Old-drug price hike ‘perversion of the system,’ Biogen CEO says

Shkreli declined to comment on Scangos’s additional remarks.

About 2,000 Americans each year use Daraprim, which treats the disease toxoplasmosis. While the parasite that causes the disease is common, it doesn’t usually cause symptoms and typically only needs to be treated in patients with compromised immune systems, such as people with HIV.

The drug industry has been under fire all year for its prices, with Gilead Sciences Inc. (Nasdaq:GILD) taking much of the criticism for its hepatitis C treatment Sovaldi. Sovaldi hit the market in December 2013 bearing the promise of a cure and a price tag of about $1,000 a day for 12 weeks. Gilead has argued that its drug represents a huge breakthrough for patients and can save the health-care system costs by keeping people with hepatitis C from eventually needing a liver transplant or getting liver cancer.

Insurance companies, which typically split medication costs with patients, have been particularly vocal in condemning prices, while pharmaceutical companies have argued that profits are used to develop the next generation of drugs and motivate innovation in a field often fraught with failure. Drugmakers have argued that inefficiencies by hospitals and doctors add far more costs.

Biogen (Nasdaq:BIIB), for example, is spending $2 billion to develop and test a drug for Alzheimer’s, including the building of a manufacturing plant, Scangos said. While Biogen is optimistic about the drug’s chances of approval based on early data, the drug could still fail, he said. “Then it’s an investment wasted.” If successful, Biogen will price its Alzheimer’s drug based on the benefit it brings to patients, he said.

Biogen’s drugs aren’t cheap — prices for its multiple sclerosis drugs have risen quickly over the years, and typically have a list price of more than $50,000. They will eventually face cheaper generic copies after their patents run out.

A period of patent exclusivity allows drugmakers “to provide investors with the kinds of returns they need to justify the risks,” then generic companies can step in to make cheaper copies, “and our children will get it for almost nothing,” Scangos said.