I am a fund manager and I have followed Martin Shkreli since his prior company, Retrophin, went public about two years ago. Simply put, Martin is a sociopathic criminal with a well-established, and consistent track record of deceit, recklessness, failure, and just plain old stupidity. But he is also hyper-aggressive. He is currently living in Switzerland, and it's my understanding that he fled the country in order to avoid prosecution and asset forfeiture.
Anyway, Martin is running the same playbook at Turing that he did at Retrophin, which is to find some old orphan drug and raise the price by orders of magnitude. It's believed insurers won't have a choice but to pay since there are no competitors. If you want to see how this has worked out in the past, feel free to google "KV Pharmaceuticals Makena" which did something similar a few years ago, only to have it bankrupt the company (which would be an outcome completely consistent with Martin's history and tactics).
For a fun read, check out the lawsuit filed against him by Retrophin. In all my years of investing, he is one of the most unique scumbags I've ever come across.
When I saw the headline I had a feeling it would be Turing. I was contacted by a recruiter last year and had a couple conversations about joining them as they were looking for an IT guy - the CIO was doing all of that work and they wanted someone else to be hands-on and eventually build a team. Sounded like a great opportunity and things were progressing. Then I bothered to Google them...
Once I read up on Martin Shkreli I told them that I did not think it was the kind of place for me and withdrew. I have no idea if they would have hired me or anything, but just reading about him gave me a sick feeling in my stomach.
I never got a direct response from them, but since the recruiter continued to reach out to me for other opportunities they must not have been too upset about me bailing on the meeting. I did avoid using any terms like "criminal behavior" in my response. :)
In other words, blame the game. From where I come from it seems very strange that medical services / prescribed medicine has free floating 'market prices' in the US. There is no such thing as a functioning market for these products - you have complete information asymmetry as well as government enforced monopoly on medication (pharmaceutical patents). Letting the providers set the price is just asking for trouble. Negotiating medical prices on government level and setting fixed prices for medical services (adjusted periodically) is absolutely necessary for a functioning general healthcare.
The sad thing is that it made my try to remember the biography of living persons rules to figure out whether any of those quotes could be kept if they were noteworthy and properly sourced.
It seems to me that the overall result would be other companies start manufacturing the generic and sell the drug for maybe 20% less than Martin and over time the price drops back down towards where it once started. In the meantime, this company either goes bankrupt or is sold off.
Or the government passes a law capping how much you can raise the price of a generic drug over so many years.
That's the loophole though, the quantities are so small that realistically, no pharmaceutical company has the incentive to make their version of the drug, even at $750 per dose. There are still costs to making a drug that's off-patent, and sometimes the number of patients being treated is only in the double digits. Additionally, a competing drug released at say, $500 per dose would still be considered predatory anyway. This is really the backwater of pharma.
The case of KV Pharmaceuticals that I cited was a little different since compounding labs had already been making the drug Makena. In that case, the FDA actually sent these labs a letter essentially saying, "Go ahead and keep making the drug even though KV now has a patent for it. We are choosing to not enforce their patent because their price increase was bs."
Maybe the government can prove its worth and get off its ass and quickly figure out how to close this loophole, then go after Martin and others like him.
The case of KV Pharmaceuticals that I cited was a little different since compounding labs had already been making the drug Makena. In that case, the FDA actually sent these labs a letter essentially saying, "Go ahead and keep making the drug even though KV now has a patent for it. We are choosing to not enforce their patent because their price increase was bs."
KV never had a patent for Makena. What they did have was "data exclusivity" which meant the FDA could not approve another version of the drug for at least 5 years.
What they were counting on was the FDA clamping down on the compounding pharmacies, since they weren't selling an approved version of the drug.
The FDA, seeing KV's strategy, declined to shutdown the compounders which resulted in KV declaring bankruptcy. KV restructured, reduced the cost of the drug and created a sustainable business. They were acquired by Valeant I believe.
I'm sure he'd be happy to let that go unprotested ... "Skrelicame to attention after his attempts to have the FDA not approve drugs being produced by companies whose stocks he was shorting".
