UPFRONT

Over a Barrel

Peter K. Kaiser, MD

You must have heard the recent scuttlebutt over Daraprim, a drug with no patent protection for more than 50 years. Part of triple therapy for toxoplasmosis, the drug has such a small market that generic manufacturers haven’t tried producing it.

Pyrimethamine was developed in the 1950s at Burroughs Wellcome (now part of GlaxoSmithKline). The rights were acquired in August by Turing Pharmaceuticals and its infamous 32-year-old former hedge fund manager, CEO Martin Shkreli.

Before 2015, the drug cost $13.50/tablet. Turing raised its price to $750/tablet — a 5,000% increase. There’s nothing new or different about the drug from Turing vs the drug on the market for more than 60 years. You can get it overseas for as little as a few cents. What justifies the $750 price? Nothing!

Unfortunately, patients can’t simply switch to another medication. If they need it, they need it. They also can’t walk into the local pharmacy to buy it. It’s only available via Walgreens Specialty Pharmacy. It can take up to a week to get the drug. For someone with toxoplasmosis chorioretinitis, that may be the difference between seeing or not.

The closed distribution system is key. According to Turing, it’s to prevent a competitor from accessing the drug for bioequivalence studies. Huh? This is exactly the sort of thing that enrages me and makes consumers hate the drug industry. The excoriation that Mr. Shkreli received in social media was well deserved.

This isn’t the first time a company has dramatically raised the price of older, usually off-patent drugs, and I do firmly believe that pharma companies have the right to make money on newly approved drugs because the development costs are almost $2 billion over an average of 12 years, and the odds of approval are poor (1 in 5,000).

But the practice of using the FDA for market exclusivity with minimal development cost or risk is ridiculous and must be stopped. It will hasten drug cost controls that are already prevalent throughout the world and should have been part of the Affordable Care Act. It will also increase distrust of the pharma industry as a whole.

The problem is there’s no downward pressure on drug prices. Thanks to Medicare Part D, it pays whatever the company charges. There’s nothing linking price to value because there is no competition.

To compete, a generic manufacturer must file an ANDA, invest millions, and wait till 1Q 2019 (the median turnaround for generics is 42 months) to find out if approval is granted. It’s not surprising that few will make that bet. Turing has simply used the FDA to its advantage. There’s nothing genius about it actually. Obviously, other barriers exist to entry, including manufacturing costs, but not in the case of Daraprim.

In the future, we will be paid based on our value (outcomes). It’s time drugs were treated similarly and given value-based prices. Insurers and the government can help by rewarding companies that provide good value and penalizing those that don’t. The ACA has shown that health care is not a free market. Costs must be trimmed, but not only by patients and physicians.

But in this case, it’s not just a free market: it’s a monopoly. For now, I’ll think very carefully about using triple therapy when Bactrim works almost as well.