5 ms·

Congressman calls for probe into Valeant’s pricing of lead poisoning drug

69 points by rgejman 10y ago

rgejman 10y ago
The real disgusting thing here is that EDTA, the heavy metal chelator, is one of the most commonly used chemicals in molecular biology. It costs very little to synthesize and is very stable when stored at room temp. In fact, it can be stored as a powder and reconstituted just-in-time to increase stability. There really is no reason this drug should cost more than a few dollars.
- rplst8 10y ago
  > There really is no reason this drug should cost more than a few dollars. Laboratory testing, animal trials, human trials, efficacy studies, FDA approval, liability insurance, etc. etc. etc.
  - wodencafe 10y ago
    How can you justify a 2,700% price increase in 2 years?
    - maxerickson 10y ago
      It's at least possible that the pricing set by the previous owner of the production line was altruistic. This would be a much more interesting discussion if we had access to the actual costs involved, but alas.
    - refurb 10y ago
      Here is a possible scenario (not saying it applies here)... There are substantial fixed costs for manufacturing a drug. The more volume you sell, the lower the total cost per unit since fixed costs get spread across a greater number of units. As volume drops, profitability eventually goes negative, so the price needs to rise for that drug to stay on the market.
    - daodedickinson 10y ago
      Well, that's not much more than the price increase in my health insurance over the past 4-5 years. One part you can call greed, but the other part is that price control attempts unique to the health care industry cause all sorts costs to be shifted into not-logically-related places. On top of that, more and more in the US you have people successfully illegally buying their prescriptions online or legally getting them from fewer peaks of the long-tail distribution. The big cost for a pharmacy is labor and their only place to recoup costs is marking up prescription costs so I have seen them make the decision to up prices to try to avoid laying off people due to sales lost to economic centralization. I wouldn't be surprised that the company in OPs post simply has a far less profitable business and this is one of the few paths they see to keeping their business and employees afloat.
  - Spooky23 10y ago
    Profiteering, retail monopoly, greed, etc...
    - harryh 10y ago
      While your explanation and rplst8's are both true, rplst8's is far more useful. When a plane crashes one person might conduct an investigation and determine that it was due to a faulty weld in the wing and that quality control should be rethought to prevent the problem from happening again. Another might simply say that it was gravity's fault. After all gravity was what caused the plane to plunge to the ground after the wing failed. Both explanations are true but one is useful and one is not. Greed, like gravity, isn't going anywhere. It's up to society, and airplane designers, to build systems that work in the face of adversity.
      - Spooky23 10y ago
        Profiteering is when run of the mill greed crosses the moral hazard line in a spectrum of greed. A businessman seeking to acquire obscure companies in order to exploit the sick isn't following some force of nature, he's a disgusting human being. It's no different than swindling refugees or the elderly. People who do this should be socially shunned, and the government should provide grants or free credit to encourage others to manufacture drugs like this.
  - rgejman 10y ago
    This is a very old drug. All of its relevant properties have been studied for decades.
    - refurb 10y ago
      There is substantial on-going costs to manufacturer a drug even if you're not doing clinical trials. I agree that this particular drug's price is inflated, but you can't compare the cost of a bulk manufacturer chemical to an FDA approved drug.
  - deleted 10y ago
    [deleted]
- ceterum_censeo 10y ago
  > With respect to concerns about the list price of CDV, past price actions enabled the provision of consistent supply of a product with high carrying costs and very limited purchase volume of 200-300 units per year. The list price of CDV does not reflect the actual cost of the product to hospitals that purchase it, after rebates and other adjustments. Because CDV has a relatively limited shelf life and the minimum CDV purchase requirement for Valeant is roughly 3-5 times higher than recent annual sales volume, we have written down at our own expense approximately half of purchased quantities in the past few years. The company does not generate material revenue from this product, which represents less than 0.01% of our total revenue. (statement by Valeant) A pharmaceutical that is being produced in such low volumes, irrespective of how mundane and cheap the raw chemical may be, cannot be produced cheaply.
