J. Michael Pearson has become a billionaire as the head of Valeant Pharmaceuticals International. His business plan is to buy up existing drugs and then raise their prices, often by enormous amounts. This action is angering patients, the healthcare industry, health insurers, and politicians.
So far this year, Valeant has raised the prices of its brand-name drugs an average of 66%, which is about five times as much as other drug companies raise their prices, according to financial analysts. The price for Cuprimine, a drug to treat a hereditary condition called Wilson disease, quadrupled after Valeant acquired it. The price of a diabetes drug called Glumetza went up 800% this year.
The costs of research and development have no bearing on these price increases because the drugs were already developed and on the market when Valeant acquired them. Valeant is an extreme example of practices that have been around in the pharmaceutical industry for years. The United States, unlike most countries, does not control drug prices, and pharmaceutical manufacturers have relied heavily on steady and sometimes outsize price increases in this country to bolster their profits.
Valeant defends itself by saying that it "prices its treatments based on a range of factors, including clinical benefits and the value they bring to patients, physicians, payers and society," according to a company statement. The company offers financial assistance programs for some patients, and says that other patients are covered by health insurance.
But even if patients are covered by insurance, the costs for drugs are paid by insurers, hospitals and taxpayers and can lead to higher premiums and co-payments for everyone, critics say.
Pearson has said he has a duty to shareholders get the most profit out of each drug. But Democrats on the House Committee on Oversight and Government Reform have demanded that Valeant be subpoenaed for information about big price increases on two older heart drugs the company purchased in February.