(Bloomberg) — Members of Congress strongly criticized Valeant Pharmaceuticals International Inc. (Nasdaq:VLNT) and Turing Pharmaceuticals AG, accusing the companies of dramatically increasing the price of drugs.
The hearing in Washington was heated and at times a puzzling spectacle, with controversial pharma executive Martin Shkreli smirking throughout but refusing to testify after invoking the Fifth Amendment, his lawyer being asked at one point to stay seated, and Shkreli later taking to Twitter to insult lawmakers.
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With Shkreli declining to comment at the hearing itself, lawmakers used the opportunity to lambaste Turing, Shkreli’s former company, and Valeant about their drug price increases.
“They bought them, jacked up the prices, took as much money as they could out of the pockets of patients, hospitals, and others, and then put those funds into their own coffers,” said Rep. Elijah Cummings of Maryland, the top Democrat on the House Committee on Oversight and Government Reform.
At one point, Shkreli cracked a smile midway through Cummings’s remarks about how the company’s price increases hurt patients.
“It’s not funny, Mr. Shkreli, people are dying,” Cummings said at the packed hearing room in Washington. Shkreli is facing federal fraud charges unrelated to Turing. He has maintained his innocence.
Shkreli declined to make any comments to the committee. “On the advice of counsel, I invoke my Fifth Amendment.”
Rep. Trey Gowdy, a South Carolina Republican, tried to lure Shkreli into speaking by asking him how to pronounce his name, which Shkreli provided.
“See there, you can answer!” Gowdy said. Shkreli then turned to his lawyer, who was sitting behind him, before turning back to the congressman.
“I intend to follow the advice of my counsel, not yours,” Shkreli told the congressman. Gowdy kept pressing Shkreli, saying that the hearing wasn’t focused on the charges against Shkreli. Shkreli repeatedly invoked his Fifth Amendment rights, which allow people to avoid incriminating themselves.
At one point, Shkreli’s lawyer, Ben Brafman, asked, “May I interject, Mr. Chairman?”
“You are not recognized, and you will be seated,” said Committee Chairman Jason Chaffetz, a Republican from Utah.
Turing and Valeant have become the poster companies for an industry that has been increasingly in the spotlight in Washington for raising some prices so high that they’re out of reach for many patients and straining state and federal budgets. Valeant shares have plunged over the last six months as the company became a lightning rod for the U.S. debate over the price of drugs and its business practices have been questioned. The stock rose 3.4 percent to $97.42 at 12:14 in New York.
As Cummings spoke, Shkreli smiled and toyed with a wooden pencil. Another member accused Shkreli of not taking the hearing seriously, and of posing for a picture instead of listening to members of Congress.
“I know you’re smiling but I’m very serious, sir,” Cummings said. “You have a spotlight and you have a platform. You could use that attention to come clean, to right your wrongs and to become one of the most effective patients’ advocates in the country and one that can make a big difference in so many peoples lives.”
Shkreli was excused after his testimony. Brafman, speaking outside the hearing room, said that Shkreli would have liked to talk.
“This was a frustrating morning for us,” Brafman said, "frustrating because many of the things said in this hearing were just not accurate.”
He said that some of Shkreli’s demeanor at the hearing was “nervous energy,” and that it was unfair that Turing had been singled out.
The “priority is to resolve the criminal case,” Brafman said. “I think at the end of this story he is a hero.”
In fact, Shkreli did comment on Twitter, minutes after leaving the hearing. “Hard to accept that these imbeciles represent the people in our government,” he said.
That didn’t go unnoticed by lawmakers. “He sends a tweet calling everybody on this committee imbeciles — did you know that?” Cummings asked Nancy Retzlaff, Turing’s chief commercial officer. “You all spent all of your time strategizing about how to hide your price increase behind positive PR, and come here with stupid jokes.”
Retzlaff said that many decisions at Turing were made before Shkreli left the company last year, after he was charged by federal authorities.
Yet Chaffetz continued to press her on the company’s claims that it was investing its money back into research and development, or whether it was planning to further increase the price of its drugs.
“Do you know who Metro Yacht Charters is?” Chaffetz asked, before asking more questions about whether the company had also spent thousands of dollars on fireworks and a cigar roller at a party. He also cited pay raises given at the company.
Retzlaff said that the company was committed to investing the company’s revenue and investing it back into R&D.
“Don’t come before the American people and cry and shed a tear and say we’re not making any money,” Chaffetz said. “If you’re going to continue to lie to the American people, the congress is going to continue to probe.”
“I am being truthful,” Retzlaff said.
Valeant interim CEO Howard Schiller, in prepared testimony released yesterday, explained why the company decided to increase the prices of two cardiac drugs by 525 percent and 212 percent, and promised to end an era of sharp hikes. Valeant’s CEO Mike Pearson is out on medical leave.
“While, like most other pharmaceutical companies, we will from time to time raise prices, I expect those price increases to be within industry norms and much more modest than the ones that drew this committee’s legitimate concern,” Schiller said in his prepared remarks.
“Where we’re made mistakes, we’re listening and we’re changing,” he told the committee at the hearing.
Different than Turing
Schiller was asked how his company was different than Turing. Schiller began to answer, “Valeant is a global company” mentioning the number of offices they have before Rep. Carolyn Maloney, a New York Democrat, cut him off, saying they were asking about the company’s strategy, not its scale.
“The only strategy I saw was, ‘Let’s increase the price of the drugs,”’ Maloney said, asking Schiller if he could name another one the company used.
Cummings said that his constituents were being hurt by the Valeant’s and Turing’s actions, making a reference to Pearson’s wealth and Shkreli’s purchase of an expensive, single-copy rap album.
“The people in my district aren’t on the Forbes billionaire list,” Cummings said. “They don’t buy $2 million Wu-Tang albums. They can’t liquidate assets to free up millions of dollars.”
Chaffetz blamed the Food and Drug Administration for not working fast enough to approve generic drugs, saying the agency was "drowning in a backlog" of applications.
"I believe that the FDA has failed to meet its statutory responsibilities," Chaffetz said. “If somebody increases the price of a prescription drug that’s going to invite more competition but if that competition can’t get approval from the FDA there will be no competition.”
Janet Woodcock, an FDA official, said the agency was working quickly through the list of applications and that the backlog wasn’t as bad as Chaffetz made it seem.
“The generic backlog was a big problem,” she said. “This was ultimately fixed” but takes time to implement.
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