5 Drug Price Increases That Will Have You Seeing Red

Outrageous drug price increases by pharmaceutical companies may seem like exceptions - but they're more common than you think.

While only a few make the news, drug price hikes have become standard practice in the pharmaceutical industry.

drug price increasesLast year DRX, a unit of Connecture Inc. (Nasdaq: CNXR), studied one-year drug price changes on 3,000 brand-name drugs. The study found 60 had drug price increases that were double the year before.

For 20 of the drugs, prices more than quadrupled...

In a separate study, DRX also looked at 21,000 generic drug price changes. More than 3,500 had prices that had doubled or more since 2007.

The widespread drug price increases are putting pressure on hospitals as well as individual patients. Many of the drugs are lifesaving.

But it's the truly mammoth drug price hikes that have drawn the most attention...

Drug Price Hikes So Bad Congress Got Involved

The Daraprim episode last year may have been the most notorious drug price increase ever.

Daraprim has been around for 63 years and is used to treat a life-threatening parasitic infection as well as AIDS and cancer. Martin Shkreli, the CEO of Turing Pharmaceuticals, acquired the drug from Impax Laboratories (Nasdaq: IPXL) in 2015 and immediately raised the price per pill from $13.50 to $750 - an increase of 5,455%.

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The shock of that drug price increase resulted in Shkreli getting called to testify before the Committee on Oversight and Government Reform in February. Blasted by both Republicans and Democrats, Shkreli simply smirked and invoked his Fifth Amendment rights.

The "Pharma Bro" came to personify outrageous drug price increases, earning the label "most hated man in America" - at least for a while. Under pressure he cut the price of Daraprim by 50%, but only to hospitals.

What many don't realize is that in 2009, years before Shkreli got his paws on Daraprim, it cost just $1 a pill. Another pharmaceutical company, CorePharma, bought the rights to the drug from GlaxoSmithKline Plc. (NYSE: GSK) in 2010 and promptly raised the price to $13.50 - an increase of 1,250%.

More recently, Mylan NV's (Nasdaq: MYL) decision to jack up the price of its EpiPens 548% drew fire. The cost rose from $93.88 in 2007 to $608 this year for two of the emergency allergy treatment injectors.

In August, Mylan CEO Heather Bresch, like Shkreli, was called before the House Committee on Oversight and Government Reform. She, too, was scolded. Unlike Shkreli, however, Bresch defended her drug price hike.

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One reason lawmakers were upset is that Mylan sells the EpiPen for much less in other countries. For example, the same two-pack costs $182 in Canada and just $69 in the UK.

The EpiPen generated $1 billion in profits for Mylan in 2015, about 20% of the company's total earnings.

But other huge drug increases that haven't gotten much attention are no less outrageous. In some ways, these three drug price hikes are even worse than what happened with EpiPen and Daraprim...

Three of the Most Outrageous Drug Price Increases

One huge drug price increase you may not have heard of is Novum Pharmaceutical Research Services Inc.'s Aloquin.

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Last month, privately held Novum raised the price on a tube of Aloquin, an ointment used to treat acne and eczema, to $9,561. Last May that same tube cost $241.50, making the total increase since then 3,900%.

Novum raised the price 1,110% last May immediately after acquiring Aloquin from Primus Pharmaceuticals, and has increased it several times since.

But Aloquin isn't some exotic medication that was costly to develop and produce. It's based on two common and inexpensive compounds. One ingredient, iodoquinol, is a generic antibiotic you can buy for less than $30. The other is an aloe vera derivative that costs less than $5.

And if that isn't outrageous enough, the U.S. Food and Drug Administration requires Novum to label Aloquin as "possibly effective." That means a skin cream that costs $9,561 might not even work.

Then there's the case of fluphenazine, made by Lannett Company Inc. (NYSE: LCI). Within three months, starting in April of this year, Lannett raised the price of this schizophrenia drug by 1,650%. The company gave no reason, but steep price hikes appear to be a policy implemented by CEO Arthur Bedrosian, who took the reins at Lannett in 2013.

drug prices

"We've been aggressive with regards to pricing our products. We certainly look at opportunities there," Bedrosian said in a conference call with analysts in August.

Hiking the prices of sleepy generic drugs has become the preferred way for some pharmaceutical companies to score quick, massive profits. Like this 3,500-year old treatment for gout...

Price Gouging an Ancient Remedy

Back in 2012, Takeda Pharmaceutical Co. (OTCMKTS: TKPYY), Asia's biggest drug maker, bought the rights to the generic drug colchicine, an anti-inflammatory plant extract first discovered by the ancient Egyptians. At the time, the pills sold for $0.25 each.

Takeda renamed the drug Colcrys and increased the price to almost $6 a pill, a 2,000% increase. Since then the company has raked in $1.2 billion in revenue from Colcrys.

And in case you're wondering, all of these drug price increases are perfectly legal. In fact, a decade-old U.S. Food and Drug Administration (FDA) program is partly to blame.

This FDA program gives an exclusive license to pharmaceutical companies willing to test drugs that pre-dated the formal approval process - in other words, old, cheap generic drugs.

As long as the program remains in place, the unjustified drug price hikes will keep coming.

"We're not paying for innovation, we're not paying for fewer side effects, and we're not paying for better care," John Lewin, director of the critical care and surgical pharmacy at Johns Hopkins Hospital told Bloomberg. "We're paying for somebody's business model to make a profit."

Next Up: The real reason Congress gets nothing done isn't partisan gridlock. It's that the primary duty of our elected representatives is no longer making laws - it's this...

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About the Author

David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

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