The Most Unconscionable Drug Price Hike I Have Yet Seen | Hacker News Reader

The Most Unconscionable Drug Price Hike I Have Yet Seen

pipeline.corante.com

54 pointstshtf66 comments

I needed some anti fungal cream this summer. My doctor informed me that the cream used to be under $10, but the big pharmaceutical company bought up all the generics and now the cream is $120.

More interesting, I got the same story from the pharmacist at rite aid. She couldn't believe I was going to pay for that and then she said, "People are up in arms over lots of stuff, but this right here is a crime that no one notices. 5 months ago you would have paid a lot less."

> and now the cream is $120.

What about tinactin, lamisil, lotrimin, monistat? They are all anti fungal creams OTC for about $10. Is this prescription you had 12x as potent?

I can't speak to the author, but I have a loved one with a serious skin condition who has tried just about everything under the sun. Only recently have they found an ointment that works and it is ~$70/oz. Not all anti-fungals are created equal.

Antifungals are like antibiotics or insecticides, in that the pathogen can develop resistances. Also the mechanisms of action differ (again, just like antibiotics or insecticides).

As with antibiotics, OTC anti-fungals are often ineffective due to resistance from over/improper use.

If that's the case then it sounds like a higher price is a good thing.

No, that's why we have prescriptions, and education for doctors and patients on when to get one.

Making them expensive means poor people don't do their full course of treatment because they can't afford it (or want to save some for next time), increasing resistance.

Usually the FTC would not allow a company to acquire all competitors. Hell, plenty of drug companies have been forced to divest assets because they are acquiring a company that has a competitor.

What may have happened is a drug shortage. Generic companies run on razor thin margins and sometime stop manufacturing drugs that become unprofitable for them. If enough companies do that and you're left with only one manufacturer, price increases are typical.

Cephalon came up with a cute idea. Rather than acquire generics makers, they buried them with bogus patent lawsuits. Then they offered to settle: a bunch of cash up front in exchange for delaying production of generic drugs for a few more years.

Generic companies play the same game. Attack the branded drug makers patents and then settle out of court. It's just how the generic industry works, it all comes down to patents.

I remember a quote from the CEO of Apotex (one of the biggest generic manufacturers in the world). The CEO said "I don't care about scientists, I just need the best lawyers).

This is an example of an arbitrage opportunity. It's a necessary evil of capitalism, and unfortunately, our government has decided that free market capitalism is an appropriate system to use for health care.

Arbitrage can be explained as thus: you have an opportunity to buy $1 for $0.75. How many dollars do you buy? The correct answer is "all of them". In this case, a drug had a sale price of $3 and a market value of $150 per pill (established by its competitor), so an investor basically purchased "all of them" and resold them at a higher price.

If your goal is maximum economic efficiency, arbitrage is necessary. It allows companies to make decisions with the goal of maximizing profit (i.e. maximum economic efficiency) in moral hazard situations: if something is legal but morally dubious, if they don't do it, someone else will force them to. This is necessary because every individual has a slightly different idea of what is "right" and what is "wrong". Businesses don't have morals because they're not people. They are amoral, and arbitrage is the means by which that amorality is maintained. If a person wishes to exercise their moral calculus, they are free to do so when making investment decisions.

I don't believe that to be the case with healthcare. In my opinion, healthcare is a sector that really shouldn't operate along capitalist principles because the goal of a national healthcare system should not be to maximize economic efficiency: it should be to maximize the health and well-being of its citizens. I know that's hard to quantify, but it's certainly not quantified by the dollars spent on health care. IMO government price controls on healthcare are the only solution to the problem. I don't know how that gets implemented, but I do know that the pendulum needs to swing towards socialized medicine if we expect things to get better.

What needs to happen is a better connection between drug prices and the outcomes they produce.

The EU does not have price controls on their drugs (only in limited circumstances). What the EU does (particularly the UK and DE) is evaluate drugs based on their own metrics to determine what a reasonable price is. If a drug is priced too high, they don't cover it.