  - maxerickson 10y ago
    The real problem is The list price of CDV does not reflect the actual cost of the product to hospitals that purchase it, after rebates and other adjustments. Translated, it means "Some payers are idiots and base their payments on whatever list price we choose.". One of the biggest idiots is the US government by way of Medicare and Medicaid. As far as the production of pharmaceuticals, just the other day I was talking to someone involved on the testing side and they were describing how the latest production techniques let them put everything they need to make a drug in a pretty small room. Basically, you could expect improvements in chemical engineering processes to drive down costs over time.
    - grzm 10y ago
      > Translated, it means "Some payers are idiots and base their payments on whatever list price we choose.". One of the biggest idiots is the US government by way of Medicare and Medicaid. This is a very contentious topic with a lot of strong opinions, so I weigh in gingerly. The pharmaceutical industry lobbied for Medicare Part D which prevents Medicare/Medicaid from negotiating prices. One argument for this is that it indirectly provides incentives for drug companies to do research. And I'm sure even that's oversimplifying it. Then again, the particular circumstances aren't actually necessary for the point I'm trying to make. I'm not sure if you think the US government is one of the biggest idiots because they're involved in health care at all or because they're not doing health care right (that's another discussion), but I'd argue they're not idiots: the lawmakers/regulators are responding to their incentives. Whether or not you (or I) agree their incentives align with our priorities is another thing entirely.
- fabian2k 10y ago
  This deserves some emphasis. This is the kind of chemical you just have around in the lab in a 1kg package. I just checked, and 1kg was around 150EUR from Sigma Aldrich. The medical version this is about are 5 ampules of 1g each. And those 5 ampules cost nearly 27,000 USD. The cost of the EDTA itself is a rounding error in the whole thing. Of course the comparison is not fair, there is quite a bit more to creating a drug out of it. But increasing the price from 950 USD to 26900 USD can't really be justified by any underlying costs.
  - pkaye 10y ago
    Are there no competitors making the medical version?
    - HarryHirsch 10y ago
      No. The market is so small that for low-volume generics there is usually just one manufacturer. There's also the moat for competitors to surmount, they must prove equivalency of their galenic form, a certification that the incumbent already has had for decades.
      - pkaye 10y ago
        Seems much like countries have strategic oil reserves they need strategy sourcing of medicines. Make sure there are multiple suppliers and negotiate long term deals.
      - barry-cotter 10y ago
        Another way of looking at it is that this is the FDA's fault. If the US Congress were to pass a law permitting importation of (generic) drugs from other first world countries with competent drug regulators this problem would not exist. This is exactly the same thing as happened with Martin Shkreli, as is happening at the moment with nitroglycerin for heart problems and it's all the FDA's fault.
- darawk 10y ago
  This is a specious argument. AFAIK the cost of synthesizing any pharmaceutical is a negligible component of its retail price. What that doesn't take into account is the money invested in turning it into an FDA approved drug, and the money wasted on all the other drugs they invested in that didn't pan out. There are plenty of things wrong with the pharmaceutical industry, and medical care in the US generally, but over-simplified populist arguments about high prices relative to marginal cost aren't helping the situation. There is real complexity and nuance here, and it deserves to be treated as such. The very real truth is that raising the price of this drug so high incentivizes other people to find competing drugs. It incentivizes pharmaceutical research in general, leading to more drugs, and ultimately more lives saved. That may not make you feel better about what they're doing, but it is a fundamental truth of markets. The more you can charge for something, the more of that thing you're going to get. If you artificially limit prices, you just as surely limit supply. This is not speculation or philosophy. There are literally investors right now running NPV calculations on how much they are willing to invest in their next biotech startup, and the most significant controllable factor in that calculation is the price they expect to be able to charge for the drug, multiplied by its addressable market. And i'll bet you that the addressable market for lead poisoning