13 ms·

It seems to me that the overall result would be other companies start manufacturing the generic and sell the drug for maybe 20% less than Martin and over time t

It seems to me that the overall result would be other companies start manufacturing the generic and sell the drug for maybe 20% less than Martin and over time the price drops back down towards where it once started. In the meantime, this company either goes bankrupt or is sold off. Or the government passes a law capping how much you can raise the price of a generic drug over so many years.

bedhead 11y ago
That's the loophole though, the quantities are so small that realistically, no pharmaceutical company has the incentive to make their version of the drug, even at $750 per dose. There are still costs to making a drug that's off-patent, and sometimes the number of patients being treated is only in the double digits. Additionally, a competing drug released at say, $500 per dose would still be considered predatory anyway. This is really the backwater of pharma. The case of KV Pharmaceuticals that I cited was a little different since compounding labs had already been making the drug Makena. In that case, the FDA actually sent these labs a letter essentially saying, "Go ahead and keep making the drug even though KV now has a patent for it. We are choosing to not enforce their patent because their price increase was bs." Maybe the government can prove its worth and get off its ass and quickly figure out how to close this loophole, then go after Martin and others like him.
- danmaz74 11y ago
  They should just allow importing drugs from other markets that have good enough quality standards - like the EU or Canada I guess. Problem solved.
  - imdsm 11y ago
    Can this drug be reproduced by others? Is it simply a licensing issue?
    - TD-Linux 11y ago
      All of the drugs mentioned in the article have had their patents expire long ago.
  - ssmoot 11y ago
    But who provides the quality standards oversight? The drug is apparently produced in India. What if pills were shipped to the US and it was found after the fact that many batches contained unacceptable levels of iron? Who to blame? I'm sure Canada has decent oversight, but who wants to say that the solution is no direct US agency oversight, and that we want a "Pharmaceuticals-NAFTA"? It seems funding oversight with a "homeland" agency is one issue you could get bipartisan support on. While sure, I doubt many have a problem with medical tourism, I'm not sure bringing drugs across the border intended for distribution without FDA approval is the answer. On the other hand maybe countries working together at the agency level to ensure their oversight measures are in compliance with some agreed upon standard is a sane way to move forward. But then who maintains the list of approved drugs? Is that power given to some international body? Or does the FDA still have to approve drugs for distribution and only alternatives are brought in? And then what about drugs that are patented in the US (like this one), but freely available in other markets from other manufacturers? It seems a worthy enough goal in general, but I don't think a fully libertarian approach to the problem comes close to being the right answer either.
    - danmaz74 11y ago
      > Pharmaceuticals-NAFTA I'm not a libertarian and I'm in favor regulations when needed, but in this case I think that recognizing drug testing and quality controls between countries that have similar standards would be a great help at curbing costs. "FDA approval" in this case should mean that the FDA could recognize that if agency X from Country Y says that a generic pharmaceutical is safe, you don't need to do the same tests again. Of course this should work both ways - I'm from the EU, and I'd like to be able to get drugs manufactured in the US when they're cheaper and just as safe.
    - leshow 11y ago
      Did you miss the main caveat? Countries with good quality testing standards. If you have many countries with very similar quality assurance standards then surely it makes sense to rely on the work of others, or have a revised (shorter, cheaper) process for drugs to go through which have already been approved by certain countries. I don't think anybody is suggesting mass importation of low quality Indian or Thai versions of drugs.
  - deleted 11y ago
    [deleted]
  - FireBeyond 11y ago
    I'm sure he'd be happy to let that go unprotested ... "Skrelicame to attention after his attempts to have the FDA not approve drugs being produced by companies whose stocks he was shorting". Who needs morality in the free market, right?
    - cowsandmilk 11y ago
      That is a very biased view of the situation. Pharma companies try to put the best face on data to get a drug approved. Analysts try to approach the data in an impartial way. If an analyst looks at the data and sees issues, it makes sense both ethically and financially to push for the drug not to be approved. Ethically, if the drug doesn't work as advertised, it is better that it is not sold as a cure. Informing the FDA of your analysis is a duty. Financially, if you think the drug doesn't work, it makes sense to short the stock in the belief that it won't be approved. Pharma companies always present it as hedge funds trying to kill their products, but if the data is strong and the drug works, the analyst could just go long on the company instead.
