Big Price Increase for Tuberculosis Drug Is Rescinded | Hacker News Reader

Big Price Increase for Tuberculosis Drug Is Rescinded

nytimes.com

This is NOT the currently viral Turing Pharmaceuticals's hike of Daraprim's price (http://www.nytimes.com/2015/09/21/business/a-huge-overnight-...) that's being rescinded. I had no idea that this practice of buying up patents and increasing drug prices is so common. Sounds like the pharmaceuticals market is full of some very unethical folks.

Sounds like handling the PR of buying drug patents and jacking up their price multiple orders of magnitude just became more expensive.

The pharmaceutical industry is just as corrupt as the financial sector. It seems capitalists will be capitalists. A lot of well intentioned companies seem to go this way too. Share holders demand profitable growth, sociopathic execs are brought in and I think the results speak for themselves.

Abuse of power comes as no surprise.

No, but capitalists follow the incentives. The surprising thing is that, although nobody likes this, there isn't yet some tax or something to make selfish capitalists avoid doing it.

A change to intellectual property laws could also fix the problem. The government could allow others to sell the drug but give a percentage of their revenue to the rights holder.

And that is called... a royalty! What the patent system was supposed to be for, in fact.

The drug isn't patented anymore. Apparently the issue is that you need to conduct trials if you want to have permission to make a copy of the drug and to do so you need a supply to compare your new copy with and that was hard to purchase.

I'm surprised about the drug trial bit. I thought generics didn't need to have new trials .. they just need to have the exact same formulation. The oddness is that they need to "reverse engineer" the formulation themselves. The pill's color, shape and markings couldn't be copied though.

Can anyone knowledgeable on this critique what I wrote? I got my info during a tour of a generic drug manufacturer's plant a looooong time ago.

I believe the generic maker must show bioequivalency to make sure the thing they are making works the same as the thing the other manufacturer was making. There's probably numerous ways that making a complicated medicine can be screwed up.

But capital is also political power. The capitalists interact with the system that structures their markets, their property rights, their contract law, their regulations, their hierarchies etc. The system itself is a strange loop which ultimately leads to contradictions. A capitalist acting in their rational self interest modifies the system in order to improve it for their own ends. This inevitably means deviations from the neoclassical ideal.

If there's one useful idea from the marxists, it's that the dominant modes of economic activity of the day determine the structures of our institutions, not the other way around. It may not be completely true, but the way capital dominates all other forms of power in the world is fundamentally troublesome. Capitalism eats itself, and every crisis requires a lot of bloodshed and suffering from the unpropertied in order to keep the system going forward.

People and other animals follow incentives.

Capitalists hiding behind patent laws enforced by the states, which isn't really the purest form of capitalism. And usually, there is no such thing as a well intentioned company, once they reach a certain size they become profit maximizers before anything else.

That is what a true business is always - regardless of size.

It would be more accurate to say that people will be people. Greed is not limited to capitalists. Greed, lust for money, and the need for power are observable across all political, social, and governmental systems.

Speak for yourself.

Edit: Here's a nice link. http://dwardmac.pitzer.edu/Anarchist_Archives/journals/freed...

Having worked in several large corporate environments for most of my lift, sociopaths are the highest achievers of the bunch when it comes to working their way up the corporate ladder.

What does this have to do with capitalists? Anyone hungry for money/power/wealth/success will do what they do bounded usually by their morals/ethics and the law.

Since we can't just "fix" morals/ethics - what remains is the legal system and regulation.

What's unfortunate is that money can also change the legal system for the worse and remove these protections over time or keep them from ever being put in place. Not sure of solution for that.

How to be praised for doubling the price of an essential drug:

1. Set the price to 55x the original

2. Wait for outrage

3. Set the price to 2x the original

4. Profit

The drug was being produced at a loss. Raising the price so that the manufacturer is able to keep producing it is surely preferable to to no drug at all, right?

There's an ever so slight difference between "we need to double the price to cover costs and keep the drug available" (which has now been done) and "we need to raise the price by 22 times because fuck you we can".

