In September, the House Committee on Oversight and Reform, led by two government officials, began investigating one pharmaceutical company’s drug pricing policies. The investigation has led to requests to subpoena the company’s CEO and to force that person to testify before the government about allegedly significant price increases in two drugs that are commonly used in hospitals nationwide. See, e.g., Jonathan D. Rockoff, “Lawmakers Seek Answers on Valeant’s Price Increases,” The Wall Street Journal, Sep. 28, 2015. This article examines the legal elements of the case and addresses the types of legal pharmaceutical experts who will be called upon to help address this and similar issues.
When a pharmaceutical company acquired two potentially life-saving medications, lawmakers argued that the prices were artificially raised by 525% and 212%. Id. The pharmaceutical company has responded by stating that the prices of the drugs that it acquired had been “significantly underpriced” in the past, and that the company made patient-assistance programs available to individuals who faced financial obstacles in obtaining the drugs in question. Id. The government’s involvement in this matter does not represent an isolated incident. To wit, the government has also taken action in cases where it alleged that two other drug manufacturers had artificially raised the prices of certain pharmaceuticals. Id. This trend of increased government scrutiny over drug prices is one that attorneys on any side of the issue should be prepared for.
In certain instances, where the government has claimed that unfair or artificial pricing occurred, drug companies have opted to simply drop their prices, in hopes to avoid further legal consequences. See id., e.g., (discussing how, after severe criticism, one company agreed to drop its prices of a drug in question from $750 a tablet).
However, when pricing their products, drug companies should be prepared to address potential criticisms in advance. This is where pharmaceutical experts come into play. The legal field is rife with experts who have in-depth knowledge of issues such as pharmaceutical marketing, drug pricing, and commerce in the industry. These experts, in concert with pharmaceutical attorneys, can help companies to not only avoid criticism in the first place, but also to respond quickly and effectively to such complaints, should they occur.
To illustrate just how serious government allegations of inappropriate pricing can be to drug companies, one need only look at recent statistics. For example, when the government made its requests to subpoena documents for a particular company and decided to publicly investigate that company’s drug prices, the company’s bottom line took a hit. In one day, stock prices fell 16.5%, and company stock had already fallen by 12% for several days “amid increasing criticism from lawmakers about drug price increases.” Id.
There are numerous implications for a pharmaceutical company when the government criticizes its prices. To avoid financial and other consequences, companies should consult pharmaceutical expert witnesses early and often, in an effort to avoid criticism and combat them in the most efficacious manner possible. Litigators in the field should advise their clients accordingly and work in tandem with such experts to provide the best protection and remedies that are legally available.
By: Kat S. Hatziavramidis, Attorney-at-Law