      - kragen 11y ago
        Yes, it makes sense ethically to push the FDA not to approve a drug you think won't work. It also makes sense financially to bet that the FDA won't approve a drug that you think won't work. But it doesn't make sense ethically to do both, both directly because it creates a conflict of interest, and indirectly because that very conflict of interest undermines both the objectivity and the credibility of your recommendation not to approve the drug.
        ci5er 11y ago
        You are arguing ... what, here? That people with some sort of knowledge of a product/company/industry's prospects shouldn't be allowed to buy/sell positions in that company? If I understand you (and I may not), and we were to come to the conclusion that "there ought to be a law", I have no idea how that would even be structured/written.
- caseysoftware 11y ago
  Even though it's $750 per dose now, since they have exclusive control over the market they could decrease it to whatever whenever they wanted to starve competitors.. probably after said competitors have invested in doing it.
  - nickff 11y ago
    This is a possible strategy, but is rarely used, as it is very risky (, it is likely to cost a great deal of market share in the long term). I have looked into it, and found very few examples of a company which tried to lure a competitor into a market, then under-sell them. The opposite (under-sell competition to gain market share then hike prices) also appears to be quite unpopular in the real market, for the opposite reason (it will surely gain market share in the short term, but can cost a great deal of money). These are very popular theories, and there are a few examples of those who have tried both strategies, but those examples are almost all cautionary tales.
    - unprepare 11y ago
      I think its somewhat common, and even occasionally successful: Amazon prime costs amazon money, and the original fire tablets were sold at cost - i suspect the new 50$ tablets are not very profitable either Walmart has commonly been accused of this practice for various products Google's original Nexus 7 tablet I believe Apple ended up losing money at least a quarter or two on the app store/itunes Granted there are few examples, but its certainly prevalent enough that its a legitimate business concern - the bigger disparity is that it takes a pretty enormous size for a company to succeed in such a tactic, I doubt turing has the kind of capital to lose that the likes of Walmart, Apple, Google and Amazon do.
      - nickff 11y ago
        Those are good examples, but I would argue that if a practice is sustainable (and often sustained), it is not problematic. If Amazon wishes to provide Prime at a loss to encourage customers to buy products which Amazon will make money on (enough to compensate for Prime), is there a problem? Would there be a problem if Amazon offered to ship things sooner in exchange for a promise that you would shop at their site more often (even if this promise plan cost them money)?
- fspeech 11y ago
  Maybe the big drug retailers (CVS/Walgreen/Walmart) could be interested in either owning or partnering with generic makers, as they can derive secondary benefits such as reputation/traffic even if a particular drug is temporarily unprofitable. They could also attempt "premium" generics like what Costco did with the Kirkland brand. You need a player that can benefit in other ways to prevent someone from gaining a monopoly through price manipulation.
  - darkmighty 11y ago
    Not familiar with the industry, but I don't think the problem can be solved this way (at least in the short term). Simply by the distribution of drugs/prices, there seems to be a very large number of low cost drugs susceptible to this tactic. There's ample space for them to pick a drug now and then and put abusive prices all of a sudden, while lowering the price as soon as competition threatens to move in. Additionally, the costs of reverse engineering a drug are high enough to make this kind of competition very hard. I see no other way than some regulation to at least force some hysteresis or stability on the prices.
- refurb 11y ago
  The case of KV Pharmaceuticals that I cited was a little different since compounding labs had already been making the drug Makena. In that case, the FDA actually sent these labs a letter essentially saying, "Go ahead and keep making the drug even though KV now has a patent for it. We are choosing to not enforce their patent because their price increase was bs." KV never had a patent for Makena. What they did have was "data exclusivity" which meant the FDA could not approve another version of the drug for at least 5 years. What they were counting on was the FDA clamping down on the compounding pharmacies, since they weren't selling an approved version of the drug. The FDA, seeing KV's strategy, declined to shutdown the compounders which resulted in KV declaring bankruptcy. KV restructured, reduced the cost of the drug and created a sustainable business. They were acquired by Valeant I believe.
- technotony 11y ago
