We've mentioned before how yeast can produce a bunch of useful stuff, beyond bread and beer. Synthetic biology promises to give us engineered microorganisms that can make almost any specialty chemical or even some biofuels. Brewing medicine might not be too far away, and it might be incredibly difficult to control "controlled substances" in the very near future.
from the and-will-only-do-so-because-the-public-doesn't-understand-business dept
Martin Shkreli -- who became the personification of a deeply-reviled industry thanks to his insanely-exorbitant price hike on a 60-year old drug -- has heard the disapproving roar of the crowd and will do… something… at some point in the future… to make things right. Or at least a bit more right-ish.
“We’ve agreed to lower the price on Daraprim to a point that is more affordable and is able to allow the company to make a profit, but a very small profit,” he told ABC News. “We think these changes will be welcomed.”
With nothing else to go on (other than Shkreli's continued assertions that the drug is still underpriced), the public will just have to assume that the new price point, whenever it arrives, will be barely above cost. (Considering it was produced for a $1/pill before Turing's purchase, one would think a significant reduction in price would still leave plenty of room for profits and additional R&D.)
Turing's mini-debacle has damaged the pharmaceutical industry. It has drawn even more heat from legislators and presidential candidates. It has even negatively affected more tangible aspects, like stock prices. Shkreli's actions have also drawn attention to the oft-ignored regulatory procedures that allow companies to fully exploit old drugs and medications, even without the protective power of active patents. Derek Lowe at Science Magazine explains the route to securing post-patent monopolies.
By various means, old generic compounds have ended up as protected species, and several companies have made it their business to take advantage of these situations to the maximum extent possible. The FDA grants market exclusivity to companies that are willing to take “grandfathered” compounds into compliance with their current regulatory framework, and that’s led to some ridiculous situations with drugs like colchicine and progesterone. (Perhaps the worst example is a company that’s using this technique to get ahold of a drug that’s currently being provided at no charge whatsoever).
Combine this with the bottleneck Turing generously refers to as "distribution" (via a single specialty pharmacy or directly from Turing itself) and you have everything you need to demand any amount you want for a lifesaving drug with a limited market. Everything being said about R&D investment is just smoke until proven otherwise.
Following his short statements promising unquantified price drops at an unspecified point in the future, Martin Shkreli -- who seemed to relish praising himself/insulting his detractors from this social media platform -- took his Twitter ball and went home.
Turns out the market will bear far less than Turing thought, even with the benefits of a tightly-controlled distribution chain and the FDA's assistance in keeping competitors off the playing field. A whole lot of people who will never use the drug managed to nudge the price downward, and all within 48 hours.
from the just-another-symptom-of-a-diseased-system dept
Martin Shkreli -- founder of Turing Pharmaceuticals and overnight poster boy for everything that is wrong with the pharmaceutical industry -- spent a lot of yesterday defending his 5000% price hike on Daraprim, a drug that treats victims of toxoplasmosis. That the drug has a nexus with cancer and AIDS sufferers (basically anyone with a diminished immune system) made the price increase seem even more unconscionable.
Dr. Wendy Armstrong, professor of infectious diseases at Emory University, questions Turing’s claim that, after more than 60 years of physicians using Daraprim, there is a need for a better version of the drug.
“I certainly don’t think this is one of those diseases where we have been clamoring for better therapies,” says Armstrong.
Next, there's the inherent ridiculousness of this assertion, which portrays Turing's plans for Daraprim as a reverse pyramid scheme, in which future "investors" will benefit from the gouging of those who got in on the ground floor.
On top of that, Shkreli claims the drug is still underpriced, despite having been sold for $1/pill before its acquisition by the company Turing acquired it from.
While it's true that drug research and development can be expensive, it is nowhere near as costly as this price hike would indicate. Shkreli tossed out the easily-debunked claim that it costs $1 billion to bring a new drug to market. The actual cost is considerably lower (~$55 million), according to research using the same data drug companies provided to backup their claims of $1.3 billion in R&D costs per new drug.
Data also shows pharmaceutical companies spend far more on marketing than research and development. They have to. Most "new" products on the market aren't actually new. They're just variants on what's already available. It's tough to sell a "new" drug that doesn't outperform a competing product, hence the increased marketing expenditures.