drugs is pretty small (same with EpiPens, for that matter - you rarely need them, so most people only need the one, just in case). Some people like to point to Europe and Canada as examples of places where drugs are cheap and plentiful, and they say that this is proof that this can work in the US too! But that view fundamentally misunderstands how the world pharmaceutical market works. Those drug markets are ancillary. They are fringe benefits to getting a drug approved by the US FDA. Pharmaceutical companies don't use those markets to recoup their costs, they recoup their costs in the US, and then just make whatever extra profit they can in those other places. If the US market ceased to allow exorbitantly high pharmaceutical prices, the entire business model of Big Pharma would collapse. And maybe it's the case that it should, maybe there's some other model that would be more equitable and successful at developing new drugs. But personally I can't think of one, and unless you've got a bold idea in this vein, i'd be very careful about advocating the destruction of the one we have. IMO the real solution is to stop letting other countries artificially restrict pharmaceutical prices. Right now the US is subsidizing all of this research for everyone else. You and I (assuming you are a US citizen as well) are paying for these drugs to be developed, and everyone on earth is benefiting from that without having to pay the cost. That is the true inequity here, and if that were removed, we'd see much more reasonable prices here too.
adrenalinelol 10y ago
While some will condemn this is runaway greed, this is a natural side-effect of a healthcare system turned over to the private market. Outcomes and/or public health improvements are side-effects, if the happen great, but the motive will always be profit, regardless of how you get there (so long as it's legal).
- Moshe_Silnorin 10y ago
  This is a side effect of regulations which prevent the competition from selling chemicals that are very cheap to synthesize. Createing monopolies and then trying to fix the ills this causes with a government monopsony seems backwards.
  - chongli 10y ago
    Regulations are, like many other forces, subject to forming equilibria. Too many, and you get EpiPen price gouging; not enough, and you get the melamine milk scandal[0]. I agree that creating monopolies and then fighting them with monopsonies is ridiculous, backwards, silly, and inefficient. But life is a coordination game[1], so too bad[2]! [0] https://en.wikipedia.org/wiki/2008_Chinese_milk_scandal https://en.wikipedia.org/wiki/2008_Chinese_milk_scandal [1] https://en.wikipedia.org/wiki/Coordination_game https://en.wikipedia.org/wiki/Coordination_game [2] http://slatestarcodex.com/2014/07/30/meditations-on-moloch/ http://slatestarcodex.com/2014/07/30/meditations-on-moloch/
- BurningFrog 10y ago
  The US health care system is extremely regulated. Calling it "turned over to the private market" is either ignorant or dishonest.
- refurb 10y ago
  side-effect of a healthcare system turned over to the private market I would disagree entirely. Take a look at Medicare Part D. The gov't collects the premiums and sends the money to private companies to manage payments. It's one of the few gov't programs where the actual costs came in way lower than projected due to the competition among plans for patients. The market at work!
merraksh 10y ago
Two years ago, the drug maker boosted the list price for Calcium EDTA by roughly 2,700 percent. I understand the need for large numbers to wow the reader, but I find this less clear than "Two years ago, the drug maker multiplied the price of Calcium EDTA by 28".
- jamroom 10y ago
  This is a standard way to present price changes. We don't say "the price was multiplied by 1.5" - we just say the price went up 50%. This isn't there to "wow" anything - we should already be wowed by the greed being presented in this case.
M_Grey 10y ago
Oh goody, another probe for political points that won't address the insane underlying issues, which Congress is responsible for in the first place. What a joke, and what a poor excuse for "circus". The healthcare and IP systems in this country need an enema.
microcolonel 10y ago
For what it's worth, they bought it as a failing product with decreasing sales volume. It could be that for the reasons they laid out, it could not be reasonably produced in such small quantities without incurring a loss, which would explain why they were sold it.
adventured 10y ago
It's worth noting that Valeant has addressed this and the drug in question would not work as politicians such as Bernie Sanders have been implying in relation to what happened in Flint Michigan: http://www.valeantnow.com/valeant-corrects-inaccurate-statements-regarding-calcium-disodium-versenate-cdv/ http://www.valeantnow.com/valeant-corrects-inaccurate-statem...

