How Big Pharma Uses Charity Programs to Cover for Drug Price Hikes

A billion-dollar system in which charitable giving is profitable.



In August 2015, Turing Pharmaceuticals and its then-chief executive, Martin Shkreli, purchased a drug called Daraprim and immediately raised its price more than 5,000 percent. Within days, Turing contacted Patient Services Inc., or PSI, a charity that helps people meet the insurance copayments on costly drugs. Turing wanted PSI to create a fund for patients with toxoplasmosis, a parasitic infection that is most often treated with Daraprim.
Having just made Daraprim much more costly, Turing was now offering to make it more affordable. But this is not a feel-good story. It’s a story about why expensive drugs keep getting more expensive, and how U.S. taxpayers support a billion-dollar system in which charitable giving is, in effect, a very profitable form of investing for drug companies—one that may also be tax-deductible.


PSI, which runs similar programs for more than 20 diseases, jumped at Turing’s offer and suggested the company kick things off with a donation of $22 million, including $1.6 million for the charity’s costs. That got Turing’s attention. “Did you see the amounts??? $22MM!!!” wrote Tina Ghorban, Turing’s senior director of business analytics, in an e-mail to a colleague. (The document was obtained by congressional investigators looking into the company’s pricing.) Turing ultimately agreed to contribute $1 million for the patient fund, plus $80,000 for PSI’s costs.
PSI is a patient-assistance charitable organization, commonly known as a copay charity. It’s one of seven large charities (among many smaller ones) offering assistance to some of the 40 million Americans covered through the government-funded Medicare drug program. Those who meet income guidelines can get much or all of their out-of-pocket drug costs covered by a charity: a large initial copay for a prescription, another sum known as the coverage gap or the donut hole, and more-modest ongoing costs. It adds up fast. After Turing raised Daraprim’s price, some toxoplasmosis patients on Medicare had initial out-of-pocket costs of as much as $3,000.

http://www.bloomberg.com/news/articles/2016-05-19/the-real-reason-big-pharma-wants-to-help-pay-for-your-prescription