Shkreli also used a variant of "everyone else is doing it" to defend the price jump. He pointed to the existence of other cancer drugs costing "over $100,000" per treatment as justifying Turing's price increase. But being slightly less exortionate than competitors isn't the same thing as being "good."
Shkreli has little interest in being good, no matter what altruistic assertions he makes. His former company -- from which he was ousted over accusations of stock price manipulation -- also jacked up the price on an essential drug just because it could.
When Retrophin acquired rights to Thiola, the drug cost about $1.50 per pill. [Patients take multiple pills per day.] Now, Retrophin has decided to charge more than $30 for the same Thiola pill. Retrophin says it has plans to change the Thiola dose and develop an extended release version of the drug, but I have seen none of those changes yet. To my knowledge, Retrophin hasn't yet done any of this work -- except to drastically increase Thiola's price.
And indeed, Retrophin never did. From a 2015 presentation, it's generating sales for Retrophin, but nowhere in it is any indication the company is actually working towards an extended-release version of the drug.
I asked Shkreli about this and he claimed the company ditched the R&D plans after it ousted him. Maybe this is true, but it doesn't exactly instill any confidence in Shkreli's latest claims that price hikes are being done with an eye on increased R&D spending. Instead, they look like nothing more than the normal deflection performed by drug companies after controversial price increases.
Other circumstantial evidence does little for consumer confidence. Not only is Shkreli being sued by his former company for fraudulent behavior, he's previously been taken to court (by Lehman Brothers) for a $2.3 million loss he incurred (but never repaid) when his bet on a market decline went south. The complaint accuses him not only of failing to pay Lehman what was owed, but of pushing through the transaction without actually possessing the funds to cover the original purchase.
Shkreli also has a history of thriving on market failure. He has made money shorting pharmaceutical stocks while simultaneously engaging in questionable behavior. Here's a "treatise" he wrote detailing the negative aspects of one company's research efforts, which clearly states at the top of each page (for legal reasons) that he stands to personally gain if the company's stock price drops.
DISCLAIMER: The authors of this article have a conflict of interest and will benefit financially if the stock price of VTL falls. The authors reserve the right to change their investment if the price of VTL changes dramatically. Please read the Disclosure at the end of this paper for more information.
(This was tracked down from a deleted tweet by Martin Shkreli. Other Twitter users had commented on it, so it was recoverable from Google cache. Here's a screenshot, because the cache won't stay live for long.)
But he's also been accused of actions that are more than simply treading the edge of legality. A heated Twitter exchange implies Shkreli talked the FDA out of a drug approval -- something that hurt the company producing the drug, but paid off for Shkreli's stock short.
Shkreli's history does little to back up his assertions of altruistic goals and a future full of well-funded research and development. Instead, it shows someone who's willing to exploit every last dollar out of something and leave its dessicated corpse behind.
On top of that, share prices for several drug companies fell the day the Daraprim price hike went viral. That this may have worked out well for Shkreli can't be ignored, considering his prior experience with shorting pharmaceutical companies. Maybe this was part of the plan: Short pharma stocks. Jack price up on newly-acquired drugs. Play the villain while cashing in on the market decline.
That's all speculation, of course. What is certain is that Martin Shkreli is not THE problem. (He's not even "Big Pharma," even though several editorials have placed him in this group.) He's part of the problem, but his specific actions are more about exploiting obscure drugs that competitors aren't interested in. His actions shed little light on the genesis of high drug prices.
The original issue is patents. That has been mostly ignored by legislators and opinion pieces during the most recent push for some sort of drug pricing controls. And it will continue to be ignored because Daraprim's price hike is completely unrelated to patent monopolies. Turing's exclusive license for Daraprim includes only the use of the trademarked name. The patents have expired. Anyone can make it, but no one's been particularly interested in offering an alternative. (Maybe this will change now that a company has a chance to take on the villain du jour…)
But it's patents that make drugs unaffordable in the first place. New drugs are given, at minimum, 20 years of competition-free sales. That's two decades (at least) where drug companies can charge whatever they want because no one else can offer a competing product. Companies -- like Shkreli -- will claim they need this exclusivity to recoup "massive" research and development costs. But this simply isn't true. Pharmaceutical companies enjoy massive profit margins, much more than would be expected if they were faced with meaningful competition. The lie is exposed when patents expire. Prices fall dramatically once the market is opened, including that of the original manufacturer's.