Right now the system for determining how much value a drug brings is broken (understandably since it's not easy to do). The best example I can provide is Sovaldi (used to treat hepatitis C). The manufacturer priced the drugs at $84K for a course of therapy. Insurance companies in the US screamed blood murder.

The UK, which has a system to evaluate the utility offered by drugs (called QUALY - quality-adjusted life year) approved Sovaldi without any complaints. The drug is cheaper in the UK, but not by much.

It makes more economic sense to cure HepC than to treat it so I would argue they made the right choice.

The american insurance companies were screaming murder because they have no way of recovering their upfront cost with people changing insurance companies all the time in the US that's not a issue for the UK and the EU.

American insurance companies were screaming blood murder not because they can't recoup the upfront costs (all insurance companies benefit if HCV is eliminated), but because the cost were all upfront, not spread out over time.

US insurance companies live and die by their yearly budgets since premiums are collected upfront. If some high cost drug comes along that they didn't plan for, they could end up in the red really quick.

To be fair, Solvaldi actually is cost effective from the perspective that chronic hep C results in liver transplants or death, and a course of Solvaldi knocks out hep C entirely. It was also developed in house by Gilead AFAIK (and they bore the risk of r&d, trials, etc).

edit: thanks for the correction refurb! I has actually looked at sofosbuvir on wikipedia prior to looking because I thought it was through an acquired company. I think it's still a different nature of acquisition & development vs Valeant or the putrid behavior described in this thread's link.

Sovaldi was acquired by Gilead when they purchased Pharmasset for ~$11B.

As for Sovaldi's cost effectiveness, it's more complicated that looking at liver transplants. Of the millions who have HCV, only a few percent will ever need a liver transplant.

That being said, if you look at what it costs to cure a patient of HCV, Gilead's drug is much more efficacious, so the "cost per cure" is much lower than with older drugs.

The Eurpoean method only works in a single-payer system. A single-payer system effectively has price controls. At the very least the EU system is not designed to maximize profit; it's designed to maximize the benefit to the people given a fixed budget.

The biggest problem with the US' system is that consumers have to pay out of pocket for life and death decisions. How much would you pay to not die? Probably a lot; which is exactly why the US system is broken. You can't make rational market-based decisions when your health / quality of life is at stake. The value calculation is skewed, and everyone ends up paying more as a result.

I agree with your comment about how the EU system works. It's a fixed budget and the gov't tries to maximize health outcomes.

I would disagree that the problem with the US system is that consumers pay out of pocket. Singapore has a system of forced savings for healthcare expenses and they have a much lower cost per person for healthcare.

> In my opinion, healthcare is a sector that really shouldn't operate along capitalist principles because the goal of a national healthcare system should not be to maximize economic efficiency: it should be to maximize the health and well-being of its citizens

Why should we stop at healthcare if we're deciding that health and well-being is more important than economic efficiency? Energy, transportation, and service are all industries that have huge health effects. Agriculture obviously has huge health effects. Why not socialize all of them in the name of health?

We do socialize all of those, to lesser or greater extents.

I regret having only one upvote for you.

If only HN were a true free market, then you could buy more!

Why stop at upvotes? If hacker news were a truly free market, you should be able to buy any action the site supports over its database, and for a higher price, any operation the database itself supports. If Hacker News really cared about economic efficiency more than things like "insight" and "good discussion," we could buy shadowbans, changes to vote weights, and edits to comments or post titles.

Your post reminded me of "Citizens United".

This article mentions price controls. There are tax benefits to using green electricity/cars versus polluting electricity/cars, but should gas cars be price-controlled up and electric cars price-controlled down? Should Tesla be made to accept only a set amount of profit as a measure of increasing the average health faster than it would otherwise?

Actually, Tesla is a great example of how the health > economic efficiency question is answered decisively in favor of economic efficiency (or at least, profit for existing stakeholders). If governments cared about health more than profits, Tesla would never be barred from selling in a single state.

If you start thinking that health and welfare are more important that economic efficiency, I think the vast majority of the current economic policy goes out the window. The IMF certainly shouldn't be advising struggling countries to cut education and healthcare first if health is truly more important that economic efficiency. If economic efficiency were truly second to health, the world should look very different. Would that really be better?

