This story has been updated.
Hillary Clinton has been quick to criticize drug companies that raise the prices of old drugs to boost their profit margins, calling the EpiPen price hikes "outrageous" and accusing embattled pharmaceutical executive Martin Shkreli of "price gouging" on a decades-old anti-parasitic drug. On Friday morning, Clinton's campaign unveiled her plan to prevent companies from exploiting these kinds of older drugs, using measures such as fines and the threat of importing alternative treatments.
Clinton's plan is carefully delineated to target "excessive, outlier" price hikes on "long-standing" treatments that haven't had any major improvements and have little or no competition. That's a clear attempt to reassure the pharmaceutical industry that government intervention won't squelch the development of new, pricey treatments. According to the campaign, the initiative will be focused on drugs without patent protection.
But it also raises a slew of questions that could make the drug industry a little uncomfortable. How long does a treatment have to be around to be "long-standing"? Given that price hikes are routine, what is "excessive" and what is okay? Competition in the drug industry sometimes appears to have counterintuitive effects, even raising the prices of drugs, so what will count as the right amount of competition? It is also unclear how much the penalties will be and whether they will be administered as fines or increased rebates.
Pharmaceutical companies fired back that a better solution was to foster greater generic competition.
“Creating a new government bureaucracy to set prices and determine the value of medicines would harm patients and limit their access to life-saving treatments. That is the wrong solution for patients,” Holly Campbell, a spokeswoman for PhRMA, the trade association for the pharmaceutical industry, said in an e-mail.
The Generic Pharmaceutical Association said that despite the attention to old drugs that have had price spikes, data shows that the majority of older, generic drugs save money and prices decline.
"In an emotionally charged environment, it is essential that decision makers consider objective data and authoritative analysis to drive any policies that affect our nation’s patients and healthcare system," the trade group said in a statement.
Clinton proposes a new watchdog group that will be charged with protecting consumers from drug price hikes. The precise details are vague, but it would include people from federal agencies that oversee health, safety and competition and would be advised by patient advocates and drug pricing experts. This group would draw a line between price increases that are acceptable and those that are not. When a company crosses into price-gouging territory, that group could impose fines, permit importing similar drugs or allow the government to directly support generic manufacturers by buying their drugs.
All this, the plan says, will protect the pharmaceutical and biotech industries that "are an incredible source of American innovation and revolutionary treatments for debilitating diseases," while punishing companies that make "unjustified" price increases of old drugs.
Separating exploitative drug price hikes from acceptable ones could be difficult. Although companies frequently find themselves in hot water for high list prices, these typically don't reflect the true prices that insurance companies or most patients pay, due to secret rebates. Those discounts are negotiated between drug companies and pharmacy benefit managers hired by insurance companies to bargain on their behalf.
The pharmaceutical industry took pains to distance itself from Shkreli, the former leader of Turing Pharmaceuticals who unapologetically hiked the price of a decades-old drug used by some AIDS and cancer patients by 5000 percent last year. The industry said Turing behaved more like a hedge fund than a drug company.
But Clinton's plan may make an industry uncomfortable that commonly uses similar tactics, though to a less extreme degree.
"In general, the idea of a patient protection initiative, based inside the government, looking at information and judging whether pricing is reasonable or unreasonable is likely to be viewed by Pharma as having the potential to be overused or misused," Steve Pearson, president of the Institute for Clinical and Economic Review, a nonprofit that evaluates the effectiveness and value of treatments and receives funding from insurers and drug companies, wrote in an email.
He compared the idea to antitrust protection, which requires regulators to judge when there is too much consolidation within a market.
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