So, if the government really wants to tackle the problem of overpriced drugs, it needs to start with the protections it grants that allow this to happen. But this seems unlikely to happen because drug companies have significant "buying power" when it comes to legislation, no matter how many people come forward to testify about being priced out of essential treatments.
Shkreli, however, is specializing in finding "orphan drugs" -- drugs for rare conditions that are no longer under patent protection (which would raise the acquisition price significantly) but which have seen little to no competitive movement over the years. His decision to implement a 5000% price increase, despite minimal costs (and benefiting from R&D performed 60 years ago), is one he can make because there's no market force in place to stop him. So, he may be the poster boy for everything that's wrong with the pharmaceutical industry, but he's not really indicative of the ongoing problem.
What he is, however, is an opportunist with a hedge fund background and a history of market exploitation. Any claims of altruism or searches for better treatments should be met with intense skepticism.
from the but,-fast-track's-in-place,-so-too-bad,-suckers dept
Over the last few years, we've seen leaks here and there of the various chapters of the TPP agreement, but generally ones that are quite out of date. The latest public leak of the "intellectual property" chapter that I'm aware of was done last October by Wikileaks and was the version from the previous May (2014). Now, Politico claims that someone has leaked the May 2015 version, though Politico has not published the document (which, frankly, is pretty lame for a journalism property). But, based on Politico's report, the agreement still looks to be what everyone's been saying it would be: a huge gift to giant corporate special interests, such as Big Pharma:
The draft text includes provisions that could make it extremely tough for generics to challenge brand-name pharmaceuticals abroad. Those provisions could also help block copycats from selling cheaper versions of the expensive cutting-edge drugs known as “biologics” inside the U.S., restricting treatment for American patients while jacking up Medicare and Medicaid costs for American taxpayers.
“There’s very little distance between what Pharma wants and what the U.S. is demanding,” said Rohat Malpini, director of policy for Doctors Without Borders.
In response, the USTR falls back on its standard lame reply, about how draft texts are not "final." But this is why it's actually important to post these draft texts publicly, because what the draft Politico saw appears to show is that, whether or not it gets it, the USTR is fighting for policies that would harm poor, sick people, and massively benefit giant pharmaceutical conglomerates.
The highly technical 90-page document, cluttered with objections from other TPP nations, shows that U.S. negotiators have fought aggressively and, at least until Guam, successfully on behalf of Big Pharma.
That bit of information seems rather important in determining whose interests the USTR is truly representing in these negotiations. Remember, that while the final agreement will be posted publicly, the negotiating texts (which show what each side argued for) are being kept secret for four yearsafter ratification -- by which point the staff at the USTR will likely have turned over greatly, and whoever is there now can pretend they had nothing to do with the negotiating positions that the US is now locked into.
And, of course, now that fast track is the law, Congress can't even step in to fix it. They'll only be allowed an up/down vote on the entire agreement -- with tremendous pressure on them to approve the whole thing, even if there are dangerous provisions mixed in the overall agreement.
Of course, we all know that this is why the agreement is secret. It's not politically feasible for the US government to publicly show that it's fighting against the health interests of the public and in favor of pharma profits. But it appears that's exactly what's happening behind closed doors. And that seems... wrong.
Genetically engineered organisms already produce some highly valuable products for us. Insulin used to be harvested from the pancreases of pigs, but now stockpiles of human insulin can be made using a fermentation process with bio-engineered bacteria. Various kinds of yeast can produce different kinds of breads and beers, but if we can modify these tiny organisms at will, yeast could produce an incredibly wide variety of products. Just check out these links on the versatility of yeast.
The inclusion of the Healthcare Transparency Annex in the TPP serves no useful public interest purpose. It sets a terrible precedent for using regional trade deals to tamper with other countries' health systems and could circumscribe the options available to developing countries seeking to introduce pharmaceutical coverage programs in future.
