The 340B program came up at last week’s House Oversight committee hearing about drug company price gouging – the hearing during which ex-Turing Pharmaceuticals CEO Martin Shkreli pleaded the Fifth Amendment and tweeted that the committee members were imbeciles.
Shkreli and Turing Chief Commercial Officer Nancy Retzlaff were there to explain why Turing raised the cost of the anti-parasitic drug Daraprim from $13.50 to $750 per pill. Shkreli smirked. Retzlaff cited “mandatory statutory discounts and rebates like those in the 340B and Medicaid programs” among the reasons.
Wait a minute.
None of the over 250,000 pages of internal Turing documents that the committee released in advance of the hearing cites 340B or any other government program as a reason for the price increase. The documents instead show that Turing bought Daraprim – an off-patent drug with no competition – to exploit its monopoly position in the marketplace and make a killing. As Shkreli said in an email to Turing’s board of directors, “1 bn here we come.”
Retzlaff also said most Daraprim sales are associated with either Medicaid or 340B and “those programs receive penny-pricing.”
The only reason Daraprim’s 340B ceiling price is one cent is because Turing and the company it bought the drug from raised Daraprim’s price through the roof. A drug’s average manufacturer price (AMP) is a component of the Medicaid rebate and 340B ceiling price calculations, and it is indexed for inflation. When a drug’s AMP increases at a rate faster than inflation, the manufacturer has to charge 340B covered entities less (and give Medicaid bigger rebates). Under a federal government policy, the lowest a 340B price can go in these circumstances is a penny.