High-flying drug firms, CEOs take a fall — will price profiteering falter, too?

valeantAlthough they may have been high-flyers just a few months ago, some big players in Big Pharma have gotten a brutal kind of karmic comeuppance for their craven business strategy of jacking up drug prices to maximize profits, the sick be damned.

Financial journalists have had a field day chronicling the recent, spectacular fall of Valeant Pharmaceuticals and its CEO Michael Pearson. He once  entranced Wall Street with his plan to use Valeant, which was acquired cheaply, as a way to take older, existing drugs and to push their prices into the stratosphere. Hedge funds and big investors loved Pearson and his plan. The company’s stock boomed.

But many who looked at the venal company and its consumer-attacking strategy dissented, calling Valeant as scandalous, suspect, and ready to collapse as the infamous energy company Enron.

Now Pearson has gotten thrown out; Valeant has seen its share price plunge, imperiling some of its big-name Wall Street investors. The company is enmeshed in internecine disputes, with charges flying about financial misstatements, allegations of wrongdoing by its chief financial officer, and a battle over a director who refuses to resign from the board.

The havoc wreaked by Valeant and Pearson persists: National Public Radio has reported that end-stage patients who might consider legal assisted suicide have been staggered by Valeant’s doubling of the cost of a sleeping pill commonly used by the gravely ill to end their lives. The company did so just as lawmakers in California, one of the largest markets in the world, were discussing whether to legalize assisted suicide. They did.

Valeant, of course, isn’t the only pharma company that has taken the Icarus-like plunge, as I’ve written before. The media and the Internet have barely settled down from dissecting the follies of Turing Pharmaceuticals and its smug, young hedge fund CEO Martin Shkreli. “Pharma Bro,” too, used his small outfit to blow up prices for medications, including one that HIV-AIDS patients rely on to avert nasty infections. Shkreli, after a disastrous appearance at a congressional hearing on drug prices, has gone to ground somewhat, especially since federal prosecutors indicted him on securities fraud charges for work he did before his stint at Turing.

Can notoriety prompt reform?

So what might it mean that two notorious drug profiteers have fallen into ignominy? Maybe not a lot.

But the powerful attention that these bad actors has attracted may, in itself, provide some badly needed impetus for real change. I’ve said before that Congress, federal regulators, and major players in health care need to stop posturing and to start actually doing something about an issue that Americans call one of their top medical concerns—skyrocketing drug prices. Even giant insurers are struggling to find effective ways to deal with the calamity of unpredictable medication pricing.

It also may be too much to ask of “markets” that they come to their senses. I don’t buy what long has been Big Pharma’s argument that it spends huge sums to research and develop drugs, so it should be allowed to control rights and markets to its products to recoup costs and turn tidy profits. But at least that model contains something real in it, the actual drugs developed—not just financial legerdemain and price gouging that exploits the sick and needy.

Those who insist on the wisdom of supply and demand also may wish to take note what’s occurring with yet another Big Pharma player—Gilead, a maker of some of the most expensive drugs on the market, notably a costly medication (sold as Sovaldi and Harvoni)  that combats the debilitating, often lethal Hepatitis C infection.

Although Gilead has reaped $19.1 billion in sales for the meds (a treatment regimen for which costs as much as $94,000), the company’s stock price has started gyrating. That’s because investors, some analyst are starting to note, don’t think Gilead can sustain its sky-high prices, and that it may have topped off in treating affluent or well-insured American patients who can pay.

Words to the wise: What goes up, can come down; even Americans in their affluence have limits.

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