The Annex is clearly intended to target New Zealand’s Pharmaceutical Management Agency (PHARMAC) and some of its provisions will result in new obligations for PHARMAC that will involve transaction costs and could impinge on its flexibility and autonomy. This is particularly worrying given that PHARMAC provides a model pharmaceutical coverage program that is suitable for adoption by developing countries.
Pharmac is New Zealand's system for buying medicines in bulk, which results in substantial savings for the country -- around $3.5 billion since 2000. US drug companies hate it for two reasons: it is able to negotiate lower prices in New Zealand by consolidating purchases for the whole country; and it represents a dangerously successful model that other countries might adopt. The latest leak is important because it confirms that Big Pharma is using TPP not only to strengthen drug patents, but also to attack Pharmac directly.
It has long been a fear that TPP would seek to undermine it, something that the New Zealand government has strenuously denied. The latest clear evidence that Pharmac is indeed under threat has forced the country's prime minister, John Key, to respond, reported here by the New Zealand Herald:
Prime Minister John Key has promised that New Zealanders will continue to pay no more than $5 [US$3] for subsidised prescriptions, whatever happens to Pharmac under the Trans Pacific Partnership.
Jane Kelsey is quoted in the new story as noting that there were only four possibilities:
the Government could increase the health budget overall; the health budget could remain the same but more funding go from non-Pharmac costs to Pharmac; the price the public paid for prescriptions could rise -- which Mr Key ruled out today; and the fourth was that fewer medicines were bought by Pharmac.
Any of the other options means higher taxes in New Zealand or cuts somewhere else to pay for the more expensive drugs TPP is almost certain to bring. That fact has led to a spate of articles in the New Zealand press, and a wider awareness about the negative consequences of the hitherto obscure TPP, albeit rather late in the day.
As a side note, it's worth noting one other interesting aspect, pointed out by Kelsey in her detailed analysis of the latest leak:
The Annex applies very specifically to a 'national health care program' that makes recommendations/decisions about listing pharmaceutical products or medical devices for reimbursement, or the sum of that reimbursement, where these programmes are run by a 'national health care authority'.
The Annex does not apply to direct government procurement of pharmaceuticals and medical devices.
'National' is presumably chosen to preclude such programmes that are run by states and provinces, which are politically sensitive in the US and Canada. In effect, the US has excluded almost all its own programmes, while targeting New Zealand
For many years now, we've been covering the pay for delay scam that many pharmaceutical companies have used to effectively pay generic drug makers not to compete with them, even though they are able to do so. The full details of how the scam works are complex, but involve abusing a ridiculous part of the Hatch Waxman Act that grants additional monopoly benefits to the first market entrant of a generic drug. The big pharma firms used that to their advantage, filing bogus lawsuits against those generic drug makers and then agreeing to "settle" the lawsuit they filed by paying the generic drug maker to not actually enter the market. The greater monopoly protection afforded to the big pharma company more than makes up for how much they have to pay the generic drug maker. In short, it's taking advantage of the stupidity of giving drug companies massive monopolies.
The FTC started looking into these practices years ago, and two years ago the Supreme Court ruled that the FTC had every right to go after drug makers using antitrust laws over these "deals." And the FTC has been filing lawsuits on an ongoing basis about these deals.
Teva has now settled one such case for a cool $1.2 billion -- giving you a sense of just how valuable it has been to these pharma companies to extend their monopoly, keep out competition and keep drug prices artificially high. With Teva, it was the sleep disorder drug provigil (and, technically, the drugmaker was Cephalon, which Teva then bought). Teva had been fighting with the FTC for years over this, and the case was scheduled to go to trial next week -- but the settlement ends that. The amount, $1.2 billion, by the way, is the largest ever settlement with the FTC. You have to imagine that there will be more of these coming considering the number of other lawsuits and the fact that "pay for delay" was a widespread practice in the pharma industry.
Of course, even with all of this abuse, some people still insist that giving monopoly rights to pharmaceutical companies is the best way to produce new medicines and to provide healthcare. Isn't it about time we began to question those assumptions?
