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OpenMarket: Drugs and Medical Devices

  • Deflate Drug Prices by Reforming the FDA

    December 8, 2015 12:13 PM

    This Wednesday, the Senate Select Committee on Aging will hold a hearing on “sudden price spikes” among certain off-patent drugs. The most widely publicized of these spikes was the recent price increase of Turing Pharmaceuticals’ toxoplasmosis treatment Daraprim, which jumped in price from $13.50 per dose to $750. The medical consequences of the price increase, obviously of concern to hospitals, doctors, and patients, was, at times, overshadowed by personal attacks leveled at Turing CEO Martin Shkreli, who quickly became a target for complaints about corporate greed.

    Shkreli was unfazed, telling the audience at last week’s Forbes Healthcare Summit that he should have raised the price even higher, citing his duty to maximize profits to shareholders. That PR provocation aside, pricing in the drug industry is a complicated and often counterintuitive process that involves maneuvering around domestic and international government policies as much as it does simple matters of supply and demand. As Forbes staff writer Matthew Herper reported in September, even for people who think pharmaceutical companies are charging “unfair” prices for certain life-saving drugs, the question of what would constitute a fair price (and how to enforce such a verdict) can be very tricky.

    Richard Evans of Sovereign & Sector, a former Roche executive and longtime industry analyst, says there’s probably nothing in Hillary Clinton’s proposals on drug pricing that would have prevented Shkreli from executing his price increase. Allowing importation of drugs from outside the U.S. might help, but companies can just limit supply, forcing countries to decide between U.S. patients and their own. And Clinton’s plan to limit patients’ out of pocket drug costs to $250 a month? Evans and I agree that would be a dream come true for pharma, losing one of the biggest points of real leverage that insurance companies have.

    Even if we simply accept that a company like Turing has the right to charge whatever the market will bear, however, we are left with the question so frequently asked at the time of the Daraprim price hike—if the drug is decades old and no longer covered by its original patent, why doesn’t another company come along and market a cheaper alternative? The answer is that another company is doing exactly that. Express Scripts has already announced a partnership with Imprimis Pharmaceuticals to sell a similar treatment for $1 a dose rather than $750.

  • A Big Payoff for Patient Investors

    November 20, 2014 12:40 PM

    There’s a fascinating story in The New York Times this week about pharmaceutical companies and the process of discovering new drugs. Fifteen years ago, the Cystic Fibrosis Foundation started investing money in a small biotech company to incentivize research into a cure for cystic fibrosis. Their eventual $150 million investment helped Vertex Pharmaceuticals develop a promising new treatment, Kalydeco, which is excellent news for CF patients. It’s also been good for the financial future of the Foundation. They recently signed a deal selling their future royalties on the drug for a one-time payment of $3.3 billion. That’s 20 times the organization’s annual budget.

    The Cystic Fibrosis Foundation’s experience with Vertex and Kalydeco will likely prove to be an outlier in terms of ROI, but it does suggest a new option for medical innovation. One longtime model has been for patient advocacy groups to use a significant portion of their budgets to pressure Congress into setting aside more taxpayer money for medical research. This requires them to gamble hard-won donations on the effectiveness of their lobbying strategy and pits them against every other patient and health advocacy group that is angling for their own slice of the federal research budget.

    The example of the Cystic Fibrosis Foundation, however, suggests that patient advocacy organizations that invest in R&D directly could not only benefit financially but also see more drugs come on to the market faster. The additional money they end up with could be poured back into more research or used to provide other services to afflicted patients and their families.

    Making an end run around the government funding process has another important advantage. Removing the expense of lobbying and the glacial slowness of government bureaucracy brings together the two entities most interested in seeing new treatments become available: the patients who are suffering and the companies that are going to make money by alleviating that suffering.

    Patient advocates are in a better position than governmental research funding committees to know what treatment options their members would find most valuable. Being able to negotiate directly with drug companies as investors can give them industry clout and access previous generations would certainly have envied.

    One need only look back to the early years of HIV/AIDS activism to be reminded that the political process cannot be relied upon to treat all illnesses or constituent groups equally. To the extent that they can, professionals charged with fighting for the interests of patients should consider going directly to the source for a cure.

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