Big U.S. pharmacies square off on Daraprim supplies

By Deena Beasley

(Reuters) - As Turing Pharmaceuticals Chief Executive Officer Martin Shkreli contends with charges of securities fraud, major U.S. pharmacies are moving to assure patients of continued access to the company's key drug, Daraprim.

Shkreli was arrested on Thursday for engaging in what U.S. prosecutors said was a Ponzi-like scheme at his former hedge fund and a pharmaceutical company he previously headed. Turing officials did not respond to multiple requests for comment on the company's future plans regarding Shkreli or its drug distribution.

Leading pharmacy chain Walgreens Boots Alliance Inc (NASDAQ: WBA), currently the exclusive U.S. supplier of Daraprim, said it has inventory of the drug, which has a list price of $750 per dose. But growing public backlash against that price has resulted in the entry of new competitors - compounding pharmacies able to produce similar versions for a fraction of the cost.

CVS Health Corp (NYSE: CVS), the No. 2 U.S. drug benefit manager, told Reuters on Thursday it can provide an alternative to Daraprim that is compounded by Avella Specialty Pharmacy, at a price of $30 per 30 pills. The 62-year-old treatment is used to fight parasitic infections in AIDS patients, pregnant women and others.

The CVS arrangement is similar to one between Imprimis Pharmaceuticals Inc (NASDAQ: IMMY), a compounding pharmacy based in San Diego, and Express Scripts Holdings Inc (NASDAQ: ESRX), the largest U.S. manager of prescription drug plans, to offer lower-cost pyrimethamine, the generic version of Daraprim.

Compounding pharmacies operate differently from drug manufacturers whose treatments must be approved by the U.S. Food and Drug Administration for mass sale. Instead, such pharmacies can prepare medications only for individual patients once they have a prescription, and must comply with state and federal regulations.

Meanwhile, several major medical groups have started to urge doctors to seek out such lower-cost alternatives to Daraprim, providing detailed instructions on how to do so. Walgreens said in an emailed statement that it has "urged Turing to expand the number of specialty pharmacies to promote greater access, and it is our understanding that they will be doing so in the near future." Turing officials could not be reached for comment.

Turing, founded by Shkreli early this year, has made front-page headlines since it bought the rights to Daraprim in August for $55 million from Impax Laboratories Inc . With no rival manufacturers making the drug, Turing quickly raised the price for a tablet of Daraprim to $750 from $13.50.

The move sparked widespread criticism - first by medical groups such as the Infectious Diseases Society of America and the HIV Medicine Association, followed by presidential candidates Hillary Clinton, Bernie Sanders, and Donald Trump.

Overnight, the tiny company was vilified as an example of pharmaceutical industry greed, an accusation also leveled at much bigger players like Gilead Sciences Inc (NASDAQ: GILD) and Valeant Pharmaceuticals International Inc (NYSE: VRX).

Turing said last month that it would not change the list price of Daraprim, but would offer the drug to hospitals at a discount of up to 50 percent.

"We don't have any reason to believe that the allegations of an investment Ponzi scheme by Turing's CEO will encumber production of Daraprim," a spokesman for Kaiser Foundation Health Plan said in an emailed statement. "However, we are still waiting to see proof of Mr. Shkreli's promise to reduce the price of this needed generic drug." Shkreli, who began his career working for various hedge funds, in 2008 formed a partnership to launch MSMB Capital Management, which became known for filing requests to the Food and Drug Administration to reject products developed by Navidea Biopharmaceuticals (NYSE: NAVB) and MannKind Corp (NASDAQ: MNKD). MSMB profited by selling short the stock of both companies.

Retrophin Inc (NASDAQ: RTRX), initially a portfolio company operated from the MSMB offices, was created in 2011 with an emphasis on biotechnology. Shkreli was president and CEO at Retrophin, which says it focuses on treatments for serious, catastrophic, or rare diseases, until October 2014, when he was fired by the company's board.

Retrophin's board earlier this year accused Shkreli in a lawsuit of using $65 million in company funds to repay MSMB investors who had lost money. Shkreli also sits on Turing’s board along with Chairman Ron Tilles, who formerly worked at Retrophin, and one other member, Walter C. Blum, according to the company's website.

Imprimis CEO Mark Baum said that even if Turing's other investors decided to remove Shkreli, that alone would not be enough to change the fortunes of Daraprim. While at Retrophin, Shkreli hiked the price of its key drug, Thiola for kidney stones, to $30 a pill from $1.50. That price has not changed since Shkreli left.

"Once Turing went and paid what it did to buy that drug, they were locked into raising the price," Baum said.

(Additional reporting by Caroline Humer; Edited by Michele Gershberg and Bernard Orr)

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