  I don't get this, the drug is available from Sigma[1] for $51.50 per 250mg, with a dosage of 50-75mg per day for a patient. So clearly someone can make it more cheaply. I get that Sigma is research chemicals not medical grade, but seems to me someone could figure this out. FDA approval must be the issue. [1] http://www.sigmaaldrich.com/catalog/product/fluka/46706?lang=en&region=US http://www.sigmaaldrich.com/catalog/product/fluka/46706?lang...
  - Laforet 11y ago
    One word: Bioequivalence. Having the correct active ingredient does not imply that drug delivery and efficacy are equivalent unless you can prove it by comparing it against a known and approved formulation in human volunteers, The burden of proof is significantly less than that of getting a new compound approved, but still a major sinkhole for money. The correct way to handle this would be for the FDA to hand out compassionate use permits for patients to import their own drugs since it is clearly unavailable for a reasonable price in the US.
Bluestrike2 11y ago
That's exactly what would happen, but the generics companies can't procure sufficient samples due to the changes in how Daraprim is distributed. So long as Shkreli is able to control distribution tightly enough, there's no worry about a generic coming onto the market.
- dperfect 11y ago
  I don't completely understand how they can effectively prevent generics companies from producing it (even through tightly controlled distribution), but if that's the case, I believe that should be the story here as opposed to the bit about raising prices. Under normal market conditions, either the demand and price will naturally incentivize generics to enter the market (even at high costs), or this is really not much of a story because the total addressable market is so small that price * demand won't significantly move the needle in the books of insurance companies who will be paying for it. If total addressable market is significant and the producers can manipulate the market in ways outside of patents to abuse monopoly power, then that's the misdeed (in my opinion), not the raising of prices. In other words, with very few exceptions it's futile to blame a company for their prices. On the other hand, if unscrupulous manipulation of a market is the culprit for unreasonable prices, that's where we should demand/enforce a higher standard.
  - sageikosa 11y ago
    Or perhaps the story should be about how the drug market is not normal. It is regulated, i.e. ruled, by bureaucratic policy and operating procedures.
- nhstanley 11y ago
  Why would they need samples when the chemical structure is so widely known[1]? It's not like it's a biologic where sequence and other formulation details are critically important. Can you explain? [1] https://en.wikipedia.org/wiki/Pyrimethamine https://en.wikipedia.org/wiki/Pyrimethamine Edit: I noticed that paulmd, further down, explained why this is important. I didn't realize the rules were this stupid. The FDA should be able to force companies to make their product available for comparison testing. It's insane that it isn't the case.
anigbrowl 11y ago
The strategy is to prevent other companies from manufacturing the generic by withholding supply from them so as to prevent them demonstrating bioequivalence. ISTM that the least-onerous regulatory solution would be to require manufacturers to provide supply at cost to FDA on demand for testing purposes.
- zaroth 11y ago
  It seems amazing that supply can be clamped down to such an extent that a competitor literally couldn't obtain some samples for bio-equivalence testing, even under a false pretense if necessary. Completely agree that if someone is willing to pay the list price, they should be guaranteed availability within some reasonable time-frame for testing purposes. I assume if the only drug line is effectively "shut down" then there's no way to run bio-equivalence and to bring on a new manufacturer they must test some other way? I guess whatever that procedure is, should take effect if the pills can't be ordered for testing.
marincounty 11y ago
"Or the government passes a law capping how much you can raise the price of a generic drug over so many years." Congress, controlled by Rebublicans, right now, won't let government get involved. I don't even want a cap. I would just like governmental over site/approval on Pharmacutical accuisition. I asked my pharmacist why my generic drug(not orphan drug, noting fancy) is going up in price. I don't know if she's right, but she told me big Pharmacutical companies are buying out generic drug companies, and raising the prices of the generic drug, or shutting the newly bought company--so they can keep supply down? I don't know if this is going on, but i've heard it, from at least, two sources. I know it sound extreme, and hard to imagine, but these pharmacutical companies are loaded with cash? Plus, they have government protection--can't buy from Canada, etc. So, in the end, we are going to be at their mercy? As to just effecting Insurance Companies, my prescription formulary excludes so many drugs, or makes them difficult to buy; I pay out of pocket. These drug prices are coming out of our pockets. (It's not just this future bottom boy at some federal correction facility, it's most of these Pharmacutical companies, or hedge funds? I can't tell the difference anymore. Oh yea, Biomarin seems just as shady, but because people don't understand what they do, they seem to just get a pass?)

