Without more information, I think the indignant tone and format of this article are unwarranted. Before we learn anything, we hear about the human toll: innocent babies will die, parents are distraught, and doctors are furious. But we're provided with no clear information on the reason for the price increase.
"When Mallinckrodt acquired Questcor in 2014, Synacthen Depot was one of the products in the portfolio. It was losing money then and still is. Moreover, in the spring of 2014, Mallinckrodt was told by the existing supplier of the product that they would cease production in early 2016," a Mallinckrodt spokesman said in an email to CBC News.
So the company faced an unexpected reduction in supply, and the drug might have been unprofitable at the previous price. One can object to the fact that the means of pharmaceutical production are privately owned, but given that these are not currently non-profit institutions, the outrage seems misplaced. There's nothing "absurd" about it.
Edit:
I'd like to address some of the commenters, who seem to have misinterpreted my comment as a defense of this company, or the pharmaceutical industry in general.
This comment is an objection to the style of journalism in this article: light on information, heavy on emotion. I've said nothing in defense of the corporation.
Some have suggested that these corporations should not increase prices in order to uphold some set of moral principles. I take it for granted that corporations are only answerable to power, and any limitations you might wish to impose upon them must either take the form of collective action (boycotts/protests) or regulation. Perhaps motivating either of these was the intent of the article, but if so the author went about expressing this wish in a way that I find objectionable, by appealing to emotion rather than reason and disguising an ideological belief as factual reporting.
> One can object to the fact that the means of pharmaceutical production are privately owned, but given that these are not currently non-profit institutions, the outrage seems misplaced.
The outrage with the outcomes is the only way a society to addressing the question of the appropriateness of the structures which produce the outcomes. That it is a natural outcome of the existing structure doesn't mean that it isn't absurd, though it might mean that if it is absurd, it is only because the structure of which it is a natural consequence is also absurd.
There exists a moral line, somewhere. In this case, parents of children with a rare, dangerous condition and the doctors that treat them find themselves on one side.
If the price increase had been negotiated, or given fair warning, or was tied to any documentation of the cost of production, it would be much more tolerable - or at least understandable.
Instead, this follows a recent trend of exploiting sick people for profit through mind-boggling price increases for critical medications after sometimes decades of very low prices. There is most certainly not a 2000% increase in the cost of production - if there were, there would likely be a lot more transparency.
> That old saying that you can't put a price on human life
It's a nice platitude, but it's obviously untrue. The unstated implication is that a human life actually has infinite value, which is even more obviously untrue.
It's easy to find an upper bound on the value of a human life; would you be willing to pay ten trillion dollars of public money (which would otherwise be hypothetically used to finance schools, research, etc.) to save the life of a single child?
If the manufacturing cost is unsustainable expensive then who burdens the moral obligation to pay it? Me? You? That other guy who is over there and conveniently not in my backyard?
> Without more information, I think the indignant tone and format of this article are unwarranted.
Agreed. For me, that "more information" includes things like: whether or not the drug is viable at its former price, the likelihood of this price driving other entrants into the market to find new solutions to address this problem, the ability of other manufacturers to develop substitutes, the amount of the profits that will be returned into development of other drugs that will save other lives, the baseline cost per life saved across the pharmaceutical industry, et. al.
High prices attract attention to existing social problems and are sometimes useful. Other times they're opportunistic and exploitative. It's not trivial to isolate the two.
Yes, but the fact that Martin Shkreli wanted to buy the rights for this drug makes me think there is somewhere a list of potential drugs that can be exploited in this way, and multiple companies are bidding for them.
Well, I certainly wouldn't expect a business executive to invest in a drug he suspects will be unprofitable. That aside, if the drug is unprofitable, and society has established as a general principle that the private sector is the appropriate venue for drug manufacturing, then I don't understand the objection to a price increase in principle. Without more information, we just don't know that this is an instance of price gouging. I'm open to that possibility, but I suggest waiting for actual evidence before taking your pitchfork out of the shed.
I'm going to repost a comment I made elsewhere that may shed some light:
Maybe we need a charity that builds a research war chest to threaten companies like this with redevelopment. It costs a lot to replicate a pill and go through the FDA hoops, and once a private company does, the price just gets competed down to the point where it doesn't cover sunk the redevelopment costs--so in some scenarios no one bothers.
Instead, a charity doesn't have to take profit into consideration and can just threaten: drop your price or we'll persue independent redevelopment. With only the credible threat of spending on independent redevelopment, they could devalue a lot of these orphan drugs, and then buy up the rights/trade secrets to them for open release.
