Lawmakers challenge Turing executives on drug price hikes

The former top lawyer for Turing Pharmaceuticals said Thursday that he and other executives warned Martin Shkreli against the drastic price hike that triggered a national backlash against the company and its 32-year-old former CEO.

The Senate Committee on Aging subpoenaed current and former Turing executives to appear Thursday and explain the fiftyfold price hike of Daraprim, a drug used to treat a life-threatening parasitic infection. Lawmakers struggled to describe the company's behavior, which Sen. Bob Casey (D-Pa.) called "pure evil."

Turing's former general counsel, Howard Dorfman, told committee members that the price hike "was certainly unjustified."

When Dorfman and other executives objected to the increase, Shkreli reportedly responded that "no one cares about pricing increases."

"Mr. Shkreli told me that he was the most knowledgeable person with regard to this business model," Dorfman said. "That I was seriously misinformed — despite my 30 years in the industry." Dorfman said he was fired from Turing in August, shortly after raising his concerns.

Thursday's hearing marked the second time in two months that lawmakers have summoned Turing executives to account for their pricing tactics. Last month House lawmakers subpoenaed Shkreli to appear at a similar hearing, though he declined to answer questions, citing his Fifth Amendment right.

Shkreli, who resigned as CEO in December, is facing charges of securities fraud unrelated to Turing. He did not appear at the hearing.

Instead, lawmakers pressed two current Turing executives to justify their business model.

"What improvements did Turing make to Daraprim to justify raising the price from $13.50 per pill to $750 per pill?" asked Sen. Susan Collins (R-Maine), who chairs the committee.

Interim CEO Ronald Tilles acknowledged that the currently sold pill is the same drug that has been available since the 1950s. It sells overseas for about $2.

Tilles began to say that the company spent 60 percent of its revenue last year on research and development. But ranking member Sen. Claire McCaskill interrupted him, pointing out that his statement contradicted testimony by Turing's chief commercial officer, Nancy Retzlaff, who testified at last month's House hearing.

"She might be correct," Tilles acknowledged.

After coming under fire last fall, Turing said that it was investing its profits into a "next generation" treatment that would be superior to Daraprim. But Dorfman said that there was no such research plan in place at the time of the price increase.

"The price increase, as contemplated and subsequently announced, was not justified by any such actual expenditure," he testified.

Tilles and Michael Smith, co-founder of the company, repeatedly said that they had little input on the pricing decision and suggested other Turing executives would be more knowledgeable.

That response didn't sit well with Democrat Joe Donnelly of Indiana.

"I was born at night, but I wasn't born last night: You guys are running a scam," he said. "And you tried to figure out how fast and how long you could milk it."

Many pharmaceutical companies increase prices annually as a matter of doing business. But the staggering size of recent increases by Turing, Valeant Pharmaceuticals and several other drugmakers turned drug pricing into a national issue, reverberating from late night TV to the presidential campaign trail.

The tactics seemed to confirm the public's worst fears about pharmaceutical companies: that they are more Wall Street-driven investment vehicles than actual makers of medicines.

Shkreli's prior work as a hedge fund manager ultimately landed him in court.

Prosecutors in December accused him of losing investors' money through bad trades and then looting Retrophin, another pharmaceutical company where he was CEO, for $11 million to pay back his disgruntled hedge fund investors. Shkreli has pleaded not guilty and is out on $5 million bail.

McCaskill vowed to go after companies like Turing.

"Let me speak very clearly to the folks who believe that they can participate in this sick game: we are coming after you," she said.



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