Sudden price rises for long-established drugs lead to calls for action
WHEN Martin Shkreli, a biotech entrepreneur (pictured), bought the American marketing rights to Daraprim, a drug that treats a parasitic infection, he probably did not expect to end up being cast as the poster-child of price-gouging. However, when his company, Turing Pharmaceuticals, said it would increase the price of Daraprim in America from $13.50 a pill to $750, he received a torrent of condemnation. Hillary Clinton, the Democrats’ leading presidential contender, announced plans to take on this sort of “outrageous” pricing. On September 22nd, Mr Shkreli promised to rethink the price rise. The row prompted big falls in biotechnology companies’ shares, amid worries that Mrs Clinton’s comments may herald a broad pushback against the high cost of medicines.
Mr Shkreli defended his move, saying that Turing plans to invest in research and development to improve the 62-year-old drug. Doctors expressed scepticism. Some said they needed not a better drug but a cheaper one. The medicine is used to treat toxoplasmosis, an infection that is particularly dangerous to people with weakened immune systems, such as those with AIDS and some cancer patients.
The price increase inflamed Americans’ anger over the growing cost of prescription medicines. In the past year there has been much criticism of the price of a recently introduced hepatitis C drug, Sovaldi, as well as the costs of new immuno-oncology and cholesterol-reducing drugs. However, Daraprim is quite different from these treatments. Its patent expired long ago and in theory there is nothing to stop another firm producing and selling it under its generic name, pyrimethamine.
In other countries, such as Britain, Daraprim is sold by GlaxoSmithKline (GSK), at a far lower cost of around $20 for 30 pills. GSK sold the rights to market Daraprim in America in 2010 and those rights changed hands again recently, with Turing the buyer. For many products, a price rise of more than 5,000% is an open invitation for a competitor to come in and offer something similar for less money. But the market for Daraprim is so small, and the process of getting permission to sell even copies of long-established drugs is so bothersome, that even at its new price it may not be worthwhile for another firm to do so.
Turing’s actions follow in the footsteps of other companies that have bought the rights to older drugs and raised their prices. Valeant of Canada sharply raised the cost of two heart drugs after acquiring them this year. Horizon Pharma increased the price of a pain-relief tablet, Vimovo, by 597% after buying the rights from AstraZeneca in 2013. Since 2008 the price of all branded drugs (including both patent-protected ones and those whose patents have expired) has risen by 127% in America, compared with an 11% rise in the consumer-price index, reckons Express Scripts, which manages medicines’ costs on behalf of employers and health insurers.
Although Turing promises to waive the cost of its pills for people who have no health cover, it still looks like imposing a big price rise on insurers, hospitals and government health schemes. So, ultimately, patients and taxpayers will feel the pain. The 13.1% increase in prescription-drug spending in 2014 is already leading to higher premiums for health cover.
An obvious and sensible palliative for rising prices for old drugs like Daraprim is, as Mrs Clinton proposes, to make it easier to import foreign-made copies. She also says Medicare, the government health scheme for elderly Americans, should be able to negotiate prices with drug firms—it now has to pay whatever they ask. She wants to stop firms treating the cost of direct-to-consumer advertising as an expense allowable against tax, since such ads encourage patients to demand specific drugs when there may be cheaper but just as effective alternatives. And Mrs Clinton says she would require drug companies that benefit from government spending on research and development to invest a “sufficient amount” in R&D of their own.
If she were elected president, she might struggle to get much of this through Congress, and even then it might have only a marginal effect on the inexorable rise in the cost of medicines. But at least Mr Shkreli’s antics have put drug pricing firmly on the election agenda.