In a testy exchange with lawmakers, Martin Shkreli declined to testify before a House committee Thursday about his actions in increasing the price of a decades-old drug fiftyfold overnight.
Shkreli, who left Turing Pharmaceuticals, the drug company he started, after being indicted on federal securities fraud charges in December, repeatedly exercised his Fifth Amendment right to avoid self-incrimination, angering various members of the House Committee on Oversight and Government Reform.
"I don't think I've ever seen the committee treated with such contempt,'' Rep. John Mica, R-Fla., said after Shkreli was excused and left the room. Mica asked if Shkreli could be held in contempt of Congress. The committee chairman, Rep. Jason Chaffetz, R-Utah, said he did not intend to do so.
The theatrics surrounding Mr. Shkreli's appearance, which included his smirking at some remarks by committee members and calling them "imbeciles" on Twitter after he left the hearing, overshadowed some of the more substantial discussion about huge overnight price increases in the prices of old drugs by Turing and another company, Valeant Pharmaceuticals International.
Both companies have come under federal scrutiny, accused of paying less attention to patients' health and pocketbooks and more to reaping big profits.
News of questionable practices involving higher drug prices has stirred public outrage, provided notable moments on the campaign trails of presidential candidates and helped send some pharmaceutical stocks into a downward spiral. Several congressional committees are examining the trends in drug pricing.
Under Shkreli, Turing acquired the rights to Daraprim, a 62-year-old drug for a parasitic infection, and raised the price fiftyfold, to $750 a pill.
Valeant has increased the price of numerous old drugs, but the House committee has focused on two heart drugs, Isuprel and Nitropress. Valeant acquired both a year ago and immediately raised the price of Isuprel by more than 500 percent and of Nitropress by more than 200 percent, provoking protest from the hospitals that buy these drugs.
Howard B. Schiller, interim chief executive of Valeant, rationalized the substantial increases in the prices of the two heart drugs by arguing that the company would merely be taking money from hospitals, not hurting patients.
"Because these drugs are hospital-administered and not purchased by patients directly, increasing the cost of the drugs to hospitals would affect the hospital's profits on these procedures, but it should not reduce patient access," Schiller said in prepared testimony that was released before a hearing Thursday morning by the House Committee on Oversight and Government Reform.
In his prepared testimony, Schiller said Valeant had "heard very clearly Congress' and the public's concerns about drug prices in the pharmaceutical industry and Valeant's increases to the list prices of certain drugs." Schiller, who is running Valeant while its chief executive, J. Michael Pearson, is on medical leave, said the company was addressing the concerns.
Much of his prepared testimony repeated things Valeant has said often in recent months, such as that it gives substantial discounts off list prices and helps patients with co-payments or with other forms of financial assistance.
However, drug companies cannot give such financial assistance to patients covered by government programs like Medicare, only to those covered by commercial insurance or to the uninsured. Schiller urged Congress to consider allowing companies to provide similar assistance to patients in federal programs.
But such financial assistance is controversial. It is not allowed for government programs because it is considered a kickback, an illegal financial inducement for wasteful medical spending.
Mark Merritt, president of the Pharmaceutical Care Management Association, which represents pharmacy benefit managers, said in his prepared testimony that co-pay assistance programs drive up overall medical costs by removing a barrier to the use of more expensive drugs. Patients are spared the out-of-pocket expenses, but insurers are then left paying the bill for the expensive drugs, eventually leading to increases in premiums, he said.
Memos released by the Democratic staff of the House committee show that both Valeant and Turing viewed patient-assistance programs as a means of diverting attention from the price increases. Valeant's argument that the increased cost of the two heart drugs would be borne by hospitals and not patients is in a similar vein.
Merritt said that one way to counter big price increases on older drugs was to rapidly approve generic versions of them.
Isuprel, Nitropress and Daraprim are all so old that they are no longer protected by patents. Before the large price increases, sales of those drugs were probably too small to interest generic manufacturers. But with the greater revenue from higher prices, that could change.
Schiller said in his testimony that he expected Isuprel and Nitropress to face generic competition "within the next year or two."
However, the Food and Drug Administration has been faced with a huge backlog of applications for approval of generic drugs. That means that companies like Valeant and Turing that raise the price of old drugs have some time to enjoy the profits from the increases. In one email he wrote just after increasing the price of Daraprim, Shkreli said of the expected profits: "I think we will get three years of that or more."
In her prepared testimony to the committee, Dr. Janet Woodcock, a senior FDA official, said the agency was making swift progress in whittling down the backlog, as a result of 2012 legislation that provided it with more money for generic application reviews. For new applications, she said, the agency is trying to take an initial action — such as approval or rejection — within 15 months.
Woodcock said the agency gave expedited reviews to applications for the first generic version of a brand-name drug and for generics that would help ease drug shortages. "All of these have been going in the 'express lane,'" she said.
Merritt of the Pharmaceutical Care Management Association said that the FDA should also consider expedited reviews of generic applications in cases where the prices of old drugs have been sharply increased.
Woodcock's prepared testimony did not mention that idea. The FDA typically does not pay attention to drug prices.