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Drug's massive price hike smacks of wholesale greed

Without a recent front-page story in the New York Times, the sudden 5,000 percent price hike for a 62-year-old drug would probably have remained in place.

The drug, called Daraprim, was bought by a start-up company founded by a 32-year-old former hedge fund manager. Soon after getting the rights to Daraprim, the young Wall Streeter raised the drug’s price to $750 per pill from $13.50.

Daraprim treats a serious parasitic infection most threatening to babies and people suffering from AIDS or cancer.

A price increase of this magnitude is shocking, and public pressure as well as proposed legislation in Congress convinced the CEO to say he would roll back the price hike. But he didn’t say by how much.

Similar, but less dramatic, price increases have been seen for drugs that treat certain forms of cancer, hepatitis C, high cholesterol and multiple sclerosis. Apparently without a 5,000 percent price increase, the media doesn’t cover it and Congress is not concerned.

Hillary Clinton, like Bernie Sanders, her challenger for the Democratic presidential nomination, blasted the increase for Daraprim. Clinton promised to find ways to reduce prescription drug costs if elected president.

Clinton also pointed out, correctly, that some pharmaceutical companies game the system to maximize profits — by extending the patent protection on a drug by making minor changes, but not really improving it. In other cases, big drug companies have paid generic drug companies to hold off on making a cheaper version of a drug losing its patent protection — a practice called “pay to delay.” Both practices should be ended.

Skyrocketing prices have been seen for other specialty drugs. Cycloserine, which treats drug-resistant tuberculosis, saw its price jump to $10,800 for 30 pills from $500. And, just as with Daraprim, the price hike came soon after a corporate acquisition.

This abuse by some in the pharmaceutical industry should trigger congressional investigations. These outrageous price increases should lead to regulations that require drug companies to justify major price increases by providing information about research and development costs as well as marketing expenses and profit margins.

The renewed focus on drug costs should be a reminder — to everyday Americans and members of Congress — that the health care reform law, known as the Affordable Care Act, is still a work in progress because health care in the United States has not become more affordable, despite the legislation’s name.

Health insurance coverage has expanded, and that’s good. But the promised cost reductions have not happened — and barely a word is heard from Congress or the president.

Admittedly, it’s a very difficult challenge to cut what most see as the excess costs in health care because those costs are some company’s profits — and those companies will fight to maintain their profits, regardless the impact on patients or companies paying for health care for their employees.

With the focus on drug costs, it’s worth remembering that Americans pay nearly twice as much as people in other advanced Western countries pay for health care, on a per-capita basis. That was true before the passage of the ACA — and it remains true. Drug costs are one part of the problem, but only one part.

Government price controls have not worked in the past and are not the answer in this case. But the pharmaceutical industry has proved it will abuse its power, without regard to those paying the bills.

Drug price increases must be justified and gaming the patent system should end. So should the prohibition against Medicare using its purchasing power to bargain for lower drug prices, which was part of the Medicare Part D legislation — clear evidence of the drug industry’s power in Congress.

Despite the passage of the ACA, health care reform is still needed in the United States. Rational drug pricing is a good place to start.

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