A couple of years ago we wrote about how the patent system creates perverse incentives for companies that make antibiotics to exploit them as fully as possible while they are still under patent. That, in its turn, drives antibiotic resistance, which is becoming an extremely serious problem. At the end of our previous post, we noted that this situation would be a perfect opportunity to try something different, such as offering some form of prize to pharmaceutical companies that come up with new antibiotics. Remarkably, the UK government's Review on Antimicrobial Resistance (pdf) has just suggested exactly that:
we want to make antibiotics R&D commercially sustainable so that the field can attract the best minds from research organisations, small biotech companies, large firms or not-for-profit entities. To do that we propose a system by which a global organisation has the authority and resources to commit lump-sum payments to successful drug developers. Payment would have to be set against selective criteria agreed in advance. Such an approach would 'de-link' the profitability of a drug from its volume of sales, supporting conservation goals by eliminating the commercial imperative for a drug company to sell new antibiotics in large quantities -- a key factor in contributing to the development and spread of resistance.
As that notes, the key to this approach is to "de-link" profitability from sales volume so there is no business pressure to over-use new antibiotics. One way to do that is to offer not a patent, but a hefty lump sum to any company that comes up with a new antibiotic. Another benefit is that the scale of the money on offer -- around $2 billion per new antibiotic -- is likely to encourage participation from companies all around the world, especially startups, since the scheme would be open to all. The UK review suggests supporting innovative approaches directly:
A global AMR [antimicrobial resistance] Innovation Fund of around 2 billion USD over 5 years would help boost funding for blue-sky research into drugs and diagnostics, and get more good ideas off the ground. Big pharma should have a role in paying for this innovation fund: it needs to look beyond short-term assessments of profit and loss, and act with ‘enlightened self-interest’ in tackling AMR, recognising that it has a long term commercial imperative to having effective antibiotics, as well as a moral one.
The 44-page document goes into more detail about the thinking behind the proposed scheme, how it might be implemented in practice, and the problems it would face. It's a bold approach, but given the continuing failure of the current patent-based system to come up with new antibiotics, it's one that governments around the world need to consider seriously. After all, as the review warns:
if we fail to act on AMR, then an additional 10 million lives would be lost each year to drug-resistant strains of malaria, HIV, TB, and certain bacterial infections by 2050, at a cost to the world economy of 100 trillion USD.
Compared to that figure, the few tens of billions of dollars needed to implement the new approach has to be a bargain.
Techdirt often points out that the current system of funding the creation of life-saving drugs is broken. But the obvious question is: what can you put in its place? The answer includes things like prizes, but also, it seems, Cuba:
Cuba has for several years had a promising therapeutic vaccine against lung cancer. The 55-year trade embargo led by the US made sure that Cuba was mostly where it stayed.
Leaving aside the fact that politics probably got in the way of saving lives (again), the more interesting issue is how Cuba managed to come up with a lung cancer vaccine. Here's the explanation from the Wired article quoted above:
Though the country is justly famous for cigars, rum, and baseball, it also has some of the best and most inventive biotech and medical research in the world. That's especially notable for a country where the average worker earns $20 a month. Cuba spends a fraction of the money the US does on healthcare per individual; yet the average Cuban has a life expectancy on par with the average American. "They’ve had to do more with less," says [Roswell Park Cancer Institute's CEO] Johnson, "so they’ve had to be even more innovative with how they approach things. For over 40 years, they have had a preeminent immunology community."
The cancer vaccine is not the only important drug Cuba has managed to develop with its limited resources. According to Wired, Cuban scientists have come up with their own vaccines for meningitis B and hepatitis B, and monoclonal antibodies for kidney transplants. That suggests the success of the "do more with less" approach isn't just a one-off, but can be applied consistently to deliver results.
That's important, and not just for people who desperately need new drugs. Big pharma is one of the main industries pushing pseudo-trade agreements like TPP and TTIP. Some of the worst elements in those are driven by that industry's desire to obtain longer patent protection and delay the entry of generics, with the justification that Big Pharma "needs" these extended monopolies to pay for costly research into novel drugs. Alternative approaches like Cuba's, which require far lower investments, offer the hope not just of doing "more with less", but also of calling the pharmaceutical giants' bluff that only they can come up with life-saving new treatments.