Competing businesses can't do this, because they can't pose a credible threat, because following through wouldn't make business sense. A charity can have non-business aims.
Not likely; insurance companies have no incentive or motivation to reduce the cost of healthcare. The more money that moves through the healthcare system, the more money that passes through the insurance company. That gives them power, giant transient account balances, and "too big to fail" status.
I agree in part. It seems like in practice it looks like insurance companies have little interest or capability to reduce healthcare costs. However, I don't understand your reasoning as to why. The high cost of drugs puts the health insurance companies in competition with drug companies for actually ending up with money in hand flowing through healthcare.
The health insurance companies collect money monthly from all enrolled participants. That money sits on their books until it has to be paid out for claims. Higher healthcare costs means that the insurance company can raise the monthly premiums, which means that it's got more money sitting in it's accounts before the claims get paid. That money isn't under a mattress; the insurance company has it invested in something that's earning interest. So higher healthcare costs == more interest earned on the premiums as they pass through the insurance company on the way to paying claims.
I've posted it as a top level, but -- questcor controls the market for this drug after an 2012 purchase[0]. Here's your "more information". I wouldn't be surprised if Martin Shkreli got the idea for buying and hiking the DataPrim price after reading[0]. Expect a lot more of these things to happen.
If I'm not mistaken in detecting hostility from the scare quotes, I'd like to say that I don't believe it is unreasonable to expect that the journalist who wrote this article to provide that information before making appeals to emotion, rather than depending on commenters on news aggregators to disseminate it.
I would not say "hostility", but ... yes, (prior to your edit) I assumed you were actually defending the company.
But after your edit - I no longer think that. I just wonder where you got this idea about unbiased or factual journalism. I've never seen it happen, and even if they tried (which they don't), there's always a bias. Personally, I try to read the facts and do my own research on anything I find interesting. Sturgeon's law applies to journalism as well: 90% of everything is crud.
I actually was not arguing against bias in the article, rather the appeal to emotion and failure to seek a reasonable explanation before directing the reader to a conclusion. I wouldn't mind if it had taken a stance. Perhaps out of personal prejudice, I dislike the attempt to influence opinions without providing evidence, especially after the flagrant attempt to elicit empathy before such evidence could even have been presented. Take this tidbit:
"Mia Brooks of Salmon Arm, B.C., noticed the seizures in her son more than a month ago."
When Mia Brooks of Salmon Arm, B.C. first noticed seizures in her son is completely irrelevant to the subject of the article. I've given my time to read in the hope of forming an educated opinion on a topic of general social interest, and the first thing I encounter after reading a description of the disease is a story meant to induce feelings of sympathy for these unfortunate people. This kind of journalism is, in my opinion, manipulative and socially destructive, no matter how noble its author's intentions. I realize this is a common enough problem, but I don't feel apologetic about pointing out when I see it.
The claim of losing money is almost certainly a lie. The marginal cost of a drug like this is usually almost nothing. The manufacturing costs tend to be small, and something like this doesn't need a sales force.
Meanwhile, Questcor and Mallinkodt were/are the poster children for abrupt and unwarranted drug price hikes by orders of magnitude. They are bad actors in an industry where scheming - both legal and otherwise - is so common that no one thinks twice.
> The claim of losing money is almost certainly a lie. The marginal cost of a drug like this is usually almost nothing.
Spoken like someone who has never worked on low-volume production before. Fixed costs that amortize to trivial amounts when producing a few million or billion doses a year get significant when amortized across a few thousand.
I don't buy the article's unsourced assertion that the medication only costs $230/dose to make. Assuming 4,000 doses/year (800 patients * 5 doses/patient [$23,000/dose / "over $100,000 per infant"]), that's a production cost of only $920,000. The cost of regulatory compliance alone is probably greater than that.
I don't know much about pharmaceutical policy, but I have an idea. I would like to have it torn to shreds if it means we can have an idea of a more equitable process of creating medicine.
What if, in a single payer model, a resesrching entity that creates a new treatment which is in turn approved by the government, automatically forfeits any rights to the drug, but is guaranteed royalties for 20 years or so? Manufacturers don't have any limits on what they may or may not create, but there is a minimum price at which the government will pay for it, similar to the "cost+profit" model seen in the defense industry. Likewise, the obscure cheap drugs that get abandoned then have the rights purchased by sociopathic hedge fund managers would instead be manufactured by the state and sold at cost.
Free markets are good a at lot of things, but staying free is not one of them. (Similarly for a democracy, by the way).
A "naturally" regulated market eventually converges into one all-powerful monopoly player - it's a stable configuration that maximizes the profit for the owners of that monopoly.