bedhead 11y ago

That's the loophole though, the quantities are so small that realistically, no pharmaceutical company has the incentive to make their version of the drug, even at $750 per dose. There are still costs to making a drug that's off-patent, and sometimes the number of patients being treated is only in the double digits. Additionally, a competing drug released at say, $500 per dose would still be considered predatory anyway. This is really the backwater of pharma. The case of KV Pharmaceuticals that I cited was a little different since compounding labs had already been making the drug Makena. In that case, the FDA actually sent these labs a letter essentially saying, "Go ahead and keep making the drug even though KV now has a patent for it. We are choosing to not enforce their patent because their price increase was bs." Maybe the government can prove its worth and get off its ass and quickly figure out how to close this loophole, then go after Martin and others like him.

danmaz74 11y ago
They should just allow importing drugs from other markets that have good enough quality standards - like the EU or Canada I guess. Problem solved.
- imdsm 11y ago
  Can this drug be reproduced by others? Is it simply a licensing issue?
  - TD-Linux 11y ago
    All of the drugs mentioned in the article have had their patents expire long ago.
- ssmoot 11y ago
  But who provides the quality standards oversight? The drug is apparently produced in India. What if pills were shipped to the US and it was found after the fact that many batches contained unacceptable levels of iron? Who to blame? I'm sure Canada has decent oversight, but who wants to say that the solution is no direct US agency oversight, and that we want a "Pharmaceuticals-NAFTA"? It seems funding oversight with a "homeland" agency is one issue you could get bipartisan support on. While sure, I doubt many have a problem with medical tourism, I'm not sure bringing drugs across the border intended for distribution without FDA approval is the answer. On the other hand maybe countries working together at the agency level to ensure their oversight measures are in compliance with some agreed upon standard is a sane way to move forward. But then who maintains the list of approved drugs? Is that power given to some international body? Or does the FDA still have to approve drugs for distribution and only alternatives are brought in? And then what about drugs that are patented in the US (like this one), but freely available in other markets from other manufacturers? It seems a worthy enough goal in general, but I don't think a fully libertarian approach to the problem comes close to being the right answer either.
  - danmaz74 11y ago
    > Pharmaceuticals-NAFTA I'm not a libertarian and I'm in favor regulations when needed, but in this case I think that recognizing drug testing and quality controls between countries that have similar standards would be a great help at curbing costs. "FDA approval" in this case should mean that the FDA could recognize that if agency X from Country Y says that a generic pharmaceutical is safe, you don't need to do the same tests again. Of course this should work both ways - I'm from the EU, and I'd like to be able to get drugs manufactured in the US when they're cheaper and just as safe.
  - leshow 11y ago
    Did you miss the main caveat? Countries with good quality testing standards. If you have many countries with very similar quality assurance standards then surely it makes sense to rely on the work of others, or have a revised (shorter, cheaper) process for drugs to go through which have already been approved by certain countries. I don't think anybody is suggesting mass importation of low quality Indian or Thai versions of drugs.
- deleted 11y ago
  [deleted]
- FireBeyond 11y ago
  I'm sure he'd be happy to let that go unprotested ... "Skrelicame to attention after his attempts to have the FDA not approve drugs being produced by companies whose stocks he was shorting". Who needs morality in the free market, right?
  - cowsandmilk 11y ago
    That is a very biased view of the situation. Pharma companies try to put the best face on data to get a drug approved. Analysts try to approach the data in an impartial way. If an analyst looks at the data and sees issues, it makes sense both ethically and financially to push for the drug not to be approved. Ethically, if the drug doesn't work as advertised, it is better that it is not sold as a cure. Informing the FDA of your analysis is a duty. Financially, if you think the drug doesn't work, it makes sense to short the stock in the belief that it won't be approved. Pharma companies always present it as hedge funds trying to kill their products, but if the data is strong and the drug works, the analyst could just go long on the company instead.
    - kragen 11y ago
      Yes, it makes sense ethically to push the FDA not to approve a drug you think won't work. It also makes sense financially to bet that the FDA won't approve a drug that you think won't work. But it doesn't make sense ethically to do both, both directly because it creates a conflict of interest, and indirectly because that very conflict of interest undermines both the objectivity and the credibility of your recommendation not to approve the drug.
      - ci5er 11y ago