You're ranting against free market capitalism when the problem in the article is the result of government interference in the free market.

Retrophin is using legal (government made the laws) maneuvering to prevent competitors from creating generic equivalents of the drug.

So we should throw out all of the benefits of free market capitalism: increased innovation, competition, efficiency, etc. because of cases like this that are usually caused by something distinctly apart from free market capitalism? If anything, this is an example of misguided government regulation.

I'm ranting against free market capitalism because the whole point of free market capitalism is to ensure the price of a product is as close to its "free market value" as possible. For health care products, the calculation of value is inherently inaccurate because an individual places a much higher value on his/her own life than the market would.

I do agree that this is an example of misguided government regulation. The problem is that the government tried to use a capitalist solution to a societal value problem (i.e. the orphan drug laws). This created additional arbitrage opportunities. What I'm saying is that we need a serious discussion at a national level about the goals of our health care system, and the optimal means for achieving those goals.

We don't need new government regulation of health care; we need an entirely new systemic approach to health care. We've recently had a national awakening that the approach we've taken to drug abuse doesn't work, and that we were maybe trying to solve the wrong problem in the first place. We need a similar awakening on health care, though I'm doubtful it will happen until health care is out of reach to all but the wealthiest in society.

> the whole point of free market capitalism is to ensure the price of a product is as close to its "free market value" as possible

You forgot competition. In a healthy market, a big difference between manufacturing cost and final price is a strong incentive for competitors to enter the market and undercut prices. You can see this in practise in unregulated markets like electronics, leading to a flood of really cheap devices, for example you can get a Galaxy S4 clone on Alibaba for about $200, whereas an original S4 goes for $400 right now.

You can bet the Chinese would also do cheap generics, if the FDA would let them.

Right; but the pharmaceutical industry goes out of its way to avoid competition. They won't develop drugs if there is too much competition.

I understand that someone needs to pay for R&D. Unfortunately, the US government already pays for most drug R&D, but the patents get assigned to the company doing the development in all but a few rare cases.

They go out of their way by lobbying, which is to say they go out of the free market scope in order to avoid competition. So you are wrong in blaming the free market for this.

And when you say 'They won't develop drugs if there is too much competition' that only means that those existing companies won't do it - and as soon as they leave the market because they don't want to compete, several entrepreneurs will step in and fill the void because they're not afraid of competing.

The US gov't does not pay for most drug R&D. It pays for most of the basic science, that often leads to drug candidates, but the industry shoulder nearly 100% of the cost of getting a drug to market.

The combined, private R&D budget for biotech is ~$70B (not including VC funding). Total NIH funding (much of which is not drug focused) is ~$30B.

because an individual places a much higher value on his/her own life than the market would

That doesn't make sense. I place a much higher value on sunflower seeds than the market does, so that means I buy a ton of sunflower seeds so that I always have a bag on hand. They are cheap to me because I love them.

we need an entirely new systemic approach to health care

We agree there, but probably not in how we would do that. Most of our healthcare industry problems would benefit from more free market, not less. Remove the government structures that create unnecessary middlemen in healthcare like employers and the current insurance companies. If there were any regulation around healthcare, it should be toward opening the market up. Force doctors and hospitals to expose their prices so that consumers can wisely use their healthcare dollars.

Even within healthcare, there are segments that produce better outcomes at diminishing prices; like the cosmetic surgery and corrective vision surgery fields. As you look at those segments, they benefit from being mostly outside of the government-insurance-employer loop of spiraling costs.

Then for all the cherry picking you're trying to do with the private sector, go back and cherry pick on the problems that governments have. Governments purposefully maximize obscurity of relationships between manufacturers, lobbyists, lawmakers, and bureaucrats so that corruption becomes rampant while serving the needs of the consumer falls way behind. If government were in charge of allocating dollars for which medicines were produced, you can bet that there would be massive overproduction of some drugs and massive shortages of others that would take election cycles to correct - with the end result being that people won't get the healthcare that they're needing.

> the problem in the article is the result of government interference in the free market.