So you have to regulate this "freedom" away from disappearing - in the same way that GPL regulates BSD freedom away from disappearing.
> A "naturally" regulated market eventually converges into one all-powerful monopoly player - it's a stable configuration that maximizes the profit for the owners of that monopoly.
This is unsupported by any serious literature. Economic theory tells us that the only circumstance in which this happens is an industry prone to natural monopoly, which are generally those constrained by geography and enormous fixed infrastructure costs coupled with relatively constant marginal costs.
The "natural" long-run state of free markets is economic equilibrium, which necessarily includes competition to reduce marginal profits to around zero at the point that the amount supplied is equal to the amount demanded.
Coca Cola is a luxury item. If they raise the price too much, no one will buy it, and that puts an upper limit to the price (and makes consolidation less profitable). And it still may happen if not for antitrust - I'm sure a combined RCPepsiCoca Cola company will be more profitable than three independent ones.
The only reason DataPrim price could be hiked was that the people who need it will actually pay for it. Same with ACTH. A captive audience is a wonderful thing -- something Coca Cola would love but doesn't have.
There were ~100 car manufacturers 100 years ago, how many are there now? (And cars are not as essential as ACTH)
There were tens to hundreds of media companies up until the 1980's. Now, there are essentially six[0]. And if antitrust didn't matter, there would probably be less.
Similar things are happening in pharma[0].
It is one aspect of capitalism that's to blame: "free market". If you monopolies are legal (and in a totally free market, they are), then you will get monopolies because they are more effective at extracting rent than competition. we've just seen this happen twice in the pharma market.
Are you saying Coca Cola is not attempting to get a soft drink monopoly? You should be a convenience store owner and see both the battle between them and Pepsi and the demands they put on their customers for preferred pricing.
Keep in mind that the United States has some pretty strong anti-monopoly laws in place. Hence, not a free market, hence, we're not all drinking Coca Cola to the exclusion of most other things.
Healthcare and pharmaceuticals are not even in the ball park of a normal free market.
1. Monopolies - We give monopolies to pharmaceutical companies to incentivize R&D.
2. Principal-Agent problem - Doctors guide, and make decisions about care for consumers. But However consumers of health care have different incentives than doctors.
3. Insurance - Most individuals are relatively shielded from the costs of their healthcare.
4. Public Good - Many people want to live in a society where people do not die from easily treatable conditions.
So yes a free markets is always the optimal solution given a certain set of assumptions. Unfortunately very few of these assumptions are true in healthcare.
There is no such thing. "Free markets" presume both particular context (which is not present in any real state, though it can sometimes be approximated) and particular artificial regulation (particular, particular constructions of property rights.)
The idea that "naturally regulated markets" is a meaningful concept (much less a meaningful concept with some correspondence with "free markets") is absurd on its face.
Disproven by privatisation of the UK rail industry. I think it's the most expensive in Europe, certainly close. Oh, and the European healthcare systems.
You could apply that to so many things. It's just an appeal to emotion. People also needlessly lack education because they can't pay, but we'd be fucked if the government jumped to guarantee more loans and grants.
If you were begging the question any harder, you'd be one of the people tech guys hate on in the Tenderloin. And at the same time you're teetering on the edge of an epiphany that strikes at the heart of techno-fetishistic free-market worship. Because the government guaranteeing loans and grants isn't a good way to provide education, no--but plenty of countries make education a state function and charge a very manageable amount, if anything at all, to students, while making the total cost of operation remarkably reasonable.
I don't understand - are you saying I was wrong? If so please tell me why or recommend me some reading. I do know that other countries are able state-fund education, but I don't concretely know why they're different. I just assumed that "jumping to guarantee more loans" is an obviously bad idea.
This is pure capitalism in action, and an important datum about what happens in free markets. [see edit below]
Questcor is cornering the market - this has nothing to do with research or availability. In 2012, they acquired the manufacturing of the pig-pituary-gland version of this drug, called "HP Acthar Gel"[0], and hiked the price from $50 to $28,000 per vial. In June 2014, they acquired the synthetic version called "Synacthen Depot" and modestly hiked it by just 2000%. The generic term naming both is ACTH, which is cleverly (?) disguised inside both names.
This is greed, plain and simple - now that Questcor owns the market, they can name any price they want, or the infantile spasm kids suffer greatly (die, or suffer developmental problems of all sorts including retardation). There are other diseases treated with ACTH, and dropping treatment due to cost has effects almost as severe.
