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Comment by cmiles74 | Hacker News Reader

It seems to me that the overall result would be other companies start manufacturing the generic and sell the drug for maybe 20% less than Martin and over time the price drops back down towards where it once started. In the meantime, this company either goes bankrupt or is sold off.

Or the government passes a law capping how much you can raise the price of a generic drug over so many years.

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That's the loophole though, the quantities are so small that realistically, no pharmaceutical company has the incentive to make their version of the drug, even at $750 per dose. There are still costs to making a drug that's off-patent, and sometimes the number of patients being treated is only in the double digits. Additionally, a competing drug released at say, $500 per dose would still be considered predatory anyway. This is really the backwater of pharma.

The case of KV Pharmaceuticals that I cited was a little different since compounding labs had already been making the drug Makena. In that case, the FDA actually sent these labs a letter essentially saying, "Go ahead and keep making the drug even though KV now has a patent for it. We are choosing to not enforce their patent because their price increase was bs."

Maybe the government can prove its worth and get off its ass and quickly figure out how to close this loophole, then go after Martin and others like him.

They should just allow importing drugs from other markets that have good enough quality standards - like the EU or Canada I guess. Problem solved.

Can this drug be reproduced by others? Is it simply a licensing issue?

All of the drugs mentioned in the article have had their patents expire long ago.

But who provides the quality standards oversight? The drug is apparently produced in India. What if pills were shipped to the US and it was found after the fact that many batches contained unacceptable levels of iron? Who to blame?

I'm sure Canada has decent oversight, but who wants to say that the solution is no direct US agency oversight, and that we want a "Pharmaceuticals-NAFTA"? It seems funding oversight with a "homeland" agency is one issue you could get bipartisan support on.

While sure, I doubt many have a problem with medical tourism, I'm not sure bringing drugs across the border intended for distribution without FDA approval is the answer.

On the other hand maybe countries working together at the agency level to ensure their oversight measures are in compliance with some agreed upon standard is a sane way to move forward. But then who maintains the list of approved drugs? Is that power given to some international body? Or does the FDA still have to approve drugs for distribution and only alternatives are brought in? And then what about drugs that are patented in the US (like this one), but freely available in other markets from other manufacturers?

It seems a worthy enough goal in general, but I don't think a fully libertarian approach to the problem comes close to being the right answer either.

> Pharmaceuticals-NAFTA

I'm not a libertarian and I'm in favor regulations when needed, but in this case I think that recognizing drug testing and quality controls between countries that have similar standards would be a great help at curbing costs. "FDA approval" in this case should mean that the FDA could recognize that if agency X from Country Y says that a generic pharmaceutical is safe, you don't need to do the same tests again.

Of course this should work both ways - I'm from the EU, and I'd like to be able to get drugs manufactured in the US when they're cheaper and just as safe.

Did you miss the main caveat? Countries with good quality testing standards. If you have many countries with very similar quality assurance standards then surely it makes sense to rely on the work of others, or have a revised (shorter, cheaper) process for drugs to go through which have already been approved by certain countries.

I don't think anybody is suggesting mass importation of low quality Indian or Thai versions of drugs.

We import all kinds of stuff from all over the world and enforce quality standards very well. The current situation is more like protectionism than consumer protection in many cases.

While broadly true, this is an area where counterfeiting is easier, detection is difficult, enforcement is harder, and legitimate manufacturing is often expensive.

In other words, exactly the conditions to encourage all kinds of abuses.

That is all true but we don't have to buy from shady producers. Canadian and European producers supply their own very safe and mature markets. Buy the stuff that the UK NHS buys and at the same prices - their scale gets them good deals (with notable exceptions). This can't be worse than the current deal.

This might surprise you, but conditions that encourage abuse also encourage people to find ways to avoid having their abuse detected.

Yeah, it can be worse than the current deal. Just look at the problems China has with counterfeit food.

This whole thread is about a horrible abuse present in the current system. The potential for abuse in an alternate system does not disqualify it. There is no perfect system and bad actors are everywhere. However, I don't see terrible endemic problems in the UK, Canada or the Eurozone from importing drugs. I'm sure they exist sometimes. But in the entire rest of the G7 drug costs are less and their outcomes no worse than the US.

If the problem is abuse, that a proposed successor system may not be better is a major source of concern.

If the situation is as I read it:

- Importing drugs from countries with reliable drug regulatory infrastructure would have substantial benefits, including a check on cost (sorely needed), and improved availability of less profitable drugs

- Other similar countries are doing this without seeing measurable negative health outcomes

then getting hung up on this 'major concern' that seems to have been rendered moot elsewhere makes most people worse off. Mentioning the existence of potential (and unlikely?[1]) downsides is not an adequate cost-benefit analysis.