I often see the "free market" referenced in contexts like this where it's the interactions of a corrupted government entity that is at the root of the trouble - yet the free market is the entity in the crosshairs.
So on a weaker FDA it would be exactly the same, except that now your guarantees about the safety and efficacy of the drug are reduced. How is that better?
How about a weaker FDA that simply advised people on the safety and efficacy of drugs rather than forcing everyone to follow their rules? That would technically be a weaker FDA, but enable more freedom for patients and their doctors to pursue treatments that they found efficacious.
How about a weaker FDA that allowed the import of drugs from other countries? That would create international scale competition for the US drug purchasing market.
There are lots of ways that we could get creative in solving these problems if there weren't a monolithic government agency in the way of our personal freedoms.
Because when people are fucking dying they tend to try whatever options they have left even if they're not guaranteed to work 100%. So now the market every disease for anyone in a precarious position will be saturated by shitty chemicals tested with far less rigor.
Seriously, it's like you're just ignoring what happens in every country that currently does have weaker systems and who look up to the strong regulatory practices of the US and Europe for exactly that reason.
Pharma companies try to put the best face on data to get a drug approved. Analysts try to approach the data in an impartial way. If an analyst looks at the data and sees issues, it makes sense both ethically and financially to push for the drug not to be approved. Ethically, if the drug doesn't work as advertised, it is better that it is not sold as a cure. Informing the FDA of your analysis is a duty. Financially, if you think the drug doesn't work, it makes sense to short the stock in the belief that it won't be approved.
Pharma companies always present it as hedge funds trying to kill their products, but if the data is strong and the drug works, the analyst could just go long on the company instead.
Yes, it makes sense ethically to push the FDA not to approve a drug you think won't work. It also makes sense financially to bet that the FDA won't approve a drug that you think won't work. But it doesn't make sense ethically to do both, both directly because it creates a conflict of interest, and indirectly because that very conflict of interest undermines both the objectivity and the credibility of your recommendation not to approve the drug.
You are arguing ... what, here? That people with some sort of knowledge of a product/company/industry's prospects shouldn't be allowed to buy/sell positions in that company?
If I understand you (and I may not), and we were to come to the conclusion that "there ought to be a law", I have no idea how that would even be structured/written.
I don't think your view of the situation is any less biased. The problem is that there is very little incentive to ever reject a drug. Shorting is the only case I can think of and even that assumes the drug in question is important enough to actually move share price.
> Remember the FDA is primarily concerned with a drug not harming people, the extent to which it's actually beneficial is of secondary interest at best
Uh... no. Just from that page, it states the FDA ensures "that drugs and devices are safe and effective for their intended uses". If safety was the only concern:
1) Why does the FDA approve indications?
2) Why has there been prosecution (possibly violating the first amendment) for promotion of off-label uses?
3) Why does the FDA have a "breakthrough" designation that fast tracks approvals solely based on their effectiveness?
4) Why do Pharma companies frequently run new trials using different end points in an effort to get a drug approved when the original end points they used showed no effect? Why have there been cases when the FDA didn't approve a drug because they declared the end point used in the clinical trials was meaningless for the indication?
I think it is fairly clear that a shitload of time and resources at the FDA are spent deciding whether drugs are effective and if the data from the pharmaceutical company shows effectiveness.
Edit: I should also add the whole DESI review[1] in the 1960's shows your statement is complete nonsense. Drugs that the FDA previously approved for safety before 1962 were re-analyzed to classify their efficacy. So, the FDA reanalyzed thousands of drugs they had already determined were safe to look at whether they were effective.
From the entire page you found the one case where the word "effective" is used and it's used after the word "safe".
Here's what the page says about new drug applications:
The IND application must contain information in three broad areas:
* Animal Pharmacology and Toxicology Studies - It must be reasonably safe.
* Manufacturing Information - The company can make consistent batches of the drug.
* Clinical Protocols and Investigator Information - Detailed protocols for proposed clinical studies to assess whether the initial-phase trials will expose subjects to unnecessary risks.
The 3 requirements around the new drug application are all safety based. Later on they look at efficacy, but it's later in the process. Efficacy doesn't mean it has to be very effective just somewhat. Read the references for your Wiki page, the FDA is concerned with removing harmful drugs.