Exactly that. This has nothing to do with free markets, it is just simple rent-seeking through abuse of regulations, which can easily be fixed by fixing (or even better abolishing) the regulations causing the problem in the first place.

In fact it is not plausible why a generics manufacturer should have to approve a substance again which has already been approved. This does not add any safety for anyone, after all Tiopronin is Tiopronin, regardless of who manufactures it.

I fail to see how things would be different without government intervention. The only difference is that competitors would be prevented through trade secrets instead of patents.

And because of trade secrets I can buy "generic" Coke for cheaper. Do you see now how things would be different for prescription drugs without government intervention?

You can't realistically equate the complexity involved in reverse engineering a 100 year old cola recipe to the complexity of reverse engineering a state-of-the-art pharmaceutical.

Those two things are both "reverse engineering some chemical substance".

Are you making the case that old substances are much easier to reverse engineer than new ones? If so, I'd like clarification on how the market age of a substance contributes to its being more complicated to figure out.

Saying something is "state-of-the-art" only means it's the best we've got. I never knew this had any bearing on the molecular complexity of these substances. Can you make that case?

The set of chemical substances that could be synthesized 100 years ago is a tiny fraction of the size of the set of chemical substances that can be synthesized now. A 100 year old cola recipe almost certainly contains only naturally occurring compounds, while a brand new pharmaceutical is almost guaranteed to contain synthetic compounds.

Additionally, creating a substitute cola recipe only requires mimicking the taste and physical characteristics. When reverse engineering a pharmaceutical it's necessary to duplicate the biological effects as well, which is far more complicated.

Isn't arbitrage where a third party buys a product in one place and sells it in another, pocketing the difference? Here, we have a company just buying up competitors to stifle competition. Arbitrage would be buying the drug where it's available at $1.50 and then selling it at $30 where the $1.50 price can't be obtained. Such opportunities are generally fleeting, because the very action of arbitrage pushes the prices towards equality.

This is also not really an example of free market capitalism, unless you take an extremely laissez-faire definition of it. This is a monopoly, with a captive audience and government regulations providing a barrier to new competitors. In true free market capitalism, this would never happen because if the original company could make a profit at $1.50, then the new company's $30 price would be immediately undercut by other companies who see that they can make a profit at, say, $20, and the price will naturally fall back to something around the costs of production. Of course, you'd also probably get a lot of companies undercutting it even further by selling dangerous products, thus why these regulations are there in the first place.

This isn't arbitrage (there's only one market in play). It's just a straightforward instance of an Econ 101 monopoly: if a good has inelastic demand with a single seller, the seller can make more money by raising the price above its equilibrium value.

And monopolies are not economically efficient: they impose a deadweight loss. Say the drug costs $1 per pill to manufacture. There are people who would like to buy it at $20 per pill, but not any higher. This transaction is profitable, but will not take place because the price has been artificially set at $30. That's the inefficiency.

From linked article: "Thiola, currently sold for $4,000 a year per patient, will be priced closer to rival drug penicillamine, which costs $80,000 to $140,000, Chief Executive Martin Shkreli said on a conference call on Friday."

I just thought I'd compare this with information from the NHS on Penicillamine.

"Penicillamine 125mg or 250mg tablets. Cost per 28 days treatment for 500mg or 750mg/day: £9.96- £14.94." - https://www.newdevonccg.nhs.uk/file/?rid=101735&download=tru...

edit - this is the dosage for arthritis and works out to £180, or around $290 per year. I don't know the dosage for Wilson's disease, but I am guessing it is unlikely to be several hundred times larger.

And that's not the cost that patients would pay. Current prescription charges are £8.05 per line item per month. About 80% of prescriptions are free because the patient is exempt from charges.

http://www.nhs.uk/nhsengland/Healthcosts/pages/Prescriptionc...

Penicillamine is another example of a pharmaceutical scam; in 1995, the cost to treat rheumatoid arthritis using it as a second-line therapy was $550/year. Even a few years ago the pricing was in the thousands, not tens of thousands. When Valeant purchased Aton, it appears that the first thing it did was jack up the price of orphan drugs. But, hey, if you've got Wilson's Disease, you have no choice but to pay whatever they demand....