[1] not that it's unlikely that there will be people who try to take advantage of the system, but it seems unlikely that given appropriate regulatory care, the downsides will be unmanageable to the extent that they cause the change to allow drug imports to have an overall negative impact.

[edited for clarity, including the addition of the footnote]

The counter argument is that most new drugs are developed in the US (due to the large profit margins here) and that the UK, Canada & the EU are essentially free riding off the US in this area.

Not sure I completely buy this argument, but there it is.

I'm sure he'd be happy to let that go unprotested ... "Skrelicame to attention after his attempts to have the FDA not approve drugs being produced by companies whose stocks he was shorting".

Who needs morality in the free market, right?

That is a very biased view of the situation.

Pharma companies try to put the best face on data to get a drug approved. Analysts try to approach the data in an impartial way. If an analyst looks at the data and sees issues, it makes sense both ethically and financially to push for the drug not to be approved. Ethically, if the drug doesn't work as advertised, it is better that it is not sold as a cure. Informing the FDA of your analysis is a duty. Financially, if you think the drug doesn't work, it makes sense to short the stock in the belief that it won't be approved.

Pharma companies always present it as hedge funds trying to kill their products, but if the data is strong and the drug works, the analyst could just go long on the company instead.

Yes, it makes sense ethically to push the FDA not to approve a drug you think won't work. It also makes sense financially to bet that the FDA won't approve a drug that you think won't work. But it doesn't make sense ethically to do both, both directly because it creates a conflict of interest, and indirectly because that very conflict of interest undermines both the objectivity and the credibility of your recommendation not to approve the drug.

You are arguing ... what, here? That people with some sort of knowledge of a product/company/industry's prospects shouldn't be allowed to buy/sell positions in that company?

If I understand you (and I may not), and we were to come to the conclusion that "there ought to be a law", I have no idea how that would even be structured/written.

Yes, I think you are correct that you did not understand me. I'm sorry.

Please don't apologize - I'm apparently the one with reading comprehension issues.

I don't think your view of the situation is any less biased. The problem is that there is very little incentive to ever reject a drug. Shorting is the only case I can think of and even that assumes the drug in question is important enough to actually move share price.

Remember the FDA is primarily concerned with a drug not harming people, the extent to which it's actually beneficial is of secondary interest at best: http://www.fda.gov/Drugs/DevelopmentApprovalProcess/HowDrugs...

> Remember the FDA is primarily concerned with a drug not harming people, the extent to which it's actually beneficial is of secondary interest at best

Uh... no. Just from that page, it states the FDA ensures "that drugs and devices are safe and effective for their intended uses". If safety was the only concern:

1) Why does the FDA approve indications?

2) Why has there been prosecution (possibly violating the first amendment) for promotion of off-label uses?

3) Why does the FDA have a "breakthrough" designation that fast tracks approvals solely based on their effectiveness?

4) Why do Pharma companies frequently run new trials using different end points in an effort to get a drug approved when the original end points they used showed no effect? Why have there been cases when the FDA didn't approve a drug because they declared the end point used in the clinical trials was meaningless for the indication?

I think it is fairly clear that a shitload of time and resources at the FDA are spent deciding whether drugs are effective and if the data from the pharmaceutical company shows effectiveness.

Edit: I should also add the whole DESI review[1] in the 1960's shows your statement is complete nonsense. Drugs that the FDA previously approved for safety before 1962 were re-analyzed to classify their efficacy. So, the FDA reanalyzed thousands of drugs they had already determined were safe to look at whether they were effective.

[1] https://en.wikipedia.org/wiki/Drug_Efficacy_Study_Implementa...

From the entire page you found the one case where the word "effective" is used and it's used after the word "safe".

Here's what the page says about new drug applications:

The IND application must contain information in three broad areas: * Animal Pharmacology and Toxicology Studies - It must be reasonably safe. * Manufacturing Information - The company can make consistent batches of the drug. * Clinical Protocols and Investigator Information - Detailed protocols for proposed clinical studies to assess whether the initial-phase trials will expose subjects to unnecessary risks.

The 3 requirements around the new drug application are all safety based. Later on they look at efficacy, but it's later in the process. Efficacy doesn't mean it has to be very effective just somewhat. Read the references for your Wiki page, the FDA is concerned with removing harmful drugs.

Given the multiple issues Martin has faced over the years, I think it's fair to say that 'impartiality' is the least of his motivations.

"If an analyst looks at the data and sees issues" - what are they? A stockbroker, or pharmaceutical scientist? How many are both?