69 points by rgejman 10y ago

The real disgusting thing here is that EDTA, the heavy metal chelator, is one of the most commonly used chemicals in molecular biology. It costs very little to synthesize and is very stable when stored at room temp. In fact, it can be stored as a powder and reconstituted just-in-time to increase stability. There really is no reason this drug should cost more than a few dollars.

rplst8 10y ago
> There really is no reason this drug should cost more than a few dollars. Laboratory testing, animal trials, human trials, efficacy studies, FDA approval, liability insurance, etc. etc. etc.
- wodencafe 10y ago
  How can you justify a 2,700% price increase in 2 years?
  - maxerickson 10y ago
    It's at least possible that the pricing set by the previous owner of the production line was altruistic. This would be a much more interesting discussion if we had access to the actual costs involved, but alas.
  - refurb 10y ago
    Here is a possible scenario (not saying it applies here)... There are substantial fixed costs for manufacturing a drug. The more volume you sell, the lower the total cost per unit since fixed costs get spread across a greater number of units. As volume drops, profitability eventually goes negative, so the price needs to rise for that drug to stay on the market.
  - daodedickinson 10y ago
    Well, that's not much more than the price increase in my health insurance over the past 4-5 years. One part you can call greed, but the other part is that price control attempts unique to the health care industry cause all sorts costs to be shifted into not-logically-related places. On top of that, more and more in the US you have people successfully illegally buying their prescriptions online or legally getting them from fewer peaks of the long-tail distribution. The big cost for a pharmacy is labor and their only place to recoup costs is marking up prescription costs so I have seen them make the decision to up prices to try to avoid laying off people due to sales lost to economic centralization. I wouldn't be surprised that the company in OPs post simply has a far less profitable business and this is one of the few paths they see to keeping their business and employees afloat.
- Spooky23 10y ago
  Profiteering, retail monopoly, greed, etc...
  - harryh 10y ago
    While your explanation and rplst8's are both true, rplst8's is far more useful. When a plane crashes one person might conduct an investigation and determine that it was due to a faulty weld in the wing and that quality control should be rethought to prevent the problem from happening again. Another might simply say that it was gravity's fault. After all gravity was what caused the plane to plunge to the ground after the wing failed. Both explanations are true but one is useful and one is not. Greed, like gravity, isn't going anywhere. It's up to society, and airplane designers, to build systems that work in the face of adversity.
    - Spooky23 10y ago
      Profiteering is when run of the mill greed crosses the moral hazard line in a spectrum of greed. A businessman seeking to acquire obscure companies in order to exploit the sick isn't following some force of nature, he's a disgusting human being. It's no different than swindling refugees or the elderly. People who do this should be socially shunned, and the government should provide grants or free credit to encourage others to manufacture drugs like this.
- rgejman 10y ago
  This is a very old drug. All of its relevant properties have been studied for decades.
  - refurb 10y ago
    There is substantial on-going costs to manufacturer a drug even if you're not doing clinical trials. I agree that this particular drug's price is inflated, but you can't compare the cost of a bulk manufacturer chemical to an FDA approved drug.
- deleted 10y ago
  [deleted]
ceterum_censeo 10y ago
> With respect to concerns about the list price of CDV, past price actions enabled the provision of consistent supply of a product with high carrying costs and very limited purchase volume of 200-300 units per year. The list price of CDV does not reflect the actual cost of the product to hospitals that purchase it, after rebates and other adjustments. Because CDV has a relatively limited shelf life and the minimum CDV purchase requirement for Valeant is roughly 3-5 times higher than recent annual sales volume, we have written down at our own expense approximately half of purchased quantities in the past few years. The company does not generate material revenue from this product, which represents less than 0.01% of our total revenue. (statement by Valeant) A pharmaceutical that is being produced in such low volumes, irrespective of how mundane and cheap the raw chemical may be, cannot be produced cheaply.
- maxerickson 10y ago
  The real problem is The list price of CDV does not reflect the actual cost of the product to hospitals that purchase it, after rebates and other adjustments. Translated, it means "Some payers are idiots and base their payments on whatever list price we choose.". One of the biggest idiots is the US government by way of Medicare and Medicaid. As far as the production of pharmaceuticals, just the other day I was talking to someone involved on the testing side and they were describing how the latest production techniques let them put everything they need to make a drug in a pretty small room. Basically, you could expect improvements in chemical engineering processes to drive down costs over time.
  - grzm 10y ago