        You are arguing ... what, here? That people with some sort of knowledge of a product/company/industry's prospects shouldn't be allowed to buy/sell positions in that company? If I understand you (and I may not), and we were to come to the conclusion that "there ought to be a law", I have no idea how that would even be structured/written.
caseysoftware 11y ago
Even though it's $750 per dose now, since they have exclusive control over the market they could decrease it to whatever whenever they wanted to starve competitors.. probably after said competitors have invested in doing it.
- nickff 11y ago
  This is a possible strategy, but is rarely used, as it is very risky (, it is likely to cost a great deal of market share in the long term). I have looked into it, and found very few examples of a company which tried to lure a competitor into a market, then under-sell them. The opposite (under-sell competition to gain market share then hike prices) also appears to be quite unpopular in the real market, for the opposite reason (it will surely gain market share in the short term, but can cost a great deal of money). These are very popular theories, and there are a few examples of those who have tried both strategies, but those examples are almost all cautionary tales.
  - unprepare 11y ago
    I think its somewhat common, and even occasionally successful: Amazon prime costs amazon money, and the original fire tablets were sold at cost - i suspect the new 50$ tablets are not very profitable either Walmart has commonly been accused of this practice for various products Google's original Nexus 7 tablet I believe Apple ended up losing money at least a quarter or two on the app store/itunes Granted there are few examples, but its certainly prevalent enough that its a legitimate business concern - the bigger disparity is that it takes a pretty enormous size for a company to succeed in such a tactic, I doubt turing has the kind of capital to lose that the likes of Walmart, Apple, Google and Amazon do.
    - nickff 11y ago
      Those are good examples, but I would argue that if a practice is sustainable (and often sustained), it is not problematic. If Amazon wishes to provide Prime at a loss to encourage customers to buy products which Amazon will make money on (enough to compensate for Prime), is there a problem? Would there be a problem if Amazon offered to ship things sooner in exchange for a promise that you would shop at their site more often (even if this promise plan cost them money)?
fspeech 11y ago
Maybe the big drug retailers (CVS/Walgreen/Walmart) could be interested in either owning or partnering with generic makers, as they can derive secondary benefits such as reputation/traffic even if a particular drug is temporarily unprofitable. They could also attempt "premium" generics like what Costco did with the Kirkland brand. You need a player that can benefit in other ways to prevent someone from gaining a monopoly through price manipulation.
- darkmighty 11y ago
  Not familiar with the industry, but I don't think the problem can be solved this way (at least in the short term). Simply by the distribution of drugs/prices, there seems to be a very large number of low cost drugs susceptible to this tactic. There's ample space for them to pick a drug now and then and put abusive prices all of a sudden, while lowering the price as soon as competition threatens to move in. Additionally, the costs of reverse engineering a drug are high enough to make this kind of competition very hard. I see no other way than some regulation to at least force some hysteresis or stability on the prices.
refurb 11y ago
The case of KV Pharmaceuticals that I cited was a little different since compounding labs had already been making the drug Makena. In that case, the FDA actually sent these labs a letter essentially saying, "Go ahead and keep making the drug even though KV now has a patent for it. We are choosing to not enforce their patent because their price increase was bs." KV never had a patent for Makena. What they did have was "data exclusivity" which meant the FDA could not approve another version of the drug for at least 5 years. What they were counting on was the FDA clamping down on the compounding pharmacies, since they weren't selling an approved version of the drug. The FDA, seeing KV's strategy, declined to shutdown the compounders which resulted in KV declaring bankruptcy. KV restructured, reduced the cost of the drug and created a sustainable business. They were acquired by Valeant I believe.
technotony 11y ago
I don't get this, the drug is available from Sigma[1] for $51.50 per 250mg, with a dosage of 50-75mg per day for a patient. So clearly someone can make it more cheaply. I get that Sigma is research chemicals not medical grade, but seems to me someone could figure this out. FDA approval must be the issue. [1] http://www.sigmaaldrich.com/catalog/product/fluka/46706?lang=en&region=US http://www.sigmaaldrich.com/catalog/product/fluka/46706?lang...
- Laforet 11y ago
  One word: Bioequivalence. Having the correct active ingredient does not imply that drug delivery and efficacy are equivalent unless you can prove it by comparing it against a known and approved formulation in human volunteers, The burden of proof is significantly less than that of getting a new compound approved, but still a major sinkhole for money. The correct way to handle this would be for the FDA to hand out compassionate use permits for patients to import their own drugs since it is clearly unavailable for a reasonable price in the US.