Given the multiple issues Martin has faced over the years, I think it's fair to say that 'impartiality' is the least of his motivations.
"If an analyst looks at the data and sees issues" - what are they? A stockbroker, or pharmaceutical scientist? How many are both?
It would only make financial sense to push for the drug not to be approved -if- you had a position that made a gain from that, but let's not pretend like Martin was doing so out of any source of ethics.
I don't care about Shkreli, I care about whether the practice is ethical.
There are plenty of pharma analysts who have used the same techniques who have medical degrees, have worked on clinical trial design at pharma companies, etc. They often aren't the names you see when pharma complains about people shorting their stocks because pharma only wants to point at the head of the hedge fund who has no life sciences expertise. They don't want the public to know about the dozen experts the hedge fund manager is paying to analyze the filings in order to challenge the filings and decide whether to short the stock.
No one complains if your analysis shows the molecule is great and you go long, it only becomes evil if your analysis shows the molecule is crap.
And if pharma analysts who have medical degrees want to analyze filings from these companies, great.
But the specific example is talking about Martin Shkreli doing this - a man whose formal education is a Bachelor of Business from CUNY.
And ethics have roots in motivations. Shkreli couldn't give two hoots whether the drugs had efficacy or not. He wanted them to fail approval only because of his position in the companies.
But who provides the quality standards oversight? The drug is apparently produced in India. What if pills were shipped to the US and it was found after the fact that many batches contained unacceptable levels of iron? Who to blame?
I'm sure Canada has decent oversight, but who wants to say that the solution is no direct US agency oversight, and that we want a "Pharmaceuticals-NAFTA"? It seems funding oversight with a "homeland" agency is one issue you could get bipartisan support on.
While sure, I doubt many have a problem with medical tourism, I'm not sure bringing drugs across the border intended for distribution without FDA approval is the answer.
On the other hand maybe countries working together at the agency level to ensure their oversight measures are in compliance with some agreed upon standard is a sane way to move forward. But then who maintains the list of approved drugs? Is that power given to some international body? Or does the FDA still have to approve drugs for distribution and only alternatives are brought in? And then what about drugs that are patented in the US (like this one), but freely available in other markets from other manufacturers?
It seems a worthy enough goal in general, but I don't think a fully libertarian approach to the problem comes close to being the right answer either.
I'm not a libertarian and I'm in favor regulations when needed, but in this case I think that recognizing drug testing and quality controls between countries that have similar standards would be a great help at curbing costs. "FDA approval" in this case should mean that the FDA could recognize that if agency X from Country Y says that a generic pharmaceutical is safe, you don't need to do the same tests again.
Of course this should work both ways - I'm from the EU, and I'd like to be able to get drugs manufactured in the US when they're cheaper and just as safe.
We import all kinds of stuff from all over the world and enforce quality standards very well. The current situation is more like protectionism than consumer protection in many cases.
While broadly true, this is an area where counterfeiting is easier, detection is difficult, enforcement is harder, and legitimate manufacturing is often expensive.
In other words, exactly the conditions to encourage all kinds of abuses.
That is all true but we don't have to buy from shady producers. Canadian and European producers supply their own very safe and mature markets. Buy the stuff that the UK NHS buys and at the same prices - their scale gets them good deals (with notable exceptions). This can't be worse than the current deal.
This whole thread is about a horrible abuse present in the current system. The potential for abuse in an alternate system does not disqualify it. There is no perfect system and bad actors are everywhere. However, I don't see terrible endemic problems in the UK, Canada or the Eurozone from importing drugs. I'm sure they exist sometimes. But in the entire rest of the G7 drug costs are less and their outcomes no worse than the US.
The counter argument is that most new drugs are developed in the US (due to the large profit margins here) and that the UK, Canada & the EU are essentially free riding off the US in this area.
Not sure I completely buy this argument, but there it is.
- Importing drugs from countries with reliable drug regulatory infrastructure would have substantial benefits, including a check on cost (sorely needed), and improved availability of less profitable drugs
- Other similar countries are doing this without seeing measurable negative health outcomes
then getting hung up on this 'major concern' that seems to have been rendered moot elsewhere makes most people worse off. Mentioning the existence of potential (and unlikely?[1]) downsides is not an adequate cost-benefit analysis.
