Look, everyone wants to see Martin Shkreli embarrassed; after the so-called “pharma bro” raised the price of an HIV medication from $13.50 to $750 per pill overnight, he became the poster child for wildly inflating drug prices. But these kids in Australia did not do it—it’s the FDA’s job.
When news broke last week that a group of high school students in Australia had scooped Shkreli, ex-CEO of Turing pharmaceuticals, and concocted the anti-parasitic drug he had ballooned the price tag on for only $2, the internet did their best proud mom impression. Finally the “most hated man in the world” had met his match, and it was young adults who were able to show him up.
Here’s the problem: they didn’t. The issue with Daraprim will never be just the cost of manufacturing. It’s galling to think that the only thing preventing Turing, or some competitor, from providing more affordable medicine to consumers was simple lab know-how. Most pharmaceuticals aren’t that difficult to make. It’s what happens on the other side, as Simon J. Elliott writes on PharmaPatents, that often dictates the pharmaceutical markets:
Pyrimethamine is extremely potent against toxoplasmosis, but the number of people with that disease are (fortunately) few. With such a small potential market and off-patent prices, there was little incentive for generic drug companies to invest the at least $400,000 it can take to obtain FDA approval of a generic drug. Thus, even though the relevant patents expired decades ago, there is only a single FDA-approved supplier of pyrimethamine. Once Turing Pharmaceuticals bought the rights to pyrimethamine and raised the prices to $750 per dose, the missing market incentive suddenly appeared. Express Scripts, the largest U.S. pharmaceutical benefit manager, quickly reached a deal with generic company Imprimis to provide pyrimethamine for $1 a pill.
…the spike in drug prices was not caused by monopoly power supported by patents, but by monopoly power stemming from the barrier to market entry associated with the requirement for FDA approval.
After all, there’s a whole lot of costly, red tape that comes with that FDA approval. The 1984 Drug Price Competition and Patent Term Restoration Act helped create a faster and cheaper barrier for generic copies to break into the market by keeping regulatory barriers relatively low.
But over the years the cost has crept back up: In 2003, the FDA estimated it’d take about $1 million to file a generic-drug application. Now it’s closer to $5 million. In 2009 the agency called for generic-drug manufacturers to retool sterile manufacturing plants and make production lines less intricate, which lead many facilities to be shut down and created a surge in drug prices. All this leads to a lack of market for generics, who now often only have one competitor and cost as much as branded drugs.
These days, if the Australian teens did want to bring their $2 drug to market, they’d have to subject it to a short FDA drug trial, Abbreviated New Drug Application. Though it’s much less expensive than alternatives, can still make it fairly unprofitable to bring a drug like this to the market. If they did want to, as ArsTechnica notes, it’s all tied up in Turing for now:
Exploiting that lack of competition, Shkreli set up a powerful, controlled distribution system. This is a legally contested trick in which pharmaceutical companies use limited-access systems and safety protocols to thwart would-be competitors.
Limited-access distribution systems can be part of safety protocol requirements set up with the Food and Drug Administration to ensure that a drug is distributed and used safely, under controlled conditions, and by the proper professionals. But it can also prevent other pharmaceutical companies from getting their hands on samples of the drugs. Without those samples, companies can’t perform the FDA-required tests that prove that their generic drug is the same as the brand name drug.
Currently, Daraprim is only distributed through Turing directly (for inpatients) or through Walgreens Specialty Pharmacy (for outpatients).
As a project these kids have done something great: Recreated a controversial drug in their own lab, and bumped the issue of drug pricing back into the news cycle. But the conversation can’t stop at how these kids have ruffled Shkreli’s standing (indeed, even after stepping down as CEO after fraud accusations, his omnipresent social media feed indicates he’s not quaking in his boots). It has to go beyond that.
At this point the debate on drug pricing is so muddled that Turing’s capitalization isn’t a clear cut violation, leaving the New York Attorney General to investigate if the company violated antitrust laws even as it brought charges against Shkreli for securities fraud. Solutions to that aren’t just chemical based. The FDA could reconsider the regulations governing generic-drugs, and aim to reduce the cost of approval to facilitate competition. Some say we should sever the link there completely. Congress could come together and examine a national approach to drug pricing transparency, as some states have. The issue may even trickle down to voting booths. Heck, with the new administration coming in a little over a month, the whole board could be different soon. The one thing that won’t change is that in order to fix this problem we need more than clever scientists. We need clever execs, lawyers, and regulators too.