It would only make financial sense to push for the drug not to be approved -if- you had a position that made a gain from that, but let's not pretend like Martin was doing so out of any source of ethics.

I don't care about Shkreli, I care about whether the practice is ethical.

There are plenty of pharma analysts who have used the same techniques who have medical degrees, have worked on clinical trial design at pharma companies, etc. They often aren't the names you see when pharma complains about people shorting their stocks because pharma only wants to point at the head of the hedge fund who has no life sciences expertise. They don't want the public to know about the dozen experts the hedge fund manager is paying to analyze the filings in order to challenge the filings and decide whether to short the stock.

No one complains if your analysis shows the molecule is great and you go long, it only becomes evil if your analysis shows the molecule is crap.

And if pharma analysts who have medical degrees want to analyze filings from these companies, great.

But the specific example is talking about Martin Shkreli doing this - a man whose formal education is a Bachelor of Business from CUNY.

And ethics have roots in motivations. Shkreli couldn't give two hoots whether the drugs had efficacy or not. He wanted them to fail approval only because of his position in the companies.

I often see the "free market" referenced in contexts like this where it's the interactions of a corrupted government entity that is at the root of the trouble - yet the free market is the entity in the crosshairs.

Where is the government interference here? How is the FDA or whomever enabling this behavior?

The FDA was the big lever that Skreli was attempting to use to skew the market in his favor.

If the FDA weren't so powerful, flawed, and easily corruptible, the strategy would make no sense.

So on a weaker FDA it would be exactly the same, except that now your guarantees about the safety and efficacy of the drug are reduced. How is that better?

How about a weaker FDA that simply advised people on the safety and efficacy of drugs rather than forcing everyone to follow their rules? That would technically be a weaker FDA, but enable more freedom for patients and their doctors to pursue treatments that they found efficacious.

How about a weaker FDA that allowed the import of drugs from other countries? That would create international scale competition for the US drug purchasing market.

There are lots of ways that we could get creative in solving these problems if there weren't a monolithic government agency in the way of our personal freedoms.

Because when people are fucking dying they tend to try whatever options they have left even if they're not guaranteed to work 100%. So now the market every disease for anyone in a precarious position will be saturated by shitty chemicals tested with far less rigor.

Seriously, it's like you're just ignoring what happens in every country that currently does have weaker systems and who look up to the strong regulatory practices of the US and Europe for exactly that reason.

Even though it's $750 per dose now, since they have exclusive control over the market they could decrease it to whatever whenever they wanted to starve competitors.. probably after said competitors have invested in doing it.

This is a possible strategy, but is rarely used, as it is very risky (, it is likely to cost a great deal of market share in the long term). I have looked into it, and found very few examples of a company which tried to lure a competitor into a market, then under-sell them. The opposite (under-sell competition to gain market share then hike prices) also appears to be quite unpopular in the real market, for the opposite reason (it will surely gain market share in the short term, but can cost a great deal of money). These are very popular theories, and there are a few examples of those who have tried both strategies, but those examples are almost all cautionary tales.

I think its somewhat common, and even occasionally successful:

Amazon prime costs amazon money, and the original fire tablets were sold at cost - i suspect the new 50$ tablets are not very profitable either

Walmart has commonly been accused of this practice for various products

Google's original Nexus 7 tablet

I believe Apple ended up losing money at least a quarter or two on the app store/itunes

Granted there are few examples, but its certainly prevalent enough that its a legitimate business concern - the bigger disparity is that it takes a pretty enormous size for a company to succeed in such a tactic, I doubt turing has the kind of capital to lose that the likes of Walmart, Apple, Google and Amazon do.

Those are good examples, but I would argue that if a practice is sustainable (and often sustained), it is not problematic. If Amazon wishes to provide Prime at a loss to encourage customers to buy products which Amazon will make money on (enough to compensate for Prime), is there a problem? Would there be a problem if Amazon offered to ship things sooner in exchange for a promise that you would shop at their site more often (even if this promise plan cost them money)?

caseysoftware's argument is not that they're trying to lure a competitor into the market, but rather the threat that, upon spending all the money to reverse-engineer the drug and enter the market, the incumbent could drop its price to $20/dose and the new entrant would be stranded with no way to recover their NRE costs in an economically relevant timeframe.

Both companies might be profitable on a marginal cost basis at $20/dose, but only the incumbent would be profitable on an average cost basis.

Because of this looming (unstated) threat, a competitor chooses to avoid the market.

Yes, I largely agree with the logic underlying your analysis (though not your conclusion), and did not mean my post to say that they were trying to lure competitors into the market, but more to say that they would (though I understand your reading of it probably makes more sense than my writing).