[1] not that it's unlikely that there will be people who try to take advantage of the system, but it seems unlikely that given appropriate regulatory care, the downsides will be unmanageable to the extent that they cause the change to allow drug imports to have an overall negative impact.
[edited for clarity, including the addition of the footnote]
Did you miss the main caveat? Countries with good quality testing standards. If you have many countries with very similar quality assurance standards then surely it makes sense to rely on the work of others, or have a revised (shorter, cheaper) process for drugs to go through which have already been approved by certain countries.
I don't think anybody is suggesting mass importation of low quality Indian or Thai versions of drugs.
Even though it's $750 per dose now, since they have exclusive control over the market they could decrease it to whatever whenever they wanted to starve competitors.. probably after said competitors have invested in doing it.
This is a possible strategy, but is rarely used, as it is very risky (, it is likely to cost a great deal of market share in the long term). I have looked into it, and found very few examples of a company which tried to lure a competitor into a market, then under-sell them. The opposite (under-sell competition to gain market share then hike prices) also appears to be quite unpopular in the real market, for the opposite reason (it will surely gain market share in the short term, but can cost a great deal of money). These are very popular theories, and there are a few examples of those who have tried both strategies, but those examples are almost all cautionary tales.
caseysoftware's argument is not that they're trying to lure a competitor into the market, but rather the threat that, upon spending all the money to reverse-engineer the drug and enter the market, the incumbent could drop its price to $20/dose and the new entrant would be stranded with no way to recover their NRE costs in an economically relevant timeframe.
Both companies might be profitable on a marginal cost basis at $20/dose, but only the incumbent would be profitable on an average cost basis.
Because of this looming (unstated) threat, a competitor chooses to avoid the market.
There is no need to reverse-engineer the drug, as its under an expired patent—so all of the processes and techniques used are open and theoretically (if the patent office has done its job right) should be easy for a competitor to reproduce.
this is in fact one of the stated goals of the patent system: a limited monopoly in exchange for the advancement of public knowledge.
I was thinking less of the reverse-engineering costs and more of the hard production costs. Equipment, personnel, production time, etc. Those are non-trivial costs even if the complete formula and process is known.
right, so the drug that was getting sales of 600k per year was probably not worth the hassle of maintaining a compliant manufacturing line. does that not suggest a price rise was valid?
It's a time-arbitrage problem: there's no one else producing it (thus no free market) so they get to charge literally whatever they want since they're the only manufacturers, for as long as it takes a competitor to build another competing production line. This is reprehensible.
Once competition returns, the price drops again, and no one makes ludicrous profits anymore. But if the expected returns in competitive conditions are miniscule, there may not be sufficient incentive to produce a competitive market for this individual drug again.
Yes, I largely agree with the logic underlying your analysis (though not your conclusion), and did not mean my post to say that they were trying to lure competitors into the market, but more to say that they would (though I understand your reading of it probably makes more sense than my writing).
If you believe that the eventual average cost would prevent a new entrant, the new entrant would have to know (or believe that there was a high probability of) the entrenched producer would cut prices upon the second producer's entry. I do not find this to be particularly likely. In any case, the first producer would be betting on the likelyhood of the second producer's estimation of the likelyhood of a downward price change by the first. This strains credulity (, in my view).[1] I think that if anything, your argument proves too much, as no company would even enter a competitive market if what you describe is the case.
I'm not suggesting that companies avoid competition at all costs. I am suggesting that the right price to model when considering entering this market is $13-20, not $500+/dose.
I think its somewhat common, and even occasionally successful:
Amazon prime costs amazon money, and the original fire tablets were sold at cost - i suspect the new 50$ tablets are not very profitable either
Walmart has commonly been accused of this practice for various products
Google's original Nexus 7 tablet
I believe Apple ended up losing money at least a quarter or two on the app store/itunes
Granted there are few examples, but its certainly prevalent enough that its a legitimate business concern - the bigger disparity is that it takes a pretty enormous size for a company to succeed in such a tactic, I doubt turing has the kind of capital to lose that the likes of Walmart, Apple, Google and Amazon do.
