Three people who attended an investor conference in Laguna Niguel, Calif., on March 14, 2017, said Mr. Bedrosian boasted in meetings about his ability to keep pushing up prices on products. The investors spoke on condition of anonymity, fearful of retaliation if they were identified.
According to the investors, Mr. Bedrosian was asked if the price-hike business model in the drug industry was over. He chuckled and said no, adding that he had tripled the price of one of Lannett’s drugs that very morning. He did not identify which one, the investors said.
When I asked Robert Jaffe, a spokesman for Lannett, to explain the rationale for these steep price increases, he said the company does not discuss its strategy. Instead, he suggested I speak with analysts, singling out Mr. Wilbur of Raymond James. In his recent report, Mr. Wilbur wrote that Lannett’s shares are attractive because the company can “find obscure, infrequently trafficked products where market dynamics facilitate or require substantial price movement.”
I asked Mr. Wilbur whether he was concerned that Lannett might face heightened scrutiny because of this practice. In a series of emails, he questioned why I would write about the company’s price increases, since they affected only a small number of people. “Convince me there is a real story here, and I can be helpful,” he said.
It’s true that some of Lannett’s price increases have been on niche drugs not used by millions of patients. Still, Dr. Aaron Kesselheim, associate professor of medicine at Brigham and Women’s Hospital in Boston and at Harvard Medical School, said, “The people who do use them maybe haven’t responded to other medications, so the rise in price for those patients would be problematic.”
The market dynamics that allow a generic drug manufacturer to hike up prices have to do mostly with competition. The problem, pharmaceutical experts say, definitely needs fixing. Generics come to market after the branded manufacturers’ exclusivity periods on their drugs expire. Prices of these drugs are a fraction of what the offerings were when they were branded.
And yet, prices on many generic products have risen significantly in recent years. A 2016 study by the United States Government Accountability Office found that from early 2010 to mid-2015, more than 20 percent of generic drugs had undergone price increases of over 100 percent.
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