Tuesday, September 22, 2015

We Need to Make A Profit. On Daraprim.

Pyrimethamine, better known under its trade name of Daraprim, is a drug developed in the 1940s by Gertrude Elion, a Nobel Prize winning scientist. It is used to treat protozoal infections and also as an anti-malaria drug.

Until quite recently, the US price of Daraprim was quite low.  But that has changed:

Specialists in infectious disease are protesting a gigantic overnight increase in the price of a 62-year-old drug that is the standard of care for treating a life-threatening parasitic infection.
The drug, called Daraprim, was acquired in August by Turing Pharmaceuticals, a start-up run by a former hedge fund manager. Turing immediately raised the price to $750 a tablet from $13.50, bringing the annual cost of treatment for some patients to hundreds of thousands of dollars.
The former hedge fund manager referred to in that quote is Martin Shkreli.  He justifies the fifty-fold price increase by the need to turn a profit:

On Monday, Shkreli said: “We need to turn a profit on the drug.” He defended the decision by telling Bloomberg News that newer versions of the drug needed to be developed and his was the first company “to really focus on this product” for decades and that such research was extremely expensive.
He also promised: “If you cannot afford the drug we will give it away for free.” Shkreli also said the drug was currently underpriced.
This whole setup is confusing for several reasons.

First, some health care experts question the need for a newer version of the drug:

Some doctors questioned Turing’s claim that there was a need for better drugs, saying the side effects, while potentially serious, could be managed.
“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.

Second, think about Shkreli's other defense for the price increase, in combination with his argument that the money would be used to create a better version of Daraprim:

Martin Shkreli, the founder and chief executive of Turing, said that the drug is so rarely used that the impact on the health system would be minuscule...
He's talking about the US market there.  The drug is rarely needed in this country.  But why would a for-profit company plan to invest money to develop another version of such a rare drug?  It wouldn't be a money-maker, because the demand (backed by money)* just isn't there to justify expensive development costs.  And if Shkreli wished to undertake such an altruistic project, why just sell the existing drug at a moderate price?

Third, the drug is actually no longer under patent.  A generic version for the US market is therefore completely possible.  But:

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.
The switch from drugstores to controlled distribution was made in June by Impax, not by Turing. Still, controlled distribution was a strategy Mr. Shkreli talked about at his previous company as a way to thwart generics.
That sounds a bit like unfair competition to me, vertical integration and such.

So, to put my three points together, I think Mr. Shkreli's defenses are utter rubbish, and the circumstances under which all sorts of long-established drugs are suddenly tagged with gigantic new prices certainly needs a much closer look by the market's regulators.  If they still have any powers.
*The need for the drug in some parts of the world is much greater, but many of those are not currently lucrative as markets for for-profit firms.

Added later:  Shrekli has canceled the planned price increase due to the negative publicity.   We are not told yet what the final price will be.