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Drug lobby said to mull membership cuts amid price scrutiny

01.06.14 BALTIMORE, MD- Stephen Wienner, Owner and Pharmacist at  Mt. Vernon Pharmacy, shown here with some generic pharmaceuticals for a story about the rising price of generic drugs. (The Daily Record/Maximilian Franz)

 (The Daily Record/Maximilian Franz)

The lobby group, Pharmaceutical Research and Manufacturers of America, or PhRMA, is proposing that member companies must spend $200 million a year on research and development, based on a three-year average. They’ll also have to have to show that their R&D spending amounts to at least 10 percent of their global sales, according to the people, who asked not to be identified because the matter is still private.

The proposed changes would create a trade group made up of mostly large, established drugmakers. It would shut out some of the small companies that have attracted the ire of insurers, patients and politicians over their business practices, buying older drugs and raising their prices, and for smaller companies that don’t yet have drugs on the market.

One company that faced questions over its pricing practices, Marathon Pharmaceuticals LLC, has already left the group ahead of the new rules. Inside Health Policy reported last week that Avanir Pharmaceuticals Inc. and Medicines Co. have also departed the group.

The review began earlier this year after Marathon said it would charge $89,000 a year for a drug that was being imported from overseas for about $1,000 a year. The company had done limited new research to get the drug approved in the U.S. The drug is used to treat a rare and deadly pediatric condition, and Marathon has since sold the rights to the product to PTC Therapeutics Inc. PTC said Monday that it will sell the drug for $35,000 a year after rebates and discounts.

Common practice

Price increases by drugmakers large and small are common in the industry. While much of the attention has focused on companies like Marathon, established pharmaceutical manufacturers including Pfizer Inc., GlaxoSmithKline Plc and AstraZeneca Plc routinely increase the price of their products, Bloomberg has reported.

Soon after Marathon announced the price for its drug,  Steve Ubl, chief executive officer of PhRMA, said Marathon’s “recent actions are not consistent with the mission of our organization.” Marathon left PhRMA last month ahead of the review, which the lobbying group’s board is scheduled to vote on Tuesday, according to the people familiar with the matter. The changes would be immediate, according to a third person familiar with the matter.

Another proposal in the new rules gets rid of a tiered membership within the trade group, one of the people said. While many large drug companies, such as Eli Lilly & Co. and Pfizer Inc., are full members, smaller companies have been able to join as “research associates” for lower fees. This category would be eliminated under the new guidelines.

Representatives for other drugmakers that belong to PhRMA, including Jazz Pharmaceuticals Plc, Aerie Pharmaceuticals Inc., AMAG Pharmaceuticals Inc. and Horizon Pharma Plc, either declined to comment or didn’t respond to requests for comment.

The changes come as the White House sends mixed messages about its plans to address drug prices. President Donald Trump’s administration has said he wants to loosen regulations on almost all industries, though he has also accused drugmakers of “ getting away with murder” because of their pricing practices. He’s promised to take action to decrease drug costs.

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