If you believe that the eventual average cost would prevent a new entrant, the new entrant would have to know (or believe that there was a high probability of) the entrenched producer would cut prices upon the second producer's entry. I do not find this to be particularly likely. In any case, the first producer would be betting on the likelyhood of the second producer's estimation of the likelyhood of a downward price change by the first. This strains credulity (, in my view).[1] I think that if anything, your argument proves too much, as no company would even enter a competitive market if what you describe is the case.

[1] https://en.wikipedia.org/wiki/Romanoff_and_Juliet_(play)

I'm not suggesting that companies avoid competition at all costs. I am suggesting that the right price to model when considering entering this market is $13-20, not $500+/dose.

There is no need to reverse-engineer the drug, as its under an expired patent—so all of the processes and techniques used are open and theoretically (if the patent office has done its job right) should be easy for a competitor to reproduce.

this is in fact one of the stated goals of the patent system: a limited monopoly in exchange for the advancement of public knowledge.

I was thinking less of the reverse-engineering costs and more of the hard production costs. Equipment, personnel, production time, etc. Those are non-trivial costs even if the complete formula and process is known.

right, so the drug that was getting sales of 600k per year was probably not worth the hassle of maintaining a compliant manufacturing line. does that not suggest a price rise was valid?

It's a time-arbitrage problem: there's no one else producing it (thus no free market) so they get to charge literally whatever they want since they're the only manufacturers, for as long as it takes a competitor to build another competing production line. This is reprehensible.

Once competition returns, the price drops again, and no one makes ludicrous profits anymore. But if the expected returns in competitive conditions are miniscule, there may not be sufficient incentive to produce a competitive market for this individual drug again.

Buyers don't have to just go on price. They can take past behaviour into account. They could justify this in the name of ensuring continuing supply at a reasonable price.

So, even if this company does always price their product at less than the new generics they've probably lost the trust of the buyers.

Maybe the big drug retailers (CVS/Walgreen/Walmart) could be interested in either owning or partnering with generic makers, as they can derive secondary benefits such as reputation/traffic even if a particular drug is temporarily unprofitable. They could also attempt "premium" generics like what Costco did with the Kirkland brand. You need a player that can benefit in other ways to prevent someone from gaining a monopoly through price manipulation.

Not familiar with the industry, but I don't think the problem can be solved this way (at least in the short term). Simply by the distribution of drugs/prices, there seems to be a very large number of low cost drugs susceptible to this tactic. There's ample space for them to pick a drug now and then and put abusive prices all of a sudden, while lowering the price as soon as competition threatens to move in. Additionally, the costs of reverse engineering a drug are high enough to make this kind of competition very hard. I see no other way than some regulation to at least force some hysteresis or stability on the prices.

KV never had a patent for Makena. What they did have was "data exclusivity" which meant the FDA could not approve another version of the drug for at least 5 years.

What they were counting on was the FDA clamping down on the compounding pharmacies, since they weren't selling an approved version of the drug.

The FDA, seeing KV's strategy, declined to shutdown the compounders which resulted in KV declaring bankruptcy. KV restructured, reduced the cost of the drug and created a sustainable business. They were acquired by Valeant I believe.

I don't get this, the drug is available from Sigma[1] for $51.50 per 250mg, with a dosage of 50-75mg per day for a patient. So clearly someone can make it more cheaply. I get that Sigma is research chemicals not medical grade, but seems to me someone could figure this out. FDA approval must be the issue. [1] http://www.sigmaaldrich.com/catalog/product/fluka/46706?lang...

One word: Bioequivalence. Having the correct active ingredient does not imply that drug delivery and efficacy are equivalent unless you can prove it by comparing it against a known and approved formulation in human volunteers, The burden of proof is significantly less than that of getting a new compound approved, but still a major sinkhole for money.

The correct way to handle this would be for the FDA to hand out compassionate use permits for patients to import their own drugs since it is clearly unavailable for a reasonable price in the US.

The strategy is to prevent other companies from manufacturing the generic by withholding supply from them so as to prevent them demonstrating bioequivalence. ISTM that the least-onerous regulatory solution would be to require manufacturers to provide supply at cost to FDA on demand for testing purposes.

It seems amazing that supply can be clamped down to such an extent that a competitor literally couldn't obtain some samples for bio-equivalence testing, even under a false pretense if necessary.

Completely agree that if someone is willing to pay the list price, they should be guaranteed availability within some reasonable time-frame for testing purposes.

