Volume 15, Number 4, 2017
Terence C. Burnham, Samuel Huang and Andrew W. Lo
Recent cases of aggressive pricing behavior in the biopharmaceutical industry have raised serious concerns among payers and policymakers about industry ethics. However, these cases should not be confused with price increases motivated by challenging business conditions that ultimately lead to greater investment in R&D and improved patient access to therapeutics. We study the example of Questcor Pharmaceuticals, which was forced to choose between increasing the price of an effective drug in 2007 and ceasing production and shutting down. We consider Questcor’s journey from inception to its acquisition in 2014, analyze the factors leading up to the price hike of its main revenue generator, Acthar Gel, and discuss its resulting impact on patients after 2007. A counterfactual financial simulation of the company’s prospects in the case where prices were not increased shows that Questcor would have become insolvent between 2008 and 2010.