Show me the parent who would let their baby die or become retarded because the price was hiked. That's an example of what any completely free market will converge to.
edit: I stand corrected in my use of "pure capitalism" - government regulation makes it very much not pure capitalism. But the monopolizing of production that we see here is a real-world result of capitalism (pure or impure) - the assumption that "if there's money to be made, some other entity will rise to the challenge" is not supported by evidence in small markets (such as ACTH). If it weren't, there would be no need for antitrust laws.
This isn't pure capitalism. This is a result of what Mises called "license monopoly". See "The Monopolized Commodity" under https://mises.org/library/monopoly-prices for more discussion of this.
"Under monopoly, a greater part of the specific factors of production concerned will remain unused. The common feature of all instances of monopoly prices is that part of the supply, which under competitive conditions would have been offered on the market, is withheld from the market. The most spectacular and objectionable instance of this withholding is the purposeful destruction of the commodities concerned. It happened mostly with consumers’ goods (e.g., coffee) but sometimes also with factors of production."
There are other sources of this drug, notably foreign production, but they don't have the proper licensing. Thus you get a license monopoly. There are a lot of drugs developed overseas that are effective but they are unknown in the U.S market because they are not approved by the proper license monopoly granter. Under pure capitalism, these products would be allowed on the market and independent rating agencies would ensure their quality.
I take it back; You are right that it is not pure capitalism - in pure capitalism, there would not be FDA regulation which definitely plays a huge part here. But I think the end result is indistinguishable.
I'll grant you that it is not YET the result of pure capitalism, assuming that there is, indeed, foreign production. But what stops the buyer from consolidating foreign producers as well? It's good for every producer involved - together, they can raise the prices even more.
>"Capitalism stands its trial before judges who have the sentence of death in their pockets. They are going to pass it, whatever the defense they may hear; the only success victorious defense can possibly produce is a change in the indictment."
-Joseph Schumpeter
> Yes, the government granting monopoly rights in 2015 to a naturally occurring chemical discovered in 1933 is "capitalism".
Nobody has been granted monopoly rights on anything. The GP's article (from 2012) is referring to a situation where there is only one FDA-approved supplier of a product (naturally-derived ACTH). Nothing except lack of motivation is stopping someone else from entering the market. The OP is discussing a particular brand of synthetic ACTH, which may or may not be in the same situation in Canada (sole approved drug).
>"Nothing except lack of motivation is stopping someone else from entering the market."
Have you ever looked at the cost of getting a new manufacturer of a drug approved by the FDA? FDA approval requires a lot more than motivation; if you disagree, I invite you to start manufacturing the drugs yourself (or even contracting it out).
"Motivation" in the business sense of "can make sufficient return on investment", not the trivially reductionist sense of "I feel like making a new drug today". So regulatory costs affect the motivation.
So why not order the drug from China or India? Is the drug expensive to manufacture? Or is it that the Canadian government will only order the drug from select countries? I wish the article dug a little deeper.
A coworker who worked as a doctor in Afghanistan and Myanmar for about a year told me that a third of the medications they had in the hospital, and two thirds of the medications you could purchase in pharmacies contained no active ingredient. People kept dying on him because an antibiotic would randomly do nothing, or lysis medication turned out to consist of colored NaCl. He said that most of those medications were delivered from China and India because of the low prices in those countries. This is anecdata, obviously, but I'd be very careful purchasing drugs from countries with low oversight. Fake drugs are an enormously profitable market.
I also like this quote from a New York Times article:
“If I have to follow U.S. standards in inspecting facilities supplying to the Indian market,” G. N. Singh, India’s top drug regulator, said in a recent interview with an Indian newspaper, “we will have to shut almost all of those.”
The unease culminated Tuesday when a top executive at Ranbaxy — which has repeatedly been caught lying to the F.D.A. and found to have conditions such as flies “too numerous to count” in critical plant areas — pleaded with Dr. Hamburg at a private meeting with other drug executives to allow his products into the United States so that the company could more easily pay for fixes. She politely declined.
There may be requirements to purchase the drug from manufacturers that comply with government regulated quality controls.
Not that someone who really needs the drug couldn't seek out an online source to get it cheaply from overseas, but doctors may not be able to legally prescribe it from those places.
I don't have any knowledge on the subject though, just speculating. At least in the US buying directly from overseas pharmacies seems to be more or less illegal.
It may be illegal for pharmacies operating in Canada to buy from those manufacturers then, I don't know. I'm just saying there are possible additional risks with buying drugs of unknown provenance. It's not necessarily as simple as "just buy it from China or India".
What's the answer here? Should the government pay for manufacturing of generic drugs that are non-profitable but "essential"? Let the tax payers eat the cost of such drugs? There's more than a few like that. I believe snake venom antidotes are often on such lists.