Those are good examples, but I would argue that if a practice is sustainable (and often sustained), it is not problematic. If Amazon wishes to provide Prime at a loss to encourage customers to buy products which Amazon will make money on (enough to compensate for Prime), is there a problem? Would there be a problem if Amazon offered to ship things sooner in exchange for a promise that you would shop at their site more often (even if this promise plan cost them money)?
Buyers don't have to just go on price. They can take past behaviour into account. They could justify this in the name of ensuring continuing supply at a reasonable price.
So, even if this company does always price their product at less than the new generics they've probably lost the trust of the buyers.
I don't get this, the drug is available from Sigma[1] for $51.50 per 250mg, with a dosage of 50-75mg per day for a patient. So clearly someone can make it more cheaply. I get that Sigma is research chemicals not medical grade, but seems to me someone could figure this out. FDA approval must be the issue.
[1] http://www.sigmaaldrich.com/catalog/product/fluka/46706?lang...
One word: Bioequivalence. Having the correct active ingredient does not imply that drug delivery and efficacy are equivalent unless you can prove it by comparing it against a known and approved formulation in human volunteers, The burden of proof is significantly less than that of getting a new compound approved, but still a major sinkhole for money.
The correct way to handle this would be for the FDA to hand out compassionate use permits for patients to import their own drugs since it is clearly unavailable for a reasonable price in the US.
Maybe the big drug retailers (CVS/Walgreen/Walmart) could be interested in either owning or partnering with generic makers, as they can derive secondary benefits such as reputation/traffic even if a particular drug is temporarily unprofitable. They could also attempt "premium" generics like what Costco did with the Kirkland brand. You need a player that can benefit in other ways to prevent someone from gaining a monopoly through price manipulation.
Not familiar with the industry, but I don't think the problem can be solved this way (at least in the short term). Simply by the distribution of drugs/prices, there seems to be a very large number of low cost drugs susceptible to this tactic. There's ample space for them to pick a drug now and then and put abusive prices all of a sudden, while lowering the price as soon as competition threatens to move in. Additionally, the costs of reverse engineering a drug are high enough to make this kind of competition very hard. I see no other way than some regulation to at least force some hysteresis or stability on the prices.
The strategy is to prevent other companies from manufacturing the generic by withholding supply from them so as to prevent them demonstrating bioequivalence. ISTM that the least-onerous regulatory solution would be to require manufacturers to provide supply at cost to FDA on demand for testing purposes.
It seems amazing that supply can be clamped down to such an extent that a competitor literally couldn't obtain some samples for bio-equivalence testing, even under a false pretense if necessary.
Completely agree that if someone is willing to pay the list price, they should be guaranteed availability within some reasonable time-frame for testing purposes.
I assume if the only drug line is effectively "shut down" then there's no way to run bio-equivalence and to bring on a new manufacturer they must test some other way? I guess whatever that procedure is, should take effect if the pills can't be ordered for testing.
"Or the government passes a law capping how much you can raise the price of a generic drug over so many years."
Congress, controlled by Rebublicans, right now, won't let government get involved. I don't even want a cap. I would just like governmental over site/approval on Pharmacutical accuisition.
I asked my pharmacist why my generic drug(not orphan drug, noting fancy) is going up in price.
I don't know if she's right, but she told me big Pharmacutical companies are buying out generic drug companies, and raising the prices of the generic drug, or shutting the newly bought company--so they can keep supply down?
I don't know if this is going on, but i've heard it, from at least, two sources. I know it sound extreme, and hard to imagine, but these pharmacutical companies are loaded with cash? Plus, they have government protection--can't buy from Canada, etc.
So, in the end, we are going to be at their mercy?
As to just effecting Insurance Companies, my prescription formulary excludes so many drugs, or makes them difficult to buy; I pay out of pocket. These drug prices are coming out of our pockets.
(It's not just this future bottom boy at some federal correction facility, it's most of these Pharmacutical companies, or hedge funds? I can't tell the difference anymore. Oh yea, Biomarin seems just as shady, but because people don't understand what they do, they seem to just get a pass?)
