, and the biotech sector more broadly, have sustained intense losses in recent weeks amid swelling concerns over the potential for greater drug-price scrutiny. Reimbursements from U.S. government programs represent 15 percent of Valeant’s revenue, “lower than any other major pharmaceutical company,” he said.

The Laval, Quebec-based company’s stock has tumbled 26.1 per cent since the beginning of the month, while the Nasdaq Biotech index has shed 14.7 per cent over the same period. That justification appears to suggest that because the cost of the drugs are buried in much larger hospital bills, of which consumers pay only a fraction if they are insured, their high prices should not be a concern. “These are drugs that are only used by hospitals — they are not sold in pharmacies — in accordance with specific surgical procedures.

Patients are never denied these drugs when the protocols call for their use,” a company spokeswoman said. “As a result of Valeant’s refusal, we have no specific information to explain the basis for its exorbitant price increases,” the letter from House Democrats states. “In fact, the only changes to these drugs since they were purchased appear to be their labels.”

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