I assume if the only drug line is effectively "shut down" then there's no way to run bio-equivalence and to bring on a new manufacturer they must test some other way? I guess whatever that procedure is, should take effect if the pills can't be ordered for testing.

"Or the government passes a law capping how much you can raise the price of a generic drug over so many years."

Congress, controlled by Rebublicans, right now, won't let government get involved. I don't even want a cap. I would just like governmental over site/approval on Pharmacutical accuisition.

I asked my pharmacist why my generic drug(not orphan drug, noting fancy) is going up in price.

I don't know if she's right, but she told me big Pharmacutical companies are buying out generic drug companies, and raising the prices of the generic drug, or shutting the newly bought company--so they can keep supply down?

I don't know if this is going on, but i've heard it, from at least, two sources. I know it sound extreme, and hard to imagine, but these pharmacutical companies are loaded with cash? Plus, they have government protection--can't buy from Canada, etc.

So, in the end, we are going to be at their mercy?

As to just effecting Insurance Companies, my prescription formulary excludes so many drugs, or makes them difficult to buy; I pay out of pocket. These drug prices are coming out of our pockets.

(It's not just this future bottom boy at some federal correction facility, it's most of these Pharmacutical companies, or hedge funds? I can't tell the difference anymore. Oh yea, Biomarin seems just as shady, but because people don't understand what they do, they seem to just get a pass?)

That's exactly what would happen, but the generics companies can't procure sufficient samples due to the changes in how Daraprim is distributed. So long as Shkreli is able to control distribution tightly enough, there's no worry about a generic coming onto the market.

I don't completely understand how they can effectively prevent generics companies from producing it (even through tightly controlled distribution), but if that's the case, I believe that should be the story here as opposed to the bit about raising prices.

Under normal market conditions, either the demand and price will naturally incentivize generics to enter the market (even at high costs), or this is really not much of a story because the total addressable market is so small that price * demand won't significantly move the needle in the books of insurance companies who will be paying for it. If total addressable market is significant and the producers can manipulate the market in ways outside of patents to abuse monopoly power, then that's the misdeed (in my opinion), not the raising of prices.

In other words, with very few exceptions it's futile to blame a company for their prices. On the other hand, if unscrupulous manipulation of a market is the culprit for unreasonable prices, that's where we should demand/enforce a higher standard.

Or perhaps the story should be about how the drug market is not normal. It is regulated, i.e. ruled, by bureaucratic policy and operating procedures.

Why would they need samples when the chemical structure is so widely known[1]? It's not like it's a biologic where sequence and other formulation details are critically important. Can you explain?

[1] https://en.wikipedia.org/wiki/Pyrimethamine

Edit: I noticed that paulmd, further down, explained why this is important. I didn't realize the rules were this stupid. The FDA should be able to force companies to make their product available for comparison testing. It's insane that it isn't the case.

Formulating the generics isn't the hard part (well, beyond the chemistry but that's straightforward enough - once you know something can be done, it's just a matter of time and effort). Once a generics company does that, they have to perform bioequivalence testing. It makes a lot of sense, because generics can have different inactive ingredients (fillers, etc.) that can still affect the patient.

But in order to perform that testing, they need examples of the brand-name drug to test against. If a manufacturer can prevent them from gaining access to those examples, then the generic is never coming to market. They can't get a doctor to just write up a prescription for somebody, so they have to go through established distribution channels. There are a lot of other, equally nasty ways manufacturers can use to try and forestall generic versions of their drugs. It's not easy to do, because the laws are written to incentivize generic competition, but if a company thinks it's profitable enough to try (and certain factors are in their favor, like with Daraprim), they can.

The FTC has a really interesting document available on their ongoing efforts to fight anti-competitive pharmaceutical practices if you're interested:

https://www.ftc.gov/system/files/attachments/us-submissions-...

So perhaps in these cases we should place the blame on certain shortcomings of the FTC's regulation rather than the companies who take advantage of the loopholes. I don't agree with the practices of this company, but if the loopholes exist, I'm not sure we have much reason to expect companies to behave any way but capitalistically.

Not american but yeah the law enforcement agencies should be more careful about these loophole or at least try to fix them as quickly as possible once they are found out. Maybe there are some other incentives (sometimes) at the top.

But none of that excuses what these guys (I don't have any reasonable word to describe them). Its like saying there was this loophole that makes this kind of murder (not self defense btw.) not punishable by law so I went ahead and killed 50 people. If people dies from these diseases I don't see how it's not fair to put these guys in some murder trail. I wish we had some reliable tools to detect lies and CEOs and PR guys like these had to pass the test before such claims and actions based off such claims (we are trying to make a better drug) could be taken.

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