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Price of anti-infection drug goes up 5,000%

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Stocks of makers of biologic and "specialty" drugs plunged Monday after Democratic presidential frontrunner Hillary Clinton said she'll soon release a plan to address "price gouging" in the industry.

It was the one of the worst days of the year for the stock market performance of the biotech industry.

Clinton's announcement on Twitter follows news that drugmaker Turing Pharmaceuticals hiked the price of a 53-year-old drug for a potentially deadly parasitic infection from $13.50 per pill to $750. Because the drug, Daraprim, treats patients with compromised immune systems, the price hike of more than 5,000 percent sparked outrage from medical groups representing doctors who care for patients with HIV and other infectious diseases.

"It's unethical at best. Just trying to make a quick dollar just by endangering the lives of a lot of people," Dan Scales, a Denver pharmacist specializing in HIV drugs, said Tuesday.

Scales works with the Colorado program that provides medication to the underinsured. About five to ten people use the drug per year, and the state may end up footing that bill.

"They still have to provide that drug. And now this cost will be taken up by the taxpaying citizens of Colorado," he added.

One drugmaker, Mallinckrodt Pharmaceuticals PLC, saw shares drop 10.02 percent. The top 20 drugmakers whose products include biologic or specialty drugs posted share drops of more than 2 percent. And the Nasdaq Biotechnology Index dropped 4.4 percent.

Biologic drugs are produced in living cells and specialty drugs treat complex, chronic conditions, usually need to be injected and sometimes refrigerated, and also are very expensive.

Many new drugs for cancer, hepatitis C, rare disorders and even a new class of cholesterol drugs have prices in the range of $80,000 or more for a year or course of treatment. Some are major medical advances, saving lives and other medical costs. Others are minor improvements, such as cancer drugs that add a few months' survival over existing medicines.

So while the Turing price hike was getting the blame Monday for the stock slump, it's only the latest - though perhaps most outrageous - example of price hikes, or sky-high prices for newly launched drugs. Insurance companies, politicians, advocates for patients and other critics have been blasting those prices as outrageous and unsustainable for the health care system, not to mention patients who sometimes must pay up to 30 percent of the cost.

In the case of Turing's Daraprim, the company obtained rights to sell the drug, the only U.S.-approved treatment for toxoplasmosis, in August and hiked the price overnight. The company, run by a former hedge fund manager named Martin Shkreli, on Monday repeated comments meant to justify the increase, saying that Turing hopes to improve the drug's formulation and develop new, better drugs for the infection. It also stressed that some patients can get financial aid from the company to obtain the drug.

Biotech analyst Steve Brozak, president of WBB Securities, said that because of the furor over Turing's action, pharmaceutical and biotech drugmakers will have to defend themselves "against the coming onslaught."

"I don't think Turing has a defense," Brozak said, adding, "As long as this is debated, nothing good for the biotech industry and biotech investors can happen."

Clinton's chief rival for the Democratic nomination, Vermont Sen. Bernie Sanders, has been railing about high drug prices for about a year and recently reintroduced legislation that would enable the Medicaid program to get lower prices for some drugs and allow U.S. residents to buy cheaper drugs from Canada.

Trade groups representing pharmaceutical and biotech companies oppose letting Americans buy drugs overseas and have repeatedly said in the past couple of years that price controls would limit the amount of money their companies can spend on research, limiting the number of new drugs developed. While small companies trying to win their first approval might have trouble money raising capital from investors, many of the top makers of biologic and specialty drugs are flush with cash and spend more on marketing than research and development.

Even those companies got sucked into the share downturn.

The top 20 drugmakers, whose stock price rarely moves more than 1 percent or so in a day, took significant hits Monday. Bristol-Myers Squibb Co. shares dropped 2.5 percent, Merck & Co. shares 2.2 percent and Pfizer shares 1.3 percent. Even giant Johnson & Johnson, one of the top makers of biologic drugs, saw shares dip 0.3 percent.

J&J, Pfizer and Merck are among the 30 Dow components, so their drops cut into the Dow's gain Monday.

Smaller, less-diversified makers of biologic and specialty drugs were hit even harder. Biogen Inc. shares dropped 5.6 percent, Vertex Pharmaceuticals Inc. 4.8 percent, Endo International PLC 4.4 percent and Regeneron Pharmaceuticals Inc. 3.8 percent. Biotech giants Amgen Inc. and Gilead Sciences Inc., both of which have been criticized for ultra-high drug prices, fell 2.3 percent and 2.5 percent, respectively.

Seven other drugmakers were among the 30 biggest losers on Wall Street Monday.