Today’s Managing Health Care Costs Number is 20%
The arrest of since-resigned Turing Pharmaceutical CEO Martin Shkreli has made a lot pharmaceutical company leaders breathe a sigh of relief. Pharma leaders are furious at Shkreli - whose in your face approach to raising the prices of long-past-patent drugs has shined a light on pharmaceutical prices in general. Pharmaceutical costs have risen to about a fifth of all costs for employer sponsored health insurance.
Shkreli hiked the price of an ancient antiparasitic useful in HIV care from $13.50 to $750 per pill (it had been $1 a pill until the drug’s sale a few years earlier). He was also infamous for paying $2 million at auction for the only available copy of a Wu Tang Clan album, and for streaming awkward internet chats with young women at the high school he didn't graduate from.
Shkreli wasn’t arrested for malfeasance as a pharma CEO – he was arrested for alleged violations of security laws when he was the CEO of a previous pharmaceutical company. His actions as CEO of Turing Pharmaceuticals were reprehensible – but not illegal.
Turing’s price hikes were also not unusual.
Here’s an incomplete list of nonpatented drugs which are now offered at prices unthinkable just a few years ago:
· Colchicinewas first used in Egypt in 1500 BC. It was a multisource generic medication until 2010, when URL Pharmaceuticals gained exclusive rights to market it for doing a small trial of the drug which had previously been grandfathered by the FDA.
· Thalidomidewas generic and cheap –but when it was found to help treat multiple myeloma, its price soared
· Minocycline, a tetracycline medication, is sold for $400 a month, and coupons hide the acquisition cost from patients.
· Isuprel and Nitropruss, two drugs
· ACTH gel cost $50 a vial. A pharmaceutical company paid $100,000 for the license to manufacture it, and has hiked the price to $28,000 a vial.
· Progesteroneto prevent premature delivery was compounded by local pharmacists for $20 is now sold by a manufacturer for $1500 a dose
· Albuterol, an inhaler I prescribe frequently for asthma and for wheezing associated with viral infections, cost a few bucks when I went into practice. It now costs over $100 an inhaler. The generic companies stopped manufacturing it when the US banned fluorocarbons. Now there are just two manufacturers. Duopoly = high prices.
Pharmaceutical research has brought us huge value – and better lifespans and quality of life. HIV is now a chronic disease, Hepatitis C is curable, life expectancy of those with Chronic Myelogenous Leukemia has become essentially the same as those without the disease. But while many pharmaceutical companies are being paid for increased value, others are simply extracting “rent” for the good work done by others dozens, hundreds, or even thousands of years ago.
It will take a combination of thoughtful regulations that help create a more efficient market to decrease this rent paid to pharmaceutical companies that are often mere financial shells that do no research, no manufacturing, and make their profits purely through financial engineering.
A few approaches that could help:
1. Tighten up the rules that the FDA has promulgated that allow companies to gain exclusivity for long-used medications
2. Allow importation from selected developed countries of drugs that are off-patent but where the market is too “thin” to support multiple manufacturers competing in the US
3. Ban pharmaceutical companies from offering coupons and other inducements that shield patients from the cost of excessively priced medications, which then raise the cost of health insurance for us all.
4. Eliminate FDA processes that give vouchers to companies that gain approval of drugs to treat tropical diseases. (Shkreli’s earlier company, Retrofin, made its profit doing this and jacking up the price of previously generic medications –and another company that was headed by Shkreli, KaloBios, was intending to do the same thing for an generic antiparastic used for Chagas Disease)
These approaches won’t entirely solve this problem – and sometimes price increases for patented brand name drugs appear to be rent- seeking aswell. But we should pay extremely well for genuine pharmaceutical innovation (like the cure for Hepatitis C) while making it more difficult for pharmas to make extreme profit by simply using financial engineering.
