The traditional response of regulators to sharply higher prices is to hold a hearing. It happened with some regularity when oil prices moved to over $100 per barrel.
In the week ahead, the skyrocketing price of prescription drugs is on the calendar for the U.S. House Committee on Oversight and Government Reform. Tuesday’s hearing will be the second in Congress to focus on the topic in the past seven weeks.
Former hedge fund and prescription drug CEO Martin Shkreli is the poster boy of bad behavior. As the boss at Turing Pharmaceutical, he jacked up the price of a drug from $13.50 a pill to $750. Shkreli has since resigned after he was arrested on securities fraud charges connected to two hedge fund firms he ran. He pleaded not guilty.
Valeant Pharmaceuticals also has come under criticism for hiking the prices of heart medications by more than 230 percent each. Congress wants to see company documents related to the drug price increases
American patients and their insurance companies spend more on prescription drugs than patients in any other developed country according to the Organization for Economic Cooperation and Development. Heart disease, diabetes, Alzheimer’s, arthritis – all have helped drive the demand for medicine.
Drug companies have been happy to feed the supply. Brand-name patented medicines can cost twice as much in the U.S. compared to the same medicine in other countries. Drug makers argue the higher costs are needed to develop new treatments.
Oil companies and their investors weathered hearings just fine. But they haven’t been immune to the market forces pushing energy prices to seven-year lows. Drug company stocks have weathered the recent sell-off better than most, but their investors exempt from politics.
Financial journalist Tom Hudson hosts “The Sunshine Economy”on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.