Capitalism at its finest

[_Kevin Graham]

Ex-hedge funder buys rights to AIDS drug and raises price from $13.50 to $750 per pill



A former hedge fund manager turned pharmaceutical businessman has purchased the rights to a 62-year-old drug used for treating life-threatening parasitic infections and raised the price overnight from $13.50 per tablet to $750.

WATCH: Ex-hedge funder who hiked AIDS pill cost by 5,500 percent says drug ‘still underpriced’

According to the New York Times, Martin Shkreli, 32, the founder and chief executive of Turing Pharmaceuticals, purchased the rights to Daraprim for $55 million on the same day that Turing announced it had raised $90 million from Shkreli and other investors in its first round of financing.

Daraprim is used for treating toxoplasmosis — an opportunistic parasitic infection that can cause serious or even life-threatening problems in babies and for people with compromised immune systems like AIDS patients and certain cancer patients — that sold for slightly over $1 a tablet several years ago. Prices have increased as the rights to the drug have been passed from one pharmaceutical company to the next, but nothing like the almost 5,500 percent increase since Shkreli acquired it.

Worrying that the cost of treatment could devastate some patients, Dr. Judith Aberg, the chief of the division of infectious diseases at the Icahn School of Medicine at Mount Sinai asked, “What is it that they are doing differently that has led to this dramatic increase?”

According to Shkreli, Turing will use the money it earns to develop better treatments for toxoplasmosis, with fewer side effects.

“This isn’t the greedy drug company trying to gouge patients, it is us trying to stay in business,” Shkreli explained, saying that many patients use the drug for far less than a year and that the new price is similar to other drugs used for rare diseases.

Shrkeli also defended his small pharmaceutical company saying, “It really doesn’t make sense to get any criticism for this.”

This is not the first time the fledgling pharmaceutical executive has come under scrutiny.

He started the hedge fund MSMB Capital while in his 20’s and was accused of urging the FDA to not approve certain drugs made by companies whose stock he was shorting.

In 2011, Shkreli helped form Retrophin, which also acquired old drugs and immediately raised their prices. Retrophin’s board fired Shkreli a year ago and has filed a complaint in Federal District Court, accusing him of using Retrophin as a personal fund to pay back angry investors in his hedge fund.

As for Shrkeli’s claim that he will put the excess profits back into research, doctors say that isn’t needed in this case.

“I certainly don’t think this is one of those diseases where we have been clamoring for better therapies,” said Dr. Wendy Armstrong, professor of infectious diseases at Emory University in Atlanta.

[_MissTish]

It makes me hope karma is real.


i can completely understand increasing the cost to cover development and give shareholders a return on their investment. but 13.50 to 750? it's just crazy. and if they are controlling the supply of these drugs, companies that develop generics can't get the drugs they need to conduct clinical trials.

[_Doctor Steuss]

According to the Mayo Clinic, there are more than 3 million cases in the US each year. Previously, at $13/pill, a person on a dose of 75mg could expect to pay about $1,170 for a month’s course of the drug, without insurance.

Now, that monthly cost (at $750 – but, most quotes I can find on GoodRX are closer to $760) will be $67,500.

That’s an increase of $66,330 for a standard monthly course of the drug. Even if only a miniscule portion of the 3 million diagnosed cases (say, 5%) end up being treated with this drug (and only require a month's worth), that’s an increase in profits of $9,949,500,000 per year. That’s about the entire R&D budget for Pfizer(!)

[_cinepro]

Sorry, but with that degree of government regulation, it's hard to say that prescription drugs operate in any kind of "capitalistic" market. This is a result of an opportunist taking advantage of the system created by the government.

I'm not saying that the prescription drug model is a bad thing (my libertarian leanings don't go so far as to believe that anyone should be allowed to sell any type of drug to anyone), but it's disingenuous to lay this at the feet of "capitalism."

But to the degree that it is a free market, I would expect the market to account for this imbalance much faster than any government action could. I suspect that at this very moment, every generic drug manufacturer has suddenly gotten very interested in Daraprim (a drug which was formerly priced too low for generic drug manufacturers to make a profit on).

And to the degree that it isn't a free market, I think the Center for American Progress has some good ideas on how to tweak the prescription drug system to the benefit of everyone involved:

https://cdn.americanprogress.org/wp-con ... eport1.pdf

[_Kevin Graham]

Sorry, but with that degree of government regulation, it's hard to say that prescription drugs operate in any kind of "capitalistic" market. This is a result of an opportunist taking advantage of the system created by the government.

I'm not saying that the prescription drug model is a bad thing (my libertarian leanings don't go so far as to believe that anyone should be allowed to sell any type of drug to anyone), but it's disingenuous to lay this at the feet of "capitalism."

But to the degree that it is a free market, I would expect the market to account for this imbalance much faster than any government action could. I suspect that at this very moment, every generic drug manufacturer has suddenly gotten very interested in Daraprim (a drug which was formerly priced too low for generic drug manufacturers to make a profit on).

And to the degree that it isn't a free market, I think the Center for American Progress has some good ideas on how to tweak the prescription drug system to the benefit of everyone involved:

https://cdn.americanprogress.org/wp-con ... eport1.pdf

That's a good Right Wing puppet. Blame it on government regulations. So predictable. I guess those evil regulations didn't exist before the hedge fund douche bag took over?

