PhRMA ousts 22 drugmakers from ranks in membership change

Original Post by Ned Pagliarulo, BioPharma Dive

Dive Brief:

• Amid an effort to revamp the drug industry’s image, PhRMA rolled out new membership criteria Tuesday aimed at blunting criticism the trade association had expanded to include companies that spent little on research and development.
• Members will now be required to invest an average of $200 million per year and at least 10% of global sales into R&D, stricter standards that seven companies didn’t meet. PhRMA’s board of directors also voted to eliminate the “associate” member category, ousting another 15 drugmakers from its ranks.
• Backlash against drugmakers like Marathon Pharmaceuticals — a now ex-associate member —  had seemed to belie the group’s messaging on bold scientific innovation and pioneering researchers toiling away in a lab.

Dive Insight:

Public and legislative outrage over rising drug prices has been felt across the entire biopharma industry. Lawmakers and prosecutors have cast a wide net, targeting smaller companies like Ariad Pharmaceuticals, specialty pharmas like Valeant, generic drugmakers and big pharmas like Eli Lilly.

But the heaviest criticism has fallen on companies which have bought up rights to older drugs only to sharply jack up the price, despite not investing much in R&D.

Think Martin Shrekli’s infamous 5,000% percent price hike for Daraprim (pyrimethamine), a generic treatment for toxoplasmosis that was no longer regularly produced. Or Marathon Pharmaceutical’s decision to price Emflaza (deflazacort) at $89,000 a year after winning U.S. approval for the decades-old steroid that is commonly available in other countries at a fraction of the price.

With its new membership criteria, PhRMA is seeking to align itself more exclusively with the kind of companies that spend big bucks on R&D. The changes help to reinforce the trade group’s message that the biopharma industry delivers innovative cures at great expense (implicitly justifying higher prices for novel drugs).

The changes go into effect immediately. Well-known names like Horizon Pharma, Mallinckrodt and Jazz Pharmaceuticals were among the 22 ousted companies.

A higher bar also means some smaller biotechs not usually associated with low research spending were shown the door.

The Medicines Company, which is developing a PCSK9 synthesis inhibitor, has spent an average of 71% of its product sales on R&D over the past three years, meeting PhRMA’s first criteria. But annual R&D spending averaged only $134 million, falling below the group’s threshold.

BioMarin Pharmaceutical, a drugmaker focused on rare diseases, was also removed from PhRMA’s membership.