That's exactly what would happen, but the generics companies can't procure sufficient samples due to the changes in how Daraprim is distributed. So long as Shkreli is able to control distribution tightly enough, there's no worry about a generic coming onto the market.
I don't completely understand how they can effectively prevent generics companies from producing it (even through tightly controlled distribution), but if that's the case, I believe that should be the story here as opposed to the bit about raising prices.
Under normal market conditions, either the demand and price will naturally incentivize generics to enter the market (even at high costs), or this is really not much of a story because the total addressable market is so small that price * demand won't significantly move the needle in the books of insurance companies who will be paying for it. If total addressable market is significant and the producers can manipulate the market in ways outside of patents to abuse monopoly power, then that's the misdeed (in my opinion), not the raising of prices.
In other words, with very few exceptions it's futile to blame a company for their prices. On the other hand, if unscrupulous manipulation of a market is the culprit for unreasonable prices, that's where we should demand/enforce a higher standard.
Why would they need samples when the chemical structure is so widely known[1]? It's not like it's a biologic where sequence and other formulation details are critically important. Can you explain?
Edit: I noticed that paulmd, further down, explained why this is important. I didn't realize the rules were this stupid. The FDA should be able to force companies to make their product available for comparison testing. It's insane that it isn't the case.
Formulating the generics isn't the hard part (well, beyond the chemistry but that's straightforward enough - once you know something can be done, it's just a matter of time and effort). Once a generics company does that, they have to perform bioequivalence testing. It makes a lot of sense, because generics can have different inactive ingredients (fillers, etc.) that can still affect the patient.
But in order to perform that testing, they need examples of the brand-name drug to test against. If a manufacturer can prevent them from gaining access to those examples, then the generic is never coming to market. They can't get a doctor to just write up a prescription for somebody, so they have to go through established distribution channels. There are a lot of other, equally nasty ways manufacturers can use to try and forestall generic versions of their drugs. It's not easy to do, because the laws are written to incentivize generic competition, but if a company thinks it's profitable enough to try (and certain factors are in their favor, like with Daraprim), they can.
The FTC has a really interesting document available on their ongoing efforts to fight anti-competitive pharmaceutical practices if you're interested:
So perhaps in these cases we should place the blame on certain shortcomings of the FTC's regulation rather than the companies who take advantage of the loopholes. I don't agree with the practices of this company, but if the loopholes exist, I'm not sure we have much reason to expect companies to behave any way but capitalistically.
Not american but yeah the law enforcement agencies should be more careful about these loophole or at least try to fix them as quickly as possible once they are found out. Maybe there are some other incentives (sometimes) at the top.
But none of that excuses what these guys (I don't have any reasonable word to describe them). Its like saying there was this loophole that makes this kind of murder (not self defense btw.) not punishable by law so I went ahead and killed 50 people. If people dies from these diseases I don't see how it's not fair to put these guys in some murder trail. I wish we had some reliable tools to detect lies and CEOs and PR guys like these had to pass the test before such claims and actions based off such claims (we are trying to make a better drug) could be taken.
When a private actor is exploiting a flaw in the regulatory system, it might be easier to fix that flow or strengthen other parts of the regulatory system (eg perhaps there are remedies in antitrust law), rather than impinging on a property interest because we don't like the outcome.
Here the problem is that other manufacturers can't take up making these drugs at a sensible price because they have to get FDA approval for their copies, and doing that requires test comparisons with the original drug which you propose to copy to ensure that they behave identically. So either we need to change that requirement to a different testing approach (eg proving your copy is good through chemical assay rather than in a clinical trial) or by making licensing contingent on cooperation with regulatory priorities (so if you want to sell your off-patent drug, you have to make samples available to would-be competitors or provide the FDA with samples on request and at cost).
Price gouging on life-saving pharmaceuticals is not a poor business decision. It's an excellent business decision. But it is also a crime against humanity.
I have re-read your comment a dozen times, trying to grasp what you mean, and come up short each time. Do you mean to say that whenever a business makes a decision that you disagree with, you (or someone else) should feel morally entitled to go a kill the individuals working there? Or do you mean that whenever a business makes a decision that you disagree with, the state is entitled to focibly take the company?
