Drug charities play role in driving up costs

Pharmaceutical companies that have been buying up rights to old-line drugs are also contributing to charity assistance programs to not only provide cover for their business practices, but to help boost sales, according to Bloomberg Businessweek. And those programs are benefiting richly from such practices.

"A million-dollar contribution from a pharmaceutical company to a copay charity can keep hundreds of patients from abandoning a newly pricey drug," the article said.

Daraprim, which has been on the market since the early 1950s, had its price jacked up by more than 50-fold after its rights were purchased by Turing Pharmaceuticals, with its former CEO Martin Shkreli claiming the increase was justified because Daraprim was an orphan drug.

Another company that engages in such practices, Valeant Pharmaceuticals, increased the cost of a drug used in physician-assisted suicides as California lawmakers approved a measure that would allow terminally ill patients to take their lives.

Turing officials were eager to contribute to charitable programs that would cover Daraprim's cost for some patients, although at a much lower level than what was suggested by one such company, PSI, according to Bloomberg Businessweek. It had requested $22 million, plus $1.6 million for its expenses. Turing chipped in $1 million plus $80,000 for expenses.

"It looks great for pharmaceutical companies to say they are helping patients get the drugs," Adriane Fugh-Berman, M.D., an associate professor of pharmacology and physiology at Georgetown University, told Bloomberg Businessweek. It allows the companies to "deflect criticism of high drug prices. Meanwhile, they're bankrupting the healthcare system."

One way this occurs is that drugmakers make donations to the charities, which then help cover Medicare Part D patients, bypassing federal kickback laws, according to Bloomberg Businessweek. That drives up demand, and runs up Medicare's drug costs.

PSI was established in the 1980s by Dana Kuhn, who was infected by HIV with a blood transfusion. It now has revenue of $138 million a year, and Kuhn is paid nearly $600,000 annually. A little more than half of PSI's revenue comes from a single drug company, which Bloomberg Businessweek suggested was Novartis.

To learn more:
- read the Bloomberg Businessweek article

Suggested Articles

NextGen Healthcare's Rusty Frantz sounded off about hospitals opposing proposed federal data-sharing rules while also sharing data with tech giants.

Welcome to this week's Chutes & Ladders, our roundup of hirings, firings and retirings throughout the industry.

It’s an idea that could save Medicare billions of dollars a year, but it would have a major impact on physicians’ revenue.