Retrophin Sinks, Pharma Group Swings Back As Pricing Fight Escalates

With new calls from politicians coming almost daily for investigations and hearings about the rising costs of drugs, a trade group representing drugmakers is swinging back...
By The Fly Staff ,

With new calls from politicians coming almost daily for investigations and hearings about the rising costs of drugs, a trade group representing drugmakers is swinging back, arguing that the blame really rests with insurers and regulators.

WHAT'S NEW: Yesterday, members of the newly formed Affordable Drug Pricing Task Force, including Reps. Cummings, Doggett, McDermott, DeLauro, Schakowsky, and Welch, announced they will hold a press conference on Wednesday, November 4, announcing "meaningful action to combat the skyrocketing costs of pharmaceuticals." This morning, U.S. Senators Susan Collins, a Republican from Maine, and Claire McCaskill, Democrat from Missouri, announced a bipartisan Senate investigation into pharmaceutical drug pricing. The Senators have requested documents and information from four pharmaceutical companies: Valeant Pharmaceuticals (VRX) , Turing Pharmaceuticals, Retrophin (RTRX) - Get Report and Rodelis Therapeutics. Each request focuses on drugs that have seen recent and significant spikes in price. The Senate Special Committee on Aging, which is led by Collins and McCaskill, has tentatively scheduled an initial hearing on this issue for December 9 and will hold subsequent hearings, as needed, in the following months, the senators announced. Meanwhile, a trade group representing dozens of drug companies, the Pharmaceutical Research and Manufacturers of America, or PhRMA, is saying the blame for rapidly rising drug costs rests with insurers and regulators, reported The Hill. Lori Reilly, executive VP for policy at PhRMA, argued to reporters during a 90-minute briefing that health insurers, not drug companies, are forcing patients to shoulder more of the costs while regulators are worsening the situation with slower drug approvals and faster patent expirations, according to The Hill.

ANALYST TAKE: Piper Jaffray analyst Joshua Schimmer, who has previously said that the growth of drug prices "does not seem particularly concerning" after adjusting for actual inflation, welcomed PhRMA's reported rebuttal, saying it is reassuring to "at least see a more balanced dialogue starting to play out." Previously, the Biotechnology research team at Jefferies, led by Brian Abrahams, Eun Yang and Biren Amin, said that their Washington D.C. consultants indicated that the political rhetoric around drug pricing is unlikely to result in any substantive future policy changes that would impact biotech sector fundamentals. Pricing concerns are nothing new, and will likely continue to be a headwind for the sector, the analysts contended, while recommending using selloffs to buy select companies including Celgene (CELG) - Get Report , BioMarin (BMRN) - Get Report and Alkermes (ALKS) - Get Report .

COMPANIES EXPOSED: Valeant has particularly been in focus over its pricing strategies in recent months, even before today's new request for documents was publicized, with a group of 18 Democratic congressional representatives recently requesting that the company be subpoenaed over what they called "massive" price increases for certain of its drugs. Piper's Schimmer acknowledges that the fight over drug prices impacts small, mid and large-cap biopharma stocks and emerging platforms such as gene therapy, but notes in particular that companies including Gilead (GILD) - Get Report , Celgene, Biogen (BIIB) - Get ReportAmgen (AMGN) - Get Report , BioMarin, Alexion (ALXN) - Get Report and Incyte (INCY) - Get Report all have high price therapies. Other large cap drugmakers include Pfizer (PFE) - Get Report and Allergan (AGN) - Get Report , who have disclosed that they are in talks to combine, AstraZeneca (AZN) - Get Report , Bristol-Myers (BMY) - Get Report , Eli Lilly (LLY) - Get Report , GlaxoSmithKline (GSK) - Get Report , Johnson & Johnson (JNJ) - Get Report , Merck (MRK) - Get Report , Novartis (NVS) - Get Report , Roche (RHHBY) and Sanofi (SNY) - Get Report .

PRICE ACTION: In pre-market trading, Retrophin slid over 10% to $19.50 per share, while Valeant rose about 1% to $98.75.

Reporting by Jason Keil.

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