[_cinepro]

That's a good Right Wing puppet. Blame it on government regulations. So predictable. I guess those evil regulations didn't exist before the hedge fund douche bag took over?

If I'm reading the story correctly, the previous company was selling the pills for about $13.50 each. HFDB bought the rights to the pill and now charges $750 each.

In what way could that be an example of "capitalism"? If it were a capitalistic market (fine or otherwise), then other drug companies would see the imbalance and quickly produce their own versions of Daraprim for much less. So the important question is why that hasn't (or won't) happen?

If the prescription drug industry was run on free-market principles (with anti-monopoly provisions included), then drugs would constantly be getting cheaper and more plentiful (like cars, computers, tv's, etc). If they're not, then you need to ask what is keeping the system from operating on free-market principles?

There may be good reasons for the pharmaceutical industry to not run as a free-market, but if it doesn't, then it's disingenuous to blame capitalism for a problem it didn't create.

The pill was patented in 1952, so I can't imagine why there isn't a generic version available; there's no way it could still be patented.

[_MissTish]

The pill was patented in 1952, so I can't imagine why there isn't a generic version available; there's no way it could still be patented.

It must still be protected in some manner, that's why this assh*** was able to buy the exclusive rights. There's no competition on this, because if what I've read today is right it worked well, and was a cheap drug, so no one put money into a competing generic, giving the original developer GlaxoSmithKlein a monopoly.

The jump in cost is particularly surprising because Daraprim is a non-brand name generic developed more than 60 years ago.

"We needed to turn a profit on the drug," Turing Pharmaceuticals CEO Martin Shkreli told Bloomberg, insisting that it was not overpriced compared to its peers. "This drug saves your life for $50,000," he said.

Generic drug-makers keep their research and spending costs lower because their drugs are already developed and they benefit from FDA allowances for faster and less rigorous approvals introduced in the Hatch-Waxman Act of 1984. The law was meant to provide both protection for the original makers of drugs to recoup their costs and, then, to help bring more generic substitutes to market for drugs that are no longer under patents.

Daraprim is part of a recent trend in increasing costs among generic pharmaceuticals, which has roused the attention of Congress.

The reasons behind increasing generic drug prices are not related to research or development costs, as new drugs would be; instead, experts say it's more about economics.

In some cases, the raw materials to make the molecules are in short supply because the drugs were developed years ago or the company has created a unique formulation that no one else has, both of which allow the companies to raise prices. In some cases, more insured patients under the Affordable Care Act have increased demand.

But very commonly, as in the case of Daraprim, the price increase is triggered by one company buying another and resetting the prices because they now have a monopoly on the most common treatment for a given disease.

"In the case for drugs for rare diseases where the market is small, you're more likely to see this behavior because the market is not large enough to sustain a large number of producers," Frank Lichtenberg, a professor of business in the Healthcare and Pharmaceutical Management Program at Columbia University, told CBS News. "Therefore an incumbent can try to exploit its market power."

The companies offer discounts for patients who cannot afford the medication, as required for public health care payers. But some medical providers say applying for the discount can be complicated.

"Manufacturers of generic drugs that legally obtain a market monopoly are free to unilaterally raise the prices of their products," the authors of a New England Journal of Medicine editorial on rising generic prescription costs wrote last year. "There is little that individual consumers can do. Some drug companies...offer assistance programs for indigent patients, but these programs often have complicated enrollment processes, and they do not offer an effective general safety net."

A Senate committee hearing focused on the rise of generic drug prices last year. Rep. Elijah E. Cummings, D-Maryland, and Sen. Bernie Sanders, I-Vermont and a Democratic presidential candidate, introduced the "Medicaid Generic Drug Price Fairness Act" in July, aimed at addressing possible price gouging in the low- or no-competition market where patients can be captive consumers

http://www.cbsnews.com/news/generic-dru ... overnight/
.

[_moksha]

This guy may just be trying to establish his Republican bona fides to run for public office.

[_cinepro]

It must still be protected in some manner, that's why this assh*** was able to buy the exclusive rights. There's no competition on this, because if what I've read today is right it worked well, and was a cheap drug, so no one put money into a competing generic, giving the original developer GlaxoSmithKlein a monopoly.

That raises some interesting problems. Namely, how do you fix the system (or market) without causing more problems than you fix?

The biggest problem is that there is no way to know what pharmaceuticals could be invented, but aren't. For example, there is no way to know whether or not another $50 billion invested in cancer research might have produced a more effective therapy by now. We only know what we have.

As I said earlier, the Center For American Progress (a progressive think tank) has some interesting ideas for trying to improve things inside the current framework of regulation and R&D. Perhaps this latest development will be the impetus for action to be taken. At the very least, I would suspect other manufacturers to have become very interested in Daraprim all of a sudden, and Shkreli's excessive pricing will soon be back to more realistic levels.

Unless there are excessive barriers to manufacturing and distributing the drug (introduced by governments, technology or logistics) , the free market will correct this situation, and much faster than any governmental action could. That is "capitalism at its finest."

[_MissTish]

I emailed a friend who works in pharma for some more information on this. The use of 'Tool' for this CEO was her own:



Because the drug is generic, competitors can create a new drug with the same efficacy and safety, but they need the actual drug created by the Tool's company to do it. The FDA requires clinical studies where the new drug is compared to the old drug in order to show that the new drug works, but Tool is controlling the supply so not sure how a new company would be able to do new studies.