Pharmalotby Ed SilvermanSeptember 30, 2015
Like it or not, Martin Shkreli is the new face of pharma. And for an industry already struggling with an image problem over the rising costs of prescription drugs, companies are going to have a hard time distancing themselves from one of the most controversial men in America. The reason is a lack of transparency. Drug makers do not really want to explain how medicines are priced and, as a result, they have adopted an air of secrecy in which one cowboy can create havoc for an entire industry.
“The [Shkreli] episode is really an extreme manifestation of an attitude that has taken over the industry,” said Bernard Munos, a former corporate strategy adviser at Eli Lilly who is now a senior fellow at FasterCures, a medical research think tank. Most drug companies “are not raising prices by 5,000 percent, but large prices will leave patients with the same impression.” To recap, the 32-year-old former hedge fund manager caused a firestorm last week when his company, Turing Pharmaceuticals, jacked up the price of a decades-old, life-saving medicine from $13.50 per pill to $750. At the same time, Shkreli made it impossible for competitors to produce low-cost generic versions of the drug…
Then there are the high prices set for new medications — such as the hepatitis C treatments from Gilead Sciences, which cost $1,000 or more per pill. The company argues that the drugs can save money down the line if patients avoid costlier care years later. There is sound logic to this argument, but in the short run health care budgets are strained. The issue is compounded still further by the tug of war between drug makers and
insurers, with each blaming the other for the pricing controversy. Drug makers say they offer rebates and discounts to insurers that then shift more out-of-pocket costs onto patients, while insurers argue the prices are set too high in the first place.
In the end, the pricing problem is like peeling the proverbial onion. If the pharmaceutical industry wants to win consumer confidence, it will have to come clean about the mechanics behind its pricing. Otherwise, drug makers should brace themselves for increased scrutiny and calls for greater oversight. Shkreli may seem an aberration to some, but he is, in reality, the latest example of an ongoing and widespread grappling with the cost of medicines. Like safety warnings in a pharmaceutical ad, the industry may hope we look the other way, but Shkreli is a side effect that is simply too hard to ignore.
Because they can…Washington PostBy Marcia AngellSeptember 25, 2015
…The public should demand something in return for all that governmental support. Other advanced countries regulate drug prices in one way or another: Some cap profits, some cap the rate of price increases, some have formularies that limit drugs in each class to those that are most cost-effective, and some regulate in more than one way. But they all have some form of regulation, and the result is much lower prices for the same drugs. In the United States, by contrast, Congress has blocked Medicare from negotiating the price of drugs or creating a formulary for patients. It’s time that we, too, move to stop price-gouging by the pharmaceutical industry — even when no one notices.
What we think of as the good side of our Capitalism is when prices are controlled by the classic supply/demand equation. To make big money, you have to step outside of that equation. One way to do that is to have a monopoly eliminating the competition required to keep the supply and demand dynamics in the forefront. Shiller pointed to another big money ploy [that’s in the same ballpark as a ponzi scheme] – to create a runaway market that relies on unlimited growth that can’t possibly keep going forever and is bound to crash. The money is made on the way up and the secret is to get out before the fall [we don’t like to think about it very much, but our whole economy is a bubble right now]:
That’s just too big for the likes of this old man. But I can manage thinking about something else we all sort of know – the US healthcare industry is in a similar financial quagmire of its own right now [and has been for a while]:
Whether you call it a bubble, a monopoly, a captive audience, or just a mess doesn’t much matter. The point is that the problem isn’t Martin Shkreli. He’s just another greedy baby who jumped into the feeding frenzy. There are plenty more where he came from. He doesn’t have the style points of an Alex Gorsky [to obey the scout law…], but it’s part of the same problem. As a matter of fact, that Paxil Study 329 I can’t stop talking about is too. Sick people really are a captive audience. The pharmaceutical industry really does have a sanctioned monopoly under our current system of approving drugs. The current steep climb in medical costs in every sector really is a financial bubble of sorts. And our government’s attempts at getting into the driver’s seat really has been successfully thwarted so far by the powerful business interests of the greedy babies.
The cheap, but challengingg solution too many people don’t take advantage of: avoid needing so many costly pills via diet and exercise!
Shkreli was kind of brilliant: looking for cheap niche pharmaceutical companies with “wide moats” — no competition for orphan drugs — than jacking up the price. This is just vulture capitalism.
He probably didn’t realize what a political hot button AIDS treatment is.
Shkreli and those like him are just pharmaceutical bottom feeders.
A system that requires 15 years, 2 billion dollars for new drug approval with a reward of a monopoly for the few drugs that get through at the end IS NOT a free market system. It’s the worst combination of hyperregulation and monopoly pricing possible. One cannot claim any segment of the economy that has to deal with the FDA is in any way shape or form in a free market.
A free market system would be something like kitchen appliances that are privately regulated and assessed by groups like Underwriters Laboratories.
I haven’t noticed any toasters that explode or that cost 5000 dollars.
Everything big business likes is not free market. In fact if you look at the lobbying and political donations of big business, they are anything but and in fact big into regulatory capture. See hospitals, insurance companies, financial services etc.
I’m somewhat surprised that many bloggers missed the news about Guido Rasi (known pro-transparency pusher) appointment as EMA exec. director. It would be very interesting to hear your opinion on this matter
I did miss that! I used to have him “news alert flagged,” but then he went away…
It is insane that we do not regulate the pharmaceutical industry more. Medicare cannot bargain for drug prices? That is probably the Most Ridiculous of issues.
So we have plenty of regulation and more regulation is the answer? When the obvious answer is more competition.
Shrkreli is BANKING on regulation and the police power of the government through misguided patent laws to STOP any competition. Shrkreli cannot make those obscene profits in a less regulated environment because obviously profits will attract competition and the supply-demand curve will correct the imbalance. Without the government power to break down doors to seize a competitive product he has nothing special.
The obvious answer here is that the whole patent system needs to be reassessed. This isn’t just a drug issue, look at the problems this creates in software. Patent and trademark is designed or was designed to strike a balance between the need for innovation and public interest. For drugs, patents should be issued under a clear agreement that price gouging CMS is unacceptable.
Please people, think these things through. More of the same that isn’t working is not the answer. Shkreli is using regulation to make himself rich. We shouldn’t be mad at him for making himself rich, we should be mad at ourselves for electing politicians who appointed cronies who set up this horrible system.
By the way, if you’re not smart enough to decide what’s safe to put in your body, you’re not smart enough to vote for a politician to appoint a regulator to decide that either.