Abstract: On August 10, 2015, at a cost of $55 million, Turing Pharmaceuticals acquired the exclusive U.S. marketing rights to Daraprim, a drug that treats toxoplasmosis (a life-threatening parasitic infection), from Impax Laboratories. Just a few weeks after the acquisition, Turing announced that, effective immediately, the price of Daraprim would be raised from $13.50 a tablet to $750 a tablet, an increase of over 5,500 percent. The overnight price spike has generated considerable censure from healthcare professionals, politicians and the general public. Yet, Turing Pharmaceuticals is not the only company in recent months to substantially increase the price of one of its brand-name drugs.  Just nine days after Turing’s acquisition of Daraprim, Rodelis Therapeutics announced its acquisition of Cycloserine, a drug used to treat tuberculosis, and subsequently raised the price for 30 capsules of the drug from $500 to $10,800. While public pressure has since forced the price of Cycloserine to be scaled back to $1,050, Turing and Rodelis have shown that pharmaceutical companies can realize substantial upside by targeting old, neglected drugs (often for rare diseases) and refashioning them into high-priced specialty drugs.

In a recent study by the American Association of Retired Persons (AARP), the average prices for brand-name prescription drugs were found to have increased by an average of 13 percent in 2013, compared to the inflation rate the year of just 1.5 percent. The Daraprim and Cycloserine cases, while extreme illustrations, depict a broader trend of increasing U.S. drug and health care costs to patients. The two manufacturers’ pricing decisions illustrate a longstanding tension in the pharmaceutical industry between the need for firms to recoup the high costs associated with bringing drugs to market and keeping drugs affordable for consumers.  To date, neither Turing nor Rodelis faces any lawsuits tied to their pricing decisions for Daraprim and Cycloserine respectively.  However, given what has transpired with Daraprim and Cycloserine, and the need to keep drug and health care costs down, perhaps action should be taken to deter future price spikes on brand-name drugs.  That is, under these circumstances, should the government intervene to curb the considerable price-making power that pharmaceutical companies possess in order to better serve the patients who rely on their brand-name drugs and society at large?

VIEW PDF