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Comment by Malarkey73 | Hacker News Reader

Lets not forget too that Martin Shkreli took no risk inventing this drug. He bought a monopoly - a necessary lifesaving drug with no alternative - and jacked up the price by thousands.

Either a free market fundamentalist (ie no explotative patents) or a dyed in the wool regulator should be able to agree this is not how the market should work.

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Daraprim is out of patent. He didn't buy a monopoly right, he just bought a drug that nobody else thought was worth making.

Anyway, the distinction between inventing the drug and buying the patent is an artificial one. If you're going to allow creating monopoly rights--and that you can debate--then making the rights tradable will make the market more efficient.

With drugs in particular, acquisition of promising drug candidates is a major input to the pipeline at the big drug companies. It enables separation of concerns: small startups to develop the drugs and big experienced companies to bring them to market. Creating an artificial distinction between inventors and acquirers precludes that efficient division of labor.

the FDA grants a de facto monopoly right to anyone bringing a drug that is unpatented but out-of-testing standard to updated fda safety standards, by preventing competitors from advertising.

Genuinely curious... does the world actually work like this? I strongly suspect not.

Yes, it does. For example, the recent Hep-C breakthrough drug was created by Pharmasset, Inc. Pharmasset was founded by the inventors of the drug--two professors at Emory University. It was purchased by Gilead, who commercialized it.

I'm curious how you came to have strong suspicions that this kind of thing wouldn't work.

Google buys innovative startups all the time. Why should pharma be different?

I just noticed this attracted some downvotes and comments. I should have been clearer. My curiosity was piqued by this:

> acquisition of promising drug candidates is a major input to the > pipeline at the big drug companies. It enables separation of > concerns: small startups to develop the drugs and big > experienced companies to bring them to market. Creating an > artificial distinction between inventors and acquirers precludes > that efficient division of labor.

I wonder how many small pharma startups are successful. Is this really "effective separation of concerns"? Seems more like standard capitalist market dynamics: allow small-fries to take all the risk -- those that sink disappear; those that succeed might get bought out.

Is this really the best way to drive innovation in pharma? But... that's a discussion about markets.

Also, without researching the history of every drug produced by any major pharma corp, I can't blithely accept whether acquisition of "promising drug candidates" is or is not a "major input" to their pipeline. I'm not denyingwhether this happens, just asking to what degree -- just saying "citation needed" for that particular point.

I'm certainly not denying that some small pharma companies are successful, and that some get bought up by large pharma companies. That wasn't my question, and I should have been clearer.

It does. Big pharma constantly acquires research-focused junior companies to input into its pipeline for regulatory approval / commercialization.

But the existence of folks willing to buy up drugs/drug companies creates a liquid market. This makes creating new drugs more profitable and induces people to make more such drugs.

If we want to claim that folks buying up drugs don't help, do we also believe that tech startups getting exits doesn't promote the creation of more tech startups?

Well I mean yeah, that is an argument that floats around lately (one that I support). Namely, that the idea of every startup getting acquihired encourages low-quality startups with no purpose except getting eventually bought out. People need to be attached to their venture personally for it to get their full dedication, and if you just plan on selling it in the future anyway, that won't happen.

There are many people who have a philosophy of "Anything's Fair Within the Rules". There is no law against buying up the only manufacturer of a lifesaving drug and squeezing out as much profit as you are able, so there are many who would say it is fine to do.

Obviously, that only works if you don't _ALSO_ create a public relations disaster by doing so.

And end up in jail.

I'm still waiting for someone to explain to me the difference between a limited-oversight hands-off free market and a competitive criminal oligarchy.

Because variations on the criminal/sociopath thing keep happening so often when you get limited regulation and religious regard for profit at any social cost that they seem to be an inevitable outcome - a kind of moral Gresham's Law, where the crazy assholes always drive out more reasonable actors.

I'm still waiting for someone to explain to me the difference between governments and stationary bandits.

  > There are many people who...

Argumentum ad popularum. There are also many people who believe the Nazis passed good laws.

Yes, there are many people who are Lawful-Evil. That has no bearing on whether Evil is acceptable, provided it is Lawful.