In fairness it was:

1. "hey, this guy wants to buy this drug that we are producing as a public service but losing money on",

2. "oh shit - he raised the price to an astronomical figure and now we all look bad. oops",

3. "we're getting the rights back before this turns into a giant PR nightmare. while we're at it, let's raise the price to a sustainable level."

The article doesn't make it sound like there was any malice on Purdue's part.

I think you're basically right. If you read between the lines, this looks like a matter of Purdue thinking "let's pass this off to a true private sector entity that will allow the market to fix the pricing/profitability issues we have with this product", only to find out they sold it to a pack of fucking inhuman scum who think "let's see if we can exploit the shit out a vulnerable, sick population" is a business plan. Purdue was clearly naive, but they are clearly not malicious.

I doubt it was that much at a loss to warrant a 55x price increase, though. Even 2x is kind of a stretch, although I can see making up for past sales or something (or they were being really generous before).

The numbers you need are in the article: $10M loss over 8 years (2007-present), ~45 cases/year.

In order to break even, they need to increase the cost of a course of treatment by about ~$28k/patient.

The new price doubles the price to about ~$50k/patient, which is still short of this number (but bleeding $3k*45 patients = $135k/year is much more manageable than bleeding $1M dollars a year).

I applaud you sir! Rather than jumping on the hysteria bandwagon, you actually did the math.

So even if the drug was priced at $28K/patient, the company would be making zero profit. Huh...

28k is the delta needed. 53k/patient is break-even.

Maybe it was, maybe it wasn't. And maybe a 100% increase of price will cover the alleged loss, and then some. Regardless, anchoring at its finest.

Do you go to 110x first for quadrupling?

Note that the 55x price and 2x price are done by different groups.

Previously, Martin Shkreli shorted drug companies and tried to convince regulators to blocked their pending drugs. I wonder if he is shorting the drug stocks again but this time he is using a new technique to destabilize the market. So the steps would be:

1. Short stocks in a vital niche market

2. Buy an inexpensive producer of an important product, jack up prices to cause outrage and a strong government response

3. Wait for the market to sell off stocks in the niche market

4. Collect the profits from 1.

5. Dump the producer purchased in step 2.

"Mr. Hasler said this was probably not done because foreign manufacturers were not willing to bear the expense of applying for regulatory approval in the United States to serve a tiny number of patients."

Or we could reduce the burden of applying for approval?

I agree. My blood isn't any different than a Europeans' or an Americans', so why duplicate the approval process? It can't be unsafe for one and safe for another just because some imaginary line has been crossed.

It would also help to reduce drug shortages if stock could be more easily transferred.

so why duplicate the approval process?

It was the separate approval process that prevented an explosion of thalidomide babies in the US.[1]

[1]http://en.wikipedia.org/wiki/Thalidomide#Birth_defects_crisi...

It could also be argued that one process would have prevented the explosions everywhere.

There is actually a FDA "waiver" process known as a "Humanitarian Device Exemption" for medical devices.

The FDA does allow compounding pharmacies [0] to produce orphan drugs that are not otherwise available commercially.

The big issue with using compounding pharmacies to produce orphan drugs is that these drugs can't be marketed for a specific use. The approval is as much about how the drug is marketed as the drug itself.

The reason why the case of Daraprim [1] is so outrageous is that the drug is approved and in production, and the increase is profit for the "marketing" drug company.

[0] https://en.wikipedia.org/wiki/Compounding#Regulation_in_the_...

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

It would be nice for someone to start a non-profit organization supported by donors that would exist purely to purchase rights to these medicines and keep them relatively low-cost to patients.

It would be nice if such an organization didn't need to exist.

This is the direct and real damage of the government allowing the fiction known as intellectual property to continue to exist.

Neither this drug nor the one from Turing are under patent.

Anyone can make it, if they're willing to invest the required money.

Great idea, and we could call it "the government".

S/he said "non-profit" and "donors".

Keeping people alive in a first-world country shouldn't rely on the whims of private charity.

But as long as it's not a first-world country, fuck those guys, huh?