Bluestrike2 11y ago

That's exactly what would happen, but the generics companies can't procure sufficient samples due to the changes in how Daraprim is distributed. So long as Shkreli is able to control distribution tightly enough, there's no worry about a generic coming onto the market.

dperfect 11y ago
I don't completely understand how they can effectively prevent generics companies from producing it (even through tightly controlled distribution), but if that's the case, I believe that should be the story here as opposed to the bit about raising prices. Under normal market conditions, either the demand and price will naturally incentivize generics to enter the market (even at high costs), or this is really not much of a story because the total addressable market is so small that price * demand won't significantly move the needle in the books of insurance companies who will be paying for it. If total addressable market is significant and the producers can manipulate the market in ways outside of patents to abuse monopoly power, then that's the misdeed (in my opinion), not the raising of prices. In other words, with very few exceptions it's futile to blame a company for their prices. On the other hand, if unscrupulous manipulation of a market is the culprit for unreasonable prices, that's where we should demand/enforce a higher standard.
- sageikosa 11y ago
  Or perhaps the story should be about how the drug market is not normal. It is regulated, i.e. ruled, by bureaucratic policy and operating procedures.
nhstanley 11y ago
Why would they need samples when the chemical structure is so widely known[1]? It's not like it's a biologic where sequence and other formulation details are critically important. Can you explain? [1] https://en.wikipedia.org/wiki/Pyrimethamine https://en.wikipedia.org/wiki/Pyrimethamine Edit: I noticed that paulmd, further down, explained why this is important. I didn't realize the rules were this stupid. The FDA should be able to force companies to make their product available for comparison testing. It's insane that it isn't the case.

anigbrowl 11y ago

The strategy is to prevent other companies from manufacturing the generic by withholding supply from them so as to prevent them demonstrating bioequivalence. ISTM that the least-onerous regulatory solution would be to require manufacturers to provide supply at cost to FDA on demand for testing purposes.

zaroth 11y ago
It seems amazing that supply can be clamped down to such an extent that a competitor literally couldn't obtain some samples for bio-equivalence testing, even under a false pretense if necessary. Completely agree that if someone is willing to pay the list price, they should be guaranteed availability within some reasonable time-frame for testing purposes. I assume if the only drug line is effectively "shut down" then there's no way to run bio-equivalence and to bring on a new manufacturer they must test some other way? I guess whatever that procedure is, should take effect if the pills can't be ordered for testing.

marincounty 11y ago

"Or the government passes a law capping how much you can raise the price of a generic drug over so many years." Congress, controlled by Rebublicans, right now, won't let government get involved. I don't even want a cap. I would just like governmental over site/approval on Pharmacutical accuisition. I asked my pharmacist why my generic drug(not orphan drug, noting fancy) is going up in price. I don't know if she's right, but she told me big Pharmacutical companies are buying out generic drug companies, and raising the prices of the generic drug, or shutting the newly bought company--so they can keep supply down? I don't know if this is going on, but i've heard it, from at least, two sources. I know it sound extreme, and hard to imagine, but these pharmacutical companies are loaded with cash? Plus, they have government protection--can't buy from Canada, etc. So, in the end, we are going to be at their mercy? As to just effecting Insurance Companies, my prescription formulary excludes so many drugs, or makes them difficult to buy; I pay out of pocket. These drug prices are coming out of our pockets. (It's not just this future bottom boy at some federal correction facility, it's most of these Pharmacutical companies, or hedge funds? I can't tell the difference anymore. Oh yea, Biomarin seems just as shady, but because people don't understand what they do, they seem to just get a pass?)