In order for it to be a fallacy, he has to be basing his argument off the fact that people believe this fact. I do not see him basing any argument on his first sentence. In fact, he mainly seems to be using it as an introduction mechanism. "Many people believe A. Proposition B about A." He states it as fact, and you may disagree with that fact, but that fact is in isolation from his actual argument.

Except in this case the patents had long expired and there was no legal monopoly involved. This was pretty much free-market business wheeling and dealing.

There was no monopoly per-se, but there is considerable cost getting a new pharmaceutical company's production spun up and FDA approved.

For limited application drugs (so annual sales smaller than Prozac... which is most of them), this effectively means there will only be one supplier.

I don't know a way to fix this that will satisfy most interested parties.

Another side note is that he was also impeding the FDA approval process.

In order to get your generic approved you have to prove that it's biologically equivalent to what's on the market. Shkreli's distributor would only sell directly to end-users and would refuse to sell it to anyone doing equivalence studies on it. Thus it was effectively impossible for anyone else to prove bioequivalence and bring a competing product to market.

Shkreli aside, it's ridiculous that the FDA would require such tests but not require that all approved drugs provide samples for further testing.

Also, any other company spending money to spin up production and get FDA approval would face its incumbent competitor suddenly dropping its price to cost. This lasts until the new entrant goes bankrupt or stops selling, and then the price jumps right back up to gouging territory.

The only way to eat the incumbent's lunch in a worthwhile way would be to start out larger, so you can absorb the startup costs, and find a way to produce at lower marginal cost.

The FDA approval process for generics is part of the problem there. It should be enough to do a chemical analysis showing that the molecules are the same. The current FDA requirements are akin to having to prove that your new vodka can get someone drunk just as well as vodka from other vodka makers. The active ingredient is ethanol. Ethanol made by you and ethanol made by AB InBev is chemically indistinguishable. As long as you can accurately report concentration, for the purposes of dosing, you shouldn't have to prove that ethanol still gets people drunk when you are the one making it. You should only need to prove that the amount of ethanol in your vodka matches the amount printed on the label.

So if your doctor prescribes 9.3 g ethanol, taken orally, once daily, your "compounding pharmacist" can give you a 1 oz. shot of any 80-proof beverage. It doesn't matter if it's name-brand top shelf or generic rail, so long as it's 40% alcohol by volume.

I'm going to have to disagree that you shouldn't only need to show chemical equivalence. You need to show biological equivalence.

A few years back the FDA approved a generic version of Wellbutrin. They didn't ask for bioequivalence testing and as a result, the formulation dumped all the drug into the body, drug levels spiked and patients got sick. The FDA eventually made the company reformulate the drug so that it was truly interchangeable with the branded drug.

There's more to the buproprion HCl fiasco. The active ingredient produced by the generics manufacturers was the same. The delivery mechanism was different. The approval for the 300 mg XL version of the pills was extrapolated from 150 mg XL pill data, rather than compared with the Wellbutrin XL 300 mg. There wasn't even a check for chemical equivalence there.

You could have dropped the pills into an artificial stomach and measured concentrations at 20 minute intervals. That tests chemical equivalence. You don't need to test bioequivalence until after that. If your synthetic stomach setup does not show chemical equivalence, that's when you need to get the animal test subjects.

Part of the problem here is that the FDA bundles several different tests into one.

  - Does the molecule do harm to a human body?  What are the side effects?
  - Is the drug effective for a specific medical condition?
  - How does a higher or lower dosage affect the observed results?
  - How effective is a given delivery mechanism?

Those questions should really be answered separately, and in that order, for initial approval. Generics would then only need to re-answer question 4 if the delivery mechanism was different.

Take a look at this article about how manufacturers extend exclusivity by tweaking the delivery mechanism: http://www.pharmaceuticalcommerce.com/index.php?pg=manufactu...

Huge costs related to creating a generic version of the drug, unless it gets fast tracked.

See my reply here for a possible approach: https://news.ycombinator.com/item?id=10577132

This was pretty much free-market business

No, it wasn't free-market at all. Much of Shkreli's strategy relied on the barrier to entry created by FDA regulations. He priced the drug just low enough that it wouldn't be worthwhile for another manufacturer to get approved.

Nothing free market here. It's rent seeking, pure and simple.

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