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Any pharma drug experts out there?

How does this happen?

A former hedge fund manager has suffered severe backlash after purchasing the rights to a 62-year-old drug used for treating AIDS patients and raising the price overnight from $13.50 per tablet to $750.

Martin Shkreli, 32, founder and chief executive of Turing Pharmaceuticals, purchased the rights to Daraprim – which is used to treat life-threatening parasitic infections – in August for $55million.

At 62 it should be out of patent, no?

So, why isn’t it simply a generic?

I can think of a couple of things: firstly, that the new use is what is still in patent, not the old anti-malaria one. Secondly, that it’s not actually in patent but it’s bloody difficult to get approval to manufacture it from the FDA etc.

But would very much like to know what actually is the legal protection here. Because I can’t see it surviving without some legal protection that allows that rent gouging.

18 thoughts on “Any pharma drug experts out there?”

  1. The entire US pharmaceutical industry and medical professions are an exercise in price gouging. Karl Denninger bangs on about it all the time. This guy is just at the tip of a very large iceberg.

  2. Without even looking, presumably the use as an AIDS drug falls under a so-called Second Medical Use claim on an active patent.

    Which is totally legit, and the way this kind of thing works both in Europe and the US.

  3. I don’t know about this drug in particular but have some knowledge of pharma. I’m not sure of the protection it has but there are not generic competitors for it, likely [at least partly] due to it being a cheap drug in an already small market – no real business opportunity there. With the price increase the market looks more attractive but generics companies are not stupid. Generics businesses generally require huge volumes of sales, something that this drug does not offer, to recover the costs of building a generic which, although much smaller than a new drug, are not insignificant. Plus now they will be looking at this PR disaster and seeing that a high price will not be maintained long…

  4. I’m no expert, but I can recommend the blog Matthew L does as being very clearly thoughtful about the whole affair. One of the points I ran into while investigating this myself last night was that the FDA’s rules for licensing generics imply, in effect, that you have to have bought a load of the real stuff to test against in order to demonstrate chemical equivalence. While the price was low, there was little incentive for the competition to invest in doing the necessary legwork [1]; alongside this price hike, the firm is clamping down on distribution, presumably to prevent competitors from being able to demonstrate chemical equivalence for an alternative.

    In essence, the American rules around healthcare create the pockets of legality in which this kind of rent-seeking behaviour can thrive. And hey presto, that’s exactly what happens. I’m not going to defend the actions of this Shkreli character, but we should reserve our stronger condemnation for the system that creates the opportunities that he is now abusing.

    [1] Though GSK held the licence until 2010, so one might have thought they might still have some of the paperwork?

  5. Think there’s some confusion here about the ‘treating AIDS patients’ thing. I doubt that this drug has any function in treating GRID as such- it will just be an effective weapon against some of the disgusting parasitical organisms that 4H enthusiasts get infested with.

  6. I suspect there is only one active marketing authorization in the USA. It’s not that other companies aren’t allowed to make it, it’s that they are no longer bothering to.

    Patents on indications (the disease you treat) are not enforceable in the real world. Drug companies do secure these patents sometimes but are more interested in patenting the molecule and manufacturing processes, as those give you enforceable protections. Bevacizumab for example is available in two different formulations at radically different prices (one for cancer one for ophthalmic) – the higher-priced ophthalmic formulation was only introduced to counter off-label use of the relatively cheaper cancer products.

  7. Yep – this company has the only active MA in the USA.

    For Worstall Pharma to grab a piece of this market you’d need (at least):

    Manufacturing setup including FDA inspections of process and facilities.
    Small Phase I clinical trial showing bioequivalence to the currently marketed product.
    Submission thrown together from that trial and everything else you can find about the product.
    Full pharmacovigilance setup causing ongoing costs for the rest of forever.

    It would take you 3 years at a minimum until you can start selling drugs. You could of course short-circuit this by importing from another manufacturer reputable country – for which you’re looking at 1 year minimum. At which point (with a million or ten in sunk costs) the price of this niche product suddenly drops again.

  8. Incidentally if Matthew L’s allegations about distribution are true that Phase I clinical trial just became a Phase III, and in the process got a whole lot more expensive and rather less feasible, as you’d have to demonstrate efficacy in real patients.

    I can see this becoming a lucrative business model with smaller products and yes, the regulators need to close the loophole.

  9. “Patents on indications (the disease you treat) are not enforceable in the real world. ”

    Not 100%, but to a large degree they can be. Any company promoting an otherwise generic for a patented use will find themselves in court post-haste. A hospital found to be infringing the patent systematically might get some attention too.

    What you can’t do is detect individual doctors infringing, and it’s not worth suing them anyway.

  10. Reason for all this is simple, government. I’ve made a number of compounds similar to this drug and could knock up a reasonable batch in a week in a bog standard lab. It is achiral and I guess it’s salt would crystallise so purification should be easy. If I then try and supply US patients with it, vastly undercutting Turing Pharmaceuticals, then the US government will lock me up for supplying an unlicensed drug, patents don’t come into it. To avoid going to jail I have to do what Bloke in Germany describes. In summary government is creating a huge barrier to entry of the market, this guy is just exploiting that.

  11. So, yea verily, we have to abolish gubmint because some smartarse has found a way to exploit a combination of rules to seek rents?

    It seems simpler (and better for humankind given that abolishing government, patents, and the regulatory environment would leave us with probably not even biblical-era medicine) to just close the loophole, doesn’t it?

  12. BTW, I’m shocked that no one has noticed that $13.50 a tab for this stuff is also price gouging.

    It’s almost as if people believe that pricing in one of the least free and least elastic markets in the developed world somehow has a whiff of the market about it!

  13. Relaxing the pharmacy regulations to a true open market isn’t such a flash idea. How could a person know that the one they are buying is pure and at the right dosage?

    Would you buy a car if you couldn’t inspect it first? Of course not, but that’s what you are basically forced to do with drugs. So the government inspects them for you.

    Oh you could hope the major players do a decent job and so stick with them. And they’d continue to charge any price they liked, because other players without their name would not be able to undercut them.

    Do you go to the cheapest possible doctor? Would you go to one not certified by a medical board? Then why would you buy cheap drugs?

    And so we’d have the worst possible result — expensive drugs and no way to be sure they were tested properly!

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