    > Translated, it means "Some payers are idiots and base their payments on whatever list price we choose.". One of the biggest idiots is the US government by way of Medicare and Medicaid. This is a very contentious topic with a lot of strong opinions, so I weigh in gingerly. The pharmaceutical industry lobbied for Medicare Part D which prevents Medicare/Medicaid from negotiating prices. One argument for this is that it indirectly provides incentives for drug companies to do research. And I'm sure even that's oversimplifying it. Then again, the particular circumstances aren't actually necessary for the point I'm trying to make. I'm not sure if you think the US government is one of the biggest idiots because they're involved in health care at all or because they're not doing health care right (that's another discussion), but I'd argue they're not idiots: the lawmakers/regulators are responding to their incentives. Whether or not you (or I) agree their incentives align with our priorities is another thing entirely.
fabian2k 10y ago
This deserves some emphasis. This is the kind of chemical you just have around in the lab in a 1kg package. I just checked, and 1kg was around 150EUR from Sigma Aldrich. The medical version this is about are 5 ampules of 1g each. And those 5 ampules cost nearly 27,000 USD. The cost of the EDTA itself is a rounding error in the whole thing. Of course the comparison is not fair, there is quite a bit more to creating a drug out of it. But increasing the price from 950 USD to 26900 USD can't really be justified by any underlying costs.
- pkaye 10y ago
  Are there no competitors making the medical version?
  - HarryHirsch 10y ago
    No. The market is so small that for low-volume generics there is usually just one manufacturer. There's also the moat for competitors to surmount, they must prove equivalency of their galenic form, a certification that the incumbent already has had for decades.
    - pkaye 10y ago
      Seems much like countries have strategic oil reserves they need strategy sourcing of medicines. Make sure there are multiple suppliers and negotiate long term deals.
    - barry-cotter 10y ago
      Another way of looking at it is that this is the FDA's fault. If the US Congress were to pass a law permitting importation of (generic) drugs from other first world countries with competent drug regulators this problem would not exist. This is exactly the same thing as happened with Martin Shkreli, as is happening at the moment with nitroglycerin for heart problems and it's all the FDA's fault.
darawk 10y ago
This is a specious argument. AFAIK the cost of synthesizing any pharmaceutical is a negligible component of its retail price. What that doesn't take into account is the money invested in turning it into an FDA approved drug, and the money wasted on all the other drugs they invested in that didn't pan out. There are plenty of things wrong with the pharmaceutical industry, and medical care in the US generally, but over-simplified populist arguments about high prices relative to marginal cost aren't helping the situation. There is real complexity and nuance here, and it deserves to be treated as such. The very real truth is that raising the price of this drug so high incentivizes other people to find competing drugs. It incentivizes pharmaceutical research in general, leading to more drugs, and ultimately more lives saved. That may not make you feel better about what they're doing, but it is a fundamental truth of markets. The more you can charge for something, the more of that thing you're going to get. If you artificially limit prices, you just as surely limit supply. This is not speculation or philosophy. There are literally investors right now running NPV calculations on how much they are willing to invest in their next biotech startup, and the most significant controllable factor in that calculation is the price they expect to be able to charge for the drug, multiplied by its addressable market. And i'll bet you that the addressable market for lead poisoning drugs is pretty small (same with EpiPens, for that matter - you rarely need them, so most people only need the one, just in case). Some people like to point to Europe and Canada as examples of places where drugs are cheap and plentiful, and they say that this is proof that this can work in the US too! But that view fundamentally misunderstands how the world pharmaceutical market works. Those drug markets are ancillary. They are fringe benefits to getting a drug approved by the US FDA. Pharmaceutical companies don't use those markets to recoup their costs, they recoup their costs in the US, and then just make whatever extra profit they can in those other places. If the US market ceased to allow exorbitantly high pharmaceutical prices, the entire business model of Big Pharma would collapse. And maybe it's the case that it should, maybe there's some other model that would be more equitable and successful at developing new drugs. But personally I can't think of one, and unless you've got a bold idea in this vein, i'd be very careful about advocating the destruction of the one we have. IMO the real solution is to stop letting other countries artificially restrict pharmaceutical prices. Right now the US is subsidizing all of this research for everyone else. You and I (assuming you are a US citizen as well) are paying for these drugs to be developed, and everyone on earth is benefiting from that without having to pay the cost. That is the true inequity here, and if that were removed, we'd see much more reasonable prices here too.

