Seems like people have discovered a profitable business model in pharmaceuticals: find an old inexpensive drug with one supplier and no substitutes (i.e. a monopoly situation, even though no longer under patent), buy control of it, then raise the price. In theory, someone else can enter with another generic version and break the monopoly, but it takes time to do so.
Of course, this trend contributes to rising medical care costs for both patients and insurance companies funded by the government and private employers.
My wife’s patients have been getting hit by this for about the past year. Until the health and wellness of the population takes precedence over the profit margins of the healthcare corporations, it will only get worse.
It’s amazing there isn’t a groundswell of outrage demanding change on this issue.
*The real question at the heart of the Daraprim outrage isn’t why one pharmaceutical company decided to hike a drug price. The real question is why other companies aren’t taking advantage of the pick-your-price nature of American pharmaceutical policy — and whether they will ultimately follow in Turing’s steps.
On American drug prices, “the sky is really the limit.”*
*The story of Daraprim’s giant price increase is, more fundamentally, a story about America’s unique drug pricing policies. We are the only developed nation that lets drug makers set their own prices — maximizing profits the same way that sellers of chairs, mugs, shoes, or any other seller of manufactured goods would.
In Europe, Canada, and Australia, governments view the market for cures as essentially uncompetitive and set the price as part of a bureaucratic process — similar to how electricity or water are priced in regulated US utility markets.
Other countries do this for drugs and medical care — but not other products, like phones or cars — because of something fundamentally unique about medication: if consumers can’t afford the product they could have worse odds of living. In some cases, they face quite certain odds of dying. So most governments have decided that keeping these products affordable is a good reason to introduce more government regulation.*
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My guess is that the big companies don’t do this (as much) because they are in the business for the long haul, and realize that if they went too far in this direction public outcry would bring regulation. These smaller guys don’t care about that–they can make a pile of money short-term, and don’t care one way or the other whether it brings about regulation.
Actually, other companies have been doing that (including the previous owner of Daraprim who raised the price from $1 to $13.50; see the NYT article), but not to the magnitude that the current owner of Daraprim raised the price (from $13.50 to $750), so it only now got noticed by the big media.
What I don’t understand, is if this is so inexpensive to manufacture (formerly sold at $13.50 a pill), and it is out of patent, then why doesn’t another firm or agency just start making the stuff?
Before it was selling for $13.50/pill it was selling for $1/pill and less than $700k in annual sales. Only about 12000 prescriptions per year. Apparently the original owner was Glaxo, and it’s changed hands twice with a price increase each time and is now owned by by a startup run by a former hedge fund manager? Someone spotted an opportunity. Another company could jump in and manufacture the drug but there may not be enough financial incentive to do so. As soon as there’s competition the price and profit margins will drop back down to nothing. DH is a pharmacist. He’s never filled a prescription for daraprim but he named a couple of common, inexpensive generic drugs that have had similar huge price increases recently. One common drug used to be $4/prescription and now is over $200. Seems like preying on sick people to me.
Maybe the real plan of an operator like this is to sell it back to big pharma for a huge profit, because big pharma needs to head off potential price controls.
@happymom1 I too had the same thought you did about why someone else doesn’t make this drug. This explanation was given in the original article:
“With the price now high, other companies could conceivably make generic copies, since patents have long expired. One factor that could discourage that option is that Daraprim’s distribution is now tightly controlled, making it harder for generic companies to get the samples they need for the required testing.”
@Hunt This situation has nothing to do with the cost of “gearing up” to manufacture a drug. The drug in question has been on the market for over 60 years. The situation has everything to do with an enterprising businessman taking advantage of the fact that out government does not allow Medicare to negotiate drug prices. A free market system is all well and good to attain the American dream but someone is paying the price and that someone is the American taxpayer and Americans who are purchasing health insurance.
I had no idea this type of gross price-gouging was going on. In the video from the the links above, the self-righteous attitude of the executive who heads this company turns my stomach. He pats himself on the back that his drug is still cheaper than the new drug out for Hepatitis C. Wow. How does he sleep at night?
