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Turing CEO Martin Shkreli.
Daraprim, a 62-year-old, daily treatment that's used to treat malaria and parasitic infections in patients with weak immune systems, was previously priced at $13.50 a pill.
The price hike drew the attention - and ire - of people including Democratic presidential candidate Hillary Clinton and numerous medical groups.
After hearing of the price hike, Rep. Elijah Cummings (D-MD) and Democratic presidential candidate Sen. Bernie Sanders (I-VT) wrote a letter to Turing requesting that the company hand over information about the company and its revenues for the sale of the drugs as well as the identities of individuals in the company responsible for the change in price.
In an Oct. 30 letter responding to Cummings and Sanders, Turing Chief Commercial Officer Nancy Retzlaff wrote, "To the best of our knowledge there are currently no instances for which a patient has actually paid the WAC [wholesale acquisition cost] of $750/tablet for the product."
So who is shouldering that new cost?
How price-gouging works
Turing isn't the only company that's suddenly jacked up the cost of certain drugs: In fact, it's often considered common practice, Bloomberg reports.
In general, it works like this: Different access plans add up to a cost that's fronted by consumers, which typically ends up getting paid via premiums, or the amount of money you and your employer pay every month for your health insurance.
The case of Daraprim
"For certain patient populations that qualify for charitable coverage, the cost of Daraprim is $0."
For certain populations, who are uninsured and meet Turing's financial need criteria, Turing picks up the tab for Daraprim. Because the drug costs so little to make, Turing can still make money without charging these people for it. Shkreli told Bloomberg TV in the first few days of the drug price craze, "Half of our drug we give away for $1."
The other half of people who need the drug, however, are still left paying the full price - if only in some capacity.
Dr. David Belck, a primary care physician who also runs the site Truecostofhealthcare.net, told Business Insider that it's the same thing as charging $30 for a ball point pen. Ball point pens only cost 10 cents a piece, but if you can get a few people to pay the full $30, you can still make a profit and give the rest of your product away for free.
"For government programs like Medicaid and Public Health Service (PHS)/340B programs, the cost of Daraprim is $0.01 per tablet."
Turing also picks up the theoretical tab for patients using Medicaid, the federal and state-funded health insurance program for low-income people and places enrolled in Public Health Service programs, which mandates that drug companies supply medications to eligible clinics, hospitals, and AIDS Drug Assistance programs at significantly discounted prices. Government organizations like these can negotiate the price they'll pay for certain drugs, and in this case, brought it down to this one-cent-per-tablet price tag.
Unfortunately, that's part of the problem when it comes to overall drug pricing: "There's no transparency between the list price and what's actually being paid," GlaxoSmithKline CEO Andrew Witty said on Bloomberg TV Tuesday. "There are enormous discounts. Even the federal government, Medicaid gets a mandated 23.8% discount, So the government only pays 76% of the list price before it starts."
So while Daraprim's listing price may be $750 a pill, the other stakeholders (pharmacies, insurers, government agencies, etc.), all influence how much the patient actually pays. And as far as who is negotiating which discount, that isn't something that's shared publicly.
"Turing opted to maintain the price ($7.13 per tablet) previously negotiated by Amedra with the Department of Veterans Affairs and the Department of Defense."
Because Amedra, a company that once had US marketing rights to Daraprim, previously took down the drug's price tag for the VA and DOD, the agencies are continuing to supply their patients with the discounted price. Turing chose to leave the discounted price tag in part because it was a contractual agreement.
"For patients that have Commercial (private) insurance and are unable to afford the product, Turing has implemented a copay mitigation program."
If a patient doesn't qualify to get the drug free, have it paid for by insurance, or through one of the other options above, Turing says there are still ways to keep costs down. Copay mitigation, with Turing's help, keeps the cost payed by the patient as low as $10 per prescription. In the case of most drug companies, however, this isn't the case, according to Belk.
That's because insurance companies must pay whatever the pharmacy pays to get the drug, said Belk. And that can come back to consumers in their health insurance premiums. In this case, the insurance company is footing the $750 per pill bill. And, if the insurance company refuses to cover the drug, the patient is likely to pay whatever the price is for access to the treatment. Insurance companies will sometimes refuse to cover medications doctors prescribe for various reasons (there are cheaper alternatives, other drugs are more effective, etc.). If that happens, your choices are to fight the decision and get an exemption, or suck it up and pay the entire cost out of pocket.
What this boils down to
All of these different access plans add up to a cost that's fronted by consumers, if only mostly through the premiums on their health insurance. But it's a long and convoluted road to get there. Discounts and deals happen all the time among the health care system, from supplier to pharmacy, to pharmacy benefits manager or insurance company, to the patient. And that information isn't as transparent as it could be.
The bottom line is, someone is paying the inflated cost that comes with skyrocketing drug prices. Pharmaceutical companies may be subsidizing a lot of it through reduced and free drug programs, and your insurance may be able to take on most of the cost, but in some way, the effect of this higher cost is being felt.