Yes, another government program to address problems caused by government in the first place. Brilliant.

What is the original problem(s) the government started in the drug industry?

Allowing drugs to be patented.

Australia has the 'PBS' system. It largely works in 2 parts; One the medicine is subsidised with a user co-payment. And secondly the government negotiates with companies to be in the PBS program. This way, especially where there are multiple drug choices there is massive negotiation power. They essentially offer access to our entire country or none.

Another effect is this scheme encourages generics so people don't pay for brand names, and if they do they're likely off the PBS list so you would pay full price so the government doesn't have to subsidise the premium.

It's not a perfect system and it's getting more expensive but it works OK in the privitised medicine system: https://en.wikipedia.org/wiki/Pharmaceutical_Benefits_Scheme

Based on the article, it sounds like Purdue University's research arm was serving more-or-less this function, but because they were losing money on regulatory costs, they accepted Rodelis's offer to buy the rights. Now, Purdue has the rights again, and is aiming for a more sustainable price.

"Rodelis reveals almost no information about itself, such as the names of its executives, directors or investors, on its web page. It operates out of Alpharetta, Ga., though the Chao Center’s statement said it was based in Dublin."

They sound a lot like a patent troll.

...with their fiscal headquarters in a tax haven. Dublin? Smells of double Irish and similar fiscal constructions...

This isn't unusual for a pharma company, or any other big company for that matter.

Transfer/keep/develop the IP in a low-tax jurisdiction and then have their US/Canadian/whatever division pay a licensing fee to the corp in that low-tax jurisdiction.

As an Irish citizen I once again have to apologize for my erstwhile government's perpetuation of this chicanery. The country is becoming the European equivalent of Delaware.

Companies don't incorporate in Delaware for tax benefits, they do it for the well-understood legal system around business law and predictable courts.

>well-understood legal system around business law and predictable courts.

I think Ireland has these as well. Laws and rulings will be in English, so American execs can easily grok what's going on without having to get pesky translations.

Actually, there's a decent argument that Delaware (and Ireland) act as parasites toward their neighbors.

http://www.newrepublic.com/article/politics/rogue-state

I was thinking of how credit card companies incorporate in Delaware because there are no restrictions on interest rates, and how other firms set up shop there because Delaware business law allows for ownership to be quite opaque, in a way that's not tolerated when other countries offer it, eg http://www.economist.com/news/leaders/21571873-how-stop-comp...

So I do think it's about 50% what you say and 50% policy.

What a boon this is for Turing. I'm willing to bet most of the public will not realize it's not the same drug from the earlier price hike story.

Although the headline is not referencing Daraprim and Turing Pharmaceuticals, some of the content is about that, and there is an embedded video interviewing Shkreli, the Turing CEO.

I recommend watching it; I thought it was a very good interview. Shkreli makes his case much more effectively than I'd have predicted.

Example: he claims that a treatment course of Daraprim costs less than other drugs that, in his opinion, are comparable (i.e. those other drugs are cures for other similar diseases).

I'm not a patent lawyer, but I don't understand how 62-year old drugs still require licenses to be manufactured? Seems like another case of patent law gone mad.

You don't understand why there are regulations around manufacturing a selling a prescription drug? Really?

I don't know about you, but I kinda like those regulations.

No, I understand that, but I thought once a drug's patent expires then any reputable pharmaceutical company could manufacture it as a generic (with the proper testing of course). Is that not the case here?

Apparently the issue is the testing. You need to purchase a large quantity of pills from the original manufacturer to compare your new batch with and that was hard to obtain.

Ah, I see. It sounds to me like the issue is that there's not enough of a market to attract the interest of another company to get over the initial fixed costs to get the drug approved. Seems like a possible reform would be to streamline the approval process for generics to make this easier.

Rescinding seems smart so as not to kill the goose that lays the golden egg by way of overarching regulatory overhaul.

Is this the CEO who was trolling on Twitter?

No.

Only an act of congress could fix this problem, so we are doomed (they have post offices to name before they try to shut them all down).

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