Until our legislators hear outrage from many Americans about this situation, there are going to be more and more drugs with absurd price increases.
Do you have any remote idea of how much it cost, and the resources needed for a pharmaceutical (even a large one that already has the facility space) to, from scratch, initiate the manufacturing of a compound/drug they are not currently manufacturing?
Much less, how many years (in decades) it often takes for new drugs to come to market? And how much money it costs us to treat people with chronic illnesses who do not have the kinds of drugs we have available today that can cure them?
I may not be the biggest fan of a few of the practices in pharmaceutical companies today, but I do know what looking down the pipeline takes and it’s far more than most people know, and for very good reasons.
Companies shelve patentable, approvable, marketable drug projects all the time if the overall NPV of bringing such a drug to the market is negative.
In these cases, the decisive factor is the market size, more so than the cost of approval etc. The cost of bringing a generic drug to the market is much smaller than the cost of the drug’s development from scratch. However, a generic drug maker would not go after an off patent drug if the market size is so small. The hedgies who control these “pharmaceutical companies” found a legal way of scamming the patients via creation of such monopolies. Shame on them for smudging the entire industry with their dirty games.
(BTW, to correct OP a tiny bit: a patent is not a monopoly, because a patent does not guarantee the right to practice the invention, only the right to exclude others from doing what is claimed - for a limited period of time.)
@teriwtt Yes I do “have a remote idea of how much it costs and the resources needed for a manufacturer to start up from scratch”. (BS ChemE here) However, that is not the situation we are discussing in this thread. As detailed in the links in the OP’s original post and that in post # 2, this drug has been in production for decades. Another company bought the original producer out and continued production in the same facilities and raised the price. Now a third company has taken over, continued production in the same facility and raised the price to a ridiculous level. It’s a financial game and has nothing to do with the cost of bringing the product to production.
Hoosiermom, you and Terri are both correct, but talking about a different angles of the issue (a biotech gal here speaking, so know something about the business). Technically, the cost of getting a generic drug on the market is relevant in this situation as well.
The scumbags get away with their schemes precisely because it takes quite a lot of money to bring a generic drug to the market. Less than developing a new pharmaceutical, but still, major $$, so not a single Teva of this world will step into the tiny market already dominated by an established player. So such companies, run but by hedgies with zero inyerest in doing any new drug development work, enjoy their monopoly - legally! - knowing that the competition will never come.
There’s a difference between a company who purchases a smaller company along with their facilities vs. a company that wishes to begin a start up of a generic. It’s not so easy to just state, “Well, we want to make such-and-such drug because the patent at XYZ company expired, so let’s start making it in our facility.” This was addressing someone’s question of why more pharmaceuticals can’t just start making a generic of another company’s drug once its patent is expired (#6). H’s 25±year career has been in the pharmaceutical industry as a Ph.D. process chemist - I’ve heard every argument out there about what big bad bullies the pharmaceutical companies are, and will repeat that most people do not know what is involved in getting a new (or newly-off patent) drug to market. I am not going to provide more details of how I know this because it would be easily identifiable information. Like I said, there are certain things I do not like about how big pharmaceuticals operate, but pricing is not as clear-cut as people think… there’s so much more that goes into the equation; it’s very complicated.
I read the story a few days ago or yesterday (I’ve gotten kind of mixed up on exactly when I read it) but apparently also this drug is taken by a very small number of people. It’s not a common drug for a common ailment. It’s very rare.
I don’t know how mad we can be at a CEO doing something legal to help his company make more money. That’s his job. But obviously, since we’re looking at a scenario where the cost to produce the drug is low, importation is illegal, there are no domestic competitors, and the benefit to consumers is great, this a bad outcome. Seems to me the easiest and most sensible solution is to allow importation but perhaps there’s some reason why that is a problem.
“Legal” may quickly become “illegal” if the legislators move their chops and put it in writing. The only downside is that in the process, some stupid restraints could be placed on real biotech companies.
I thought the hedgie who used some of his money to start proceedings to invalidate pharmaceutical patents - after shorting their holders’ stock - took home the prize. This CEO clearly beat him, IMO.