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High Drug Prices Are a Bitter Pill, But Not Always Fraud

Here is the frustrating thing about the Federal False Claims Act:

Regardless of whether some actions are terrible or appear to be terrible, they may not be actionable under the False Claims Act.  In August, former hedge fund manager Mark Shkreli and his drug company, Turing Pharmaceuticals of New York, bought a drug called Daraprim from Impax Laboratories for $55 million. The drug treats a deadly infection in HIV patients.

After acquiring the drug, Turing promptly raised the price. Current news reports suggest that the price has risen by 4000-5000%, which has Hilary Clinton accusing Turing of price gouging. When you get accused of price gouging from someone who is used to charging hundreds of thousands of dollars for a speech, you must be charging an awful lot. To be fair to the Presidential candidate, nobody forced anyone to go see her speak, but people who need this prescription don’t have much choice.

Turing claims that the money made from the drug will be used to develop new drugs.  This justification is weakened by the facts of how this drug was acquired.

According to the New York Times, generic drug companies had not made Daraprim because of the minimal historic sales of the drug.  However, the exorbitant price increase makes Daraprim appeal to generic drug companies who would be able to make money off of a cheaper generic copy. However, getting a generic approved takes time and money under the best of circumstances and Turing required Impax to remove the drug from drugstores and wholesalers, which may delay the effort to create a generic alternative.

It would be hard to make a fraud case based on price gouging of pharmaceuticals alone under the False Claims Act. Yet, Mr. Shkreli may have unwittingly made people more aware of how high drug prices are and how difficult an area this is to regulate.  Prices for pharmaceuticals paid for by the private sector and by Medicare Part B or Medicare Part D plans may vary considerably. The government has authority to negotiate prices in some cases, but not others.

Many times, most of us have no idea how much a pill the doctor prescribes for us will cost until we have to make a co-payment and look at that bill. Worse (and here’s where the problem really starts) the competition for business and the amount of money that can be made through the use of these drugs is intense. The cloud of information, combined with the legitimate need for something that, after all, could save one’s life, creates a tricky business environment.

Lifesaving pharmaceuticals have the potential to provide companies with significant profits, but when there is a lot of money and not a lot of regulation, fraud can run rampant. The justification for large profits is that the money allows for a greater amount of research. Shkreli attempted to radically raise the price of the drug and restrict its availability, it seems like that ought to be stopped but, believe it or not, the current price structure for drugs in this country creates even more blatant abuses.

This is why monitoring the industry is so essential.  This due diligence combined with the controls the False Claims Act provides will help protect vulnerable Americans from becoming victims of big companies’ questionable business practices.

It’s why we all have to be on the lookout for the next big scam.


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