And this is why in situations like this you need one large buyer (like the British NHS) to negotiate pricing. If you have one, suddenly the market price becomes much close to the cost to provide the item.

"Valeant" is all you have to say. You can see what the In the Pipeline author thinks of that company by reading the archives, too. Or any number of other chem/r&d pharma blogs. In particular a lot of ink has been spilled over their ongoing hostile bid for Allergan.

Valeant has a controversial business model. The acquire successful R&D pharma organizations, drastically cut R&D spends, raise drug prices, and then use accounting (IMO) to understate R&D costs as goodwill/depreciation for the acquisitions. Not a fan.

Was the link changed, because I don't see that quote in the linked article?

Sorry, linked within the article. Reuters.

There's a lot of links in the article. It would be nice if you could include it.

FFS http://www.reuters.com/article/2014/05/30/retrophin-stocks-i...

FFS Thanks

Okay, so the price of the Thiola is ridiculous and unjustified. Who's agreeing to pay it??? I don't know how this works, do insurance companies simply roll over any time a company raises the price of some obscure drug by ten fold? Why haven't the insurers (I'm guessing no one pays for Thiola out of pocket) balked at this?

The pricing power of a drug is related to a number of factors: (1) competition, (2) size of patient population, (3) severity of disease.

Payers (insurers) balk at the price of drugs all the time. When there are competitors, they have the ability to say "no, you can't have drug A, but you can have drug B". Also, when a drug treats a disease that isn't that severe (erectile dysfunction), they can also say "no, you can't have that drug".

When it comes to a disease like the one Thiola treats (only a few therapies, serious disease, small patient population), payers don't have much choice but to pay whatever the company charge. They can't deny patients a critical therapy.

I'll bet that insurance companies will complain about the price increase, but in the end just pay it. Sure it's ridiculous, but the overall impact to payers is limited since the disease is so rare. They have bigger fish to fry.

Why has this been flagged off the front page?

https://twitter.com/MartinShkreli

All the text and comments are crossed out with no visible explanation as to why.

"Because they can"

Without oversight, this behavior is completely expected.

Oversight by who?

Oh, I thought that user was talking about the article. My bad.

I read that blog all the time. The blog host has terrible software and the site is often down. What you're seeing is typical. Try to reload the page.

Can't you get generics?

About as easily as you were able to read the article....

Sarcastic quip aside the "Update" part of the article discusses the various legal maneuvers the company is using to inhibit the production of generics. Apparently it is possible in some cases for the original manufacturer to deny access to the drug to potential producers of generics, which prevents them from doing the necessary testing needed to get regulatory approval.

Thanks, the update wasn't there when I read it.

Funny how the mutable nature of the web can transform a reasonable question into what looks like a stupid one, through no fault of your own. Have an upvote to compensate.

As a Canadian, I'm wondering what the drug goes for here.

You still need to pay for drugs in Canada but they are generally cheaper than in the US.

However, go to the real home of 'socialist medicine' [who thought up that name?] in Europe or the UK, you pay a fixed price (8 pounds in England - completely FREE in Scotland) for drugs. Drug companies get to charge a fee which differs but if they rip the piss out of the pricing then the NHS gets to set a price (the Pharmaceutical Price Regulation Scheme - it's complicated but it's discussed here https://www.ucl.ac.uk/european-institute/analysis-publicatio...).

Now, countries like India are even more aggressive - rip the piss there and they just license a local company to make the drug and you get a kick in the nuts for your price gouging ways.

The result is companies really rip off US patients and elsewhere they are a lot more careful and can charge dramatically lower prices (but still as much as they possibly can) to avoid regulation or enforcement measures.

Americans really need to rethink healthcare - starting by dropping all the pejorative stuff like 'Socialist Medicine' would help refocus peoples minds.

People in Europe don't focus all their attention on getting healthcare like people in the US - I have a friend who uses his measly 1 week vacation every year to come to Europe and purchase his year's supply of medication as it's way cheaper than even his co-pay, including flights, accommodation etc, to buy over the counter in Europe. That's just nuts.

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