When the manufacturer of Daraprim, a lifesaving drug used in the treatment of infections, increased its prices, Walgreens became the center of attention. Daraprim’s price increased by about 5,000% and the only reason people are taking their fury out on Walgreens and not the manufacturer is because the drug can only be bought from them.
This became an issue due to a deal the pharmacy chain struck with the manufacturer of the drug. In order to purchase Daraprim, you will have to visit a Walgreens specialty pharmacy. Specialty pharmacies are stores that carry drugs that treat life-threatening and chronic conditions. They employ pharmacists to assist patients’ manage their treatments and coordinate with doctors.
Their specialty pharmacies offer services such as centralized patient support, health system pharmacies, retail pharmacies, and hospitals. When reporters asked Walgreens to comment about the price of Daraprim, they said, “We have no impact on how manufacturers price their drugs.”
Turing Pharmaceuticals, the manufacturer behind the drastic price increase, hiked the prices from $13.50 a tablet to $750. Due to the backlash by customers, the manufacturer decided to lower the prices, but didn’t specify the amount. Walgreens declined to disclose the details of its contract with Turing or tell reporters if the drug’s increased price will generate more revenue for them.
However, the spokesperson from Walgreens did want to clarify one thing that “Sole distribution network does not affect price.” Currently, two drugs including Daraprim are sold through one distributor. Specialty drugs like Daraprim have always been a profitable market for the pharmacy industry, as they are used to treat diseases such as HIV, hepatitis C, and cancer.
According to the National Business Coalition on Health, specialty drugs represent 1% of all prescription drugs, but they account for about 20% of the profits. Industry experts have predicted a flourishing future for specialty drugs, saying that by 2020, the money spent on them will quadruple. With time, the demand for specialty drugs by specialty pharmacies will increase as well, as more people will depend on them to supply them with drugs like Daraprim.
Since only a few thousand people use specialty drugs, manufacturers choose to supply their drugs to limited distributors, which is what Turing has done with Walgreens. According to Jim Smeeding, a pharmacist and executive director at National Association of Specialty Pharmacy, “[Retailers can profit more from specialty medicines] than they do on run-of-the-mill diabetes medications.”
If that’s the case, why did Walgreens say in their second-quarter earnings that the profit margins for specialty drugs are lower than non-specialty drugs? Perhaps, Walgreens next earnings report will shed some light on this, as all signs point to the superstore making a lot of money by supplying the overpriced drug Daraprim.
In fact, all specialty pharmacies have a monopoly over these specialty drugs, as they are the only ones allowed to sell them. Community pharmacies would love to level the playing field by getting into the market of specialty medicine, as they sell for a higher price than other drugs.
In Walgreens’ defense, they signed the deal to distribute Daraprim with Amedra Pharmaceuticals of Horsham, Pa. It was after they finalized the deal that Turing Pharmaceuticals came into the picture.