adrenalinelol 10y ago

While some will condemn this is runaway greed, this is a natural side-effect of a healthcare system turned over to the private market. Outcomes and/or public health improvements are side-effects, if the happen great, but the motive will always be profit, regardless of how you get there (so long as it's legal).

Moshe_Silnorin 10y ago
This is a side effect of regulations which prevent the competition from selling chemicals that are very cheap to synthesize. Createing monopolies and then trying to fix the ills this causes with a government monopsony seems backwards.
- chongli 10y ago
  Regulations are, like many other forces, subject to forming equilibria. Too many, and you get EpiPen price gouging; not enough, and you get the melamine milk scandal[0]. I agree that creating monopolies and then fighting them with monopsonies is ridiculous, backwards, silly, and inefficient. But life is a coordination game[1], so too bad[2]! [0] https://en.wikipedia.org/wiki/2008_Chinese_milk_scandal https://en.wikipedia.org/wiki/2008_Chinese_milk_scandal [1] https://en.wikipedia.org/wiki/Coordination_game https://en.wikipedia.org/wiki/Coordination_game [2] http://slatestarcodex.com/2014/07/30/meditations-on-moloch/ http://slatestarcodex.com/2014/07/30/meditations-on-moloch/
BurningFrog 10y ago
The US health care system is extremely regulated. Calling it "turned over to the private market" is either ignorant or dishonest.
refurb 10y ago
side-effect of a healthcare system turned over to the private market I would disagree entirely. Take a look at Medicare Part D. The gov't collects the premiums and sends the money to private companies to manage payments. It's one of the few gov't programs where the actual costs came in way lower than projected due to the competition among plans for patients. The market at work!

merraksh 10y ago

Two years ago, the drug maker boosted the list price for Calcium EDTA by roughly 2,700 percent. I understand the need for large numbers to wow the reader, but I find this less clear than "Two years ago, the drug maker multiplied the price of Calcium EDTA by 28".

jamroom 10y ago
This is a standard way to present price changes. We don't say "the price was multiplied by 1.5" - we just say the price went up 50%. This isn't there to "wow" anything - we should already be wowed by the greed being presented in this case.

M_Grey 10y ago

Oh goody, another probe for political points that won't address the insane underlying issues, which Congress is responsible for in the first place. What a joke, and what a poor excuse for "circus". The healthcare and IP systems in this country need an enema.

microcolonel 10y ago

For what it's worth, they bought it as a failing product with decreasing sales volume. It could be that for the reasons they laid out, it could not be reasonably produced in such small quantities without incurring a loss, which would explain why they were sold it.

adventured 10y ago

It's worth noting that Valeant has addressed this and the drug in question would not work as politicians such as Bernie Sanders have been implying in relation to what happened in Flint Michigan: http://www.valeantnow.com/valeant-corrects-inaccurate-statements-regarding-calcium-disodium-versenate-cdv/ http://www.valeantnow.com/valeant-corrects-inaccurate-statem...