(note: I did specify generic drugs. Not drugs still under patent exclusivity windows. Which is a valid but separate discussion.)
Not to excuse the hike, but lets call it what it is - a 20 times increase.
Any use of percentages over double-digits is asking for confusion. And using a four-digit percentage is intentionally misrepresenting the scale of the increase.
>The price was so high that Alberta delisted it in July,
and government chickens out and fails to protect its citizens. The government has the power to treat it for example as public utility and negotiate the price based on that premise.
Hopefully more incidents like this will prompt people to question whether granting patents are actually useful to society or not.
Patents are after all an artificial (and supposedly temporary) monopoly enforced by society on behalf of a private entity, because society deems the value of this protection will create something beneficial to society as large.
Using patents to bump prices of existing, already profitable medicines hardly seems what patents were made for.
This is what confuses me, so maybe someone with a better understanding of this market works can elaborate. How is it that the drug is not patented but the manufacturer has the exclusive right to sell it? It blows my mind that one company can overnight make such a huge change and there is no competitor to turn to.
In the US, you still have to get FDA approval to sell drugs that claim to be reformulations of another manufacturer’s product. This isn’t entirely baseless - demonstrating your version’s bioequivalency to the original is part of the process, which doesn’t seem like an unreasonable thing to require.
Unfortunately, the whole approval process still costs in the low $millions at a minimum & so for out of patent drugs that are a pain to manufacture, and/or have small numbers of patients, they just aren’t financially viable once you factor in the approval costs.
Part of what you see when a drug company steps in and jacks up the prices like this is that the new owners know that the FDA approval process combined with their pre-existing manufacturing capability gives them an expensive moat to bridge for other companies that isn’t justified by the size of the market, so if they’re willing to take the reputational hit that the previous owners weren’t then they can jack up the prices enormously since the patients have no-where else to go.
I am several steps removed from the industry but to my knowledge -
There is still a regulatory approval process to be able to manufacture the drug - so the cost and time required to receive this approval, then to market the drug as a generic alternative to the existing drug to a market that often doesn't see itself as the ultimate payor (ie. the consumer thinks the insurance companies / government are paying) and may prefer known names, and the original manufacturer's ability to then lower the price of the drug all combine to push away competition on low volume drugs like this one.
I'm not very familiar with the drug market myself, but game theory can theorize why they can do it. From what I have read, drugs cost a lot of money and a few years to get to market even when they are not patent protected. This means that when a competitor starts investing money in a competing product, the main company can simply reduce the price to a point where that investment is no longer profitable. Potential competitors know this and that’s why they wont enter the market.
According to a CNBC interview last week the product is protected via trade secrets. People know what's in it, but not how to make it. And it's some weird stuff (I think pituitary glands from pigs or something equally weird are key components - not sure there's a lot of open-source knowledge on how to deal with that ingredient pipeline.)
The CEO's pitch was that they believe the drug is useful in more roles than it's currently used for, so they're taking the increased money to perform the studies required to allow the drug to be used to treat more diseases for which there is no alternative.
And right now this is a last-ditch drug - it's used once all other therapies have failed.
So they're trying to increase marketshare by doing expensive studies, which is why this drug is still produced and where the money is going.
How would you propose we incentivize drug companies to spend $1B and 10 years in development/time costs (in the oncology space, for instance) if there is no IP to protect that investment?
Drug development is hard, expensive, and littered with failure. There isn't a simple approach to this problem.
"When Mallinckrodt acquired Questcor in 2014, Synacthen Depot was one of the products in the portfolio. It was losing money then and still is. Moreover, in the spring of 2014, Mallinckrodt was told by the existing supplier of the product that they would cease production in early 2016," a Mallinckrodt spokesman said in an email to CBC News.
So the company faced an unexpected reduction in supply, and the drug might have been unprofitable at the previous price. One can object to the fact that the means of pharmaceutical production are privately owned, but given that these are not currently non-profit institutions, the outrage seems misplaced. There's nothing "absurd" about it.
Edit:
I'd like to address some of the commenters, who seem to have misinterpreted my comment as a defense of this company, or the pharmaceutical industry in general.
This comment is an objection to the style of journalism in this article: light on information, heavy on emotion. I've said nothing in defense of the corporation.
Some have suggested that these corporations should not increase prices in order to uphold some set of moral principles. I take it for granted that corporations are only answerable to power, and any limitations you might wish to impose upon them must either take the form of collective action (boycotts/protests) or regulation. Perhaps motivating either of these was the intent of the article, but if so the author went about expressing this wish in a way that I find objectionable, by appealing to emotion rather than reason and disguising an ideological belief as factual reporting.