There have been several developments in the T*ing/Valeant world, that supposedly risk-free gravy train where you wait for others to discover the drugs, then you take over and raise the prices. An outfit called Imprimis Pharmaceuticals is moving in on Daraprim (pyrimethamine), Martin Shkreli’s infamous fifty-fold price increase drug. Shkreli’s model of restricted distribution is still in effect – and to the best of my knowledge, he has not announced the promised lower price for the drug, either. So Imprimis is doing an end run around that end run: they’re making the ingredients available to compounding pharmacies, for the equivalent of about a dollar a pill. Their formulation is actually pyrimethamine and leucovorin (folinic acid), a reduced form of folic acid. This has already been used for years as an addition to high doses of DHFR compounds like pyrimethamine, to mitigate effects on bone marrow.
As the Imprimis press release says, “Imprimis’ finished compounded drug formulations do not have an FDA-approval label for recommended use. Imprimis compounded formulations are not FDA approved and may only be prescribed pursuant to a physician prescription for an individually identified patient consistent with federal and state laws governing compounded drug formulations.” That’s exactly the situation, but (as stated), in many cases prescriptions can still be written for these formulations, and I think that insurance companies may be quite enthusiastic about not having to reimburse for the T*ring drug.
You may remember the case of KV Pharmaceuticals and another generic drug, Makena. They got market exclusivity for it after a trial to “de-grandfather” the old medication into the modern regulatory system, and promptly raised the price steeply. Compounding pharmacies stepped in on that one, too, and the FDA basically stated that it saw no reason to take any action on KV’s behalf. Imprimis, for their part, seem to be targeting other generic compounds whose prices have been raised substantially, taking advantage of the same loophole. This is just the sort of thing that an economist would tell you to expect in such a situation, and I’m happy to see it happening.
Meanwhile, the trade group PhRMA has been more assertive about pointing out that the business models of companies like Valeant and T*ring have very little to do with the research-based drug industry. I’m glad to finally see them doing this; it took long enough. These companies are, in fact, sheer business/accounting plays, which is why some of Valeant’s large investors have loved the stock so much over the last few years. It’s a model that they can understand and appreciate – most of these folks don’t know much about biology or medicinal chemistry, naturally, but what they do know is that it’s risky to bet on that stuff, and they’re not into taking unnecessary risks. And that’s why the Valeant story is being fought out in classic Wall St. fashion – it’s about financial disclosure and accounting practices, not about medicine at all. When PhRMA says that such companies operate more like hedge funds than drug companies, they’ve got a point (although the use of the term “hedge fund” is probably thrown in there because the one thing most people know about them is that they don’t like them).
Hillary Clinton and other politicians have certainly cast a lot of uncertainty over Valeant with their statements about its pricing policies. But the people who (in the end) are doing the most damage to Valeant right now are the short-sellers and financial skeptics, like the ones I wrote about the other day (Citron, Bronte Capital) and the likes of Jim Chanos and Jim Grant, who were publicly wondering about Valeant’s debt-fueled strategy (and its obfuscatory financial statements) early in 2014. Regulatory uncertainly is a bad thing for investors, but the sudden realization of a lack of financial transparency (and the suspicion of outright fraud) is even worse. The former will depress your company’s stock; the latter will put a hole in it under the waterline.
Second update: here’s even more oddness about Valeant and their specialty pharmacies. Not looking very good. The company is supposed to be explaining all this on Monday, and that should be quite something to watch.