Here on Techdirt we've written many times about the problematic nature of drug patents. They are harmful both directly, in terms of the price distortions they cause and seek to spread to new markets, and indirectly, through the lobbying that the pharma industry deploys to strengthen and extend them, notably in trade agreements such as TPP and TAFTA/TTIP.
The standard justification for these patents is that they are needed to provide incentives for costly research and development of new drugs, something that Techdirt has been questioning for manyyears. A fascinating new paper entitled "Patent Monopolies and the Costs of Mismarketing Drugs" (pdf), by Ravi Katari and Dean Baker at the Center for Economic and Policy Research, explores yet another problem with pharma patents:
in the case of prescription drugs, there are also major costs associated with the enormous asymmetry between the knowledge available to drug companies and the knowledge available to patients and their doctors. As a result of this asymmetry of knowledge, drug companies will often be in a situation to earn large patent rents by concealing information that show their drugs are less effective than they claimed or possibly even harmful.
One way in which drug companies take advantage of this asymmetry is with "off-label" promotion of their drugs. An off-label use of a drug is one which has not been approved by the FDA. While doctors are free to prescribe drugs for off-label uses, drug companies are prohibited from promoting their drugs for off-label uses. If they want to get a drug approved for additional uses then they have to clear a path by seeking FDA approval. However, they routinely avoid this independent assessment by finding ways to promote their drugs for unapproved uses. Promotion of drugs for off-label uses is harmful to the public because it diminishes drug safety regulation, discourages companies from conducting or revealing internal safety studies, and incentivizes them to seek FDA approval for narrow "label use" that is easier to push through the approval process.
The bulk of the paper is concerned with quantifying those costs by looking at five high-profile cases of mismarketing. Here's the final result:
The cumulative costs associated with the increased morbidity and mortality associated with these drugs was $382.4 billion over the 14-year period from 1994–2008. This comes to just over $27 billion a year, an amount that is comparable to what the pharmaceutical industry claims to have been spending on research at the time.
As the paper's authors emphasize, this is only a rough figure, and is likely to underestimate the total negative consequences of this kind of rent-seeking behavior, since it is based on only a small subset of drugs, and uses conservative estimates for key quantities. More important than the specific figure are the policy implications. For example, the deliberate mismarketing is only possible because data is kept secret:
If, for example, this research was all in the public domain and carried through by researchers who had no direct financial interest in the sales of a drug, it is unlikely that they would go to elaborate lengths to misrepresent or conceal research findings, or that they would be successful if they tried. In other words, the costs documented here are the result of the incentives provided by patent monopolies in the same way that the research itself is motivated by patent monopolies.
At the very least, that's an argument for requiring that all research data and clinical trial information should be made freely available for others to analyze. The paper also points out that there are implications for TPP and TAFTA/TTIP:
One of the major goals of the United States in these and other trade pacts currently being negotiated is to strengthen patent and related protections for prescription drugs. The justification is that increased patent rents will provide a greater incentive to the pharmaceutical industry, leading to more innovation.
But as the present study shows, strengthening those protections is likely to encourage more rent-seeking behavior, increased mismarketing, and thus unnecessary deaths and greater costs to society -- hardly something to promote through trade agreements. Finally, the new research adds further weight to the argument that we need to find better ways of funding research into new drugs:
The fact that incentives from patent rents lead firms to promote drugs in ways that impose large costs on patients and society should raise additional questions about the desirability of patent protection as a mechanism for financing research. Other mechanisms for financing research have been proposed, such as a prize system or direct public funding. Of course the U.S. government already spends $30.9 billion annually funding biomedical research through grants administered by the National Institutes of Health, so direct public funding is already an integral part of the drug development process. The proposal is to expand this funding and have NIH’s mission extend to the development and testing of drugs. By having all research in the public domain and taking away the patent rents associated with marketed drugs, direct funding would both remove the incentive and hugely lessen the ability to misrepresent research in order to promote drugs for uses that may not be
When so many lives and so much money are at stake, it's surely time to look at this idea more closely.