[Ip-health] Economist: Hillary Clinton promises curbs on drug prices

Thiru Balasubramaniam thiru at keionline.org
Wed Sep 23 02:58:49 PDT 2015


Pills and politics

Hillary Clinton promises curbs on drug prices

Dramatic rises in the price of some medicines prompt calls for action

Sep 26th 2015 | From the print edition

Update: On Tuesday evening Turing Pharmaceuticals said it would reduce the
price of Daraprim in order to make it more affordable. It has yet to
announce the new price.

WHEN Martin Shkreli, a biotech entrepreneur and former hedge-fund manager,
bought the rights to make 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, increased the price of Daraprim in America from $13.50 a
pill to $750, he was subjected to widespread condemnation. The Democrats’
leading presidential contender, Hillary Clinton, tweeted on September 21st
that she would lay out a plan out to take on this sort of “outrageous”
pricing. The NASDAQ Biotechnology Index promptly fell by 4.7%, amid worries
that Mrs Clinton’s comments might herald a broad pushback against the high
cost of medicines.

Mr Shkreli has 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 that they did not need a better drug, but a cheaper
one. The medicine is used to treat toxoplasmosis, an infection that is
particularly dangerous to those whose immune systems are weakened, 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
about the price of a recently introduced drug for treating hepatitis C,
Sovaldi, as well the costs of a new breed of immuno-oncology and
cholesterol-reducing drugs. However, Daraprim is quite different from these
new treatments. Its patent expired long ago and in theory there is nothing
to stop another manufacturer producing and selling it under its generic
name, pyrimethamine.

In other countries, such as Britain, Daraprim is still sold by a
pharmaceutical giant, GlaxoSmithKline (GSK), at a far lower cost of around
$20 for 30 pills. GSK sold the American marketing rights to Daraprim 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 that, even at its new price, it may not
be worthwhile for another drugmaker to set up facilities to make it, and
obtain the necessary approvals to sell it.

Turing’s actions follow closely in the footsteps of other companies that
have bought the rights to older drugs and raised their prices. Valeant, a
Canadian company, 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 is promising to waive the cost of its pills for people who
have no health cover, the price rise will be costly for insurers, hospitals
and government health-care schemes. But ultimately, patients and taxpayers
will feel the pain. The 13.1% increase in prescription-drug spending in
2014 is already feeding through into higher premiums for health cover.

Under Mrs Clinton’s proposals, partially unveiled on September 22nd,
Medicare, the government health scheme for elderly Americans, would be
allowed to negotiate prices directly with drug companies—something the
firms would fight tooth-and-nail. She also wants to stop drug firms
treating the cost of direct-to-consumer advertising as a business expense
allowable against tax; such ads encourage patients to demand specific drugs
when there may be cheaper alternatives that are just as effective. And Mrs
Clinton 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 however, she might struggle to get much
of this through Congress, and even then it might have only a marginal
effect on the unrelenting rise in the cost of medicines.

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