Four months ago, a small pharmaceuticals company bought a medicine used to combat a rare growth disorder in children and quickly raised the list price by 150%.
Such a dramatic boost — from $5,882 to $14,705 per vial — is the sort of move that often draws attention at a time when many Americans complain about rising drug costs. But the company, Eton Pharmaceuticals, argues there is no other way to keep its treatment on the market and make a profit. But its decision involves a calculated twist: a willingness to take a hefty loss on each Medicaid patient.
The gambit was prompted by the penalties that companies must pay to Medicaid when they raise the price of a medicine above the inflation rate, a consequence of a provision in a federal law that went into effect in early 2024. Thanks to the American Rescue Plan Act, pharmaceutical companies are now required to pay that difference in the form of a rebate to the government health care program.
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