I personally find both to be morally problematic (to say the least), and unless you can establish a viewpoint neutral rule for this new criteria for nationalization (or murder), it will be enforced arbitrarily and capriciously.
would you complain about the state simply setting up a plant to manufacture and distribute a generic version of the drug, thereby driving the predatory company out of business? that seems like it would be an ideal solution that doesn't involve forcibly taking anything away from anyone.
I would have no moral objections to an alternative producer being set up (by the government or anyone else), so long as nobody is forced to buy from either one.
There may be some practical issues (such as the regulator being a member of the same organization as the regulated producer), or issues with the scope (and scope creep) of the project, but those are only related issues.
So you could be in favor of nationalisation, by way of making it common property, of the IP that supports his business, but not nationalisation of the business itself.
The IP that supports the business is already common property. As far as I understand it, the outrage here stems from exactly this fact, that the IP is common property, but they dramatically increased the prices. I am not sure what the reaction would have been if this was a patent-protected drug. Presumably the patent exists to allow for this type of dramatic price change (; though I do not support the current patent system).
I understand that they have currently secured a de-facto exclusive distribution right for the US market from the FDA. Ok, it isn't classic IP, but it has the same effect and as far as I understand it is transferable property, as otherwise this company would not have been able to acquire the rights in this way.
Check out the book The Sociopath Next Door - it talks about how there are so many sociopathic people today because societies used to conveniently do away with them. I'd guess this is similar to what the person is referring to.
I am trying to understand what the case for nationalization is in this instance. Is it an arbitrary emotional standard, or a rational viewpoint-neutral standard? I am wary of emotional and viewpoint-dependent standards.
Please also review the Hacker News Guidelines.[1]
>Be civil. Don't say things you wouldn't say in a face-to-face conversation. Avoid gratuitous negativity.
When disagreeing, please reply to the argument instead of calling names. E.g. "That is idiotic; 1 + 1 is 2, not 3" can be shortened to "1 + 1 is 2, not 3."
He's no different from the other Wall Street thugs. Though he being an outsider may stand out more and make an easier target for NYT compared to his other colleagues.
From an economic and policy perspective, unfortunately, Turing is doing everything right. Makena is probably not a great comparison as its used for prevent early birth, which is something of an edge case for certain pregnant women, versus Daraprim, which is a more common drug. It is the only FDA approved drug for Toxoplasmosis. According to wikipedia: Up to half of the world's population is infected with toxoplasmosis.[8] In the United States about 23% are affected[9] and in some areas of the world this is up to 95%
What no one seems to be discussing here, is why there is such a long approval process from the FDA for generics? Ideally, someone should be able to ramp up production of this quickly, but apparently it takes years just to get the FDA to test your generic, even if its detected in the lab as being 100% chemically identical to the now expired patented drug. Turing is using this lag time to its benefit, but why aren't we yelling at the FDA to move faster on this kind of thing? I guess this might be moot because Turing can simply drop prices to scare off the investors of this hypothetical generic competitor. Say its x amount to launch this and they need to sell at $25 a pill for 10 years to break even. Turing now drops its price to $24 a pill. They're going to have a lot more flexibility here than someone entering the market from scratch and as long as they're selling above the old generic rate, they will continue to make serious money.
Also, from perhaps a less practical POV, considering what the government spends on medicare (3% of our GDP), perhaps it should be building its own generic drug producing plants. Private industry has 20 long years to make profit on patented drugs, but after that it should go into a federal program. This avoid these situations entirely, cut costs, etc. Or regulate prices on generics, or heaven forbid, finally bite the bullet and migrate into a Euro-style socialized medicine/single payer system and be able to bargain with big pharma as one 800lbs gorilla as opposed to hundreds of 6lbs capuchins.
Expecting people seeking profit to "act nice" is asinine. We can insult Shkreli all day but it doesn't change the status quo. Even if he's an outlier, how long is your average white collar criminal case resolution, assuming he's even doing something illegal? 2, 3, 4, or even 5 years? That's a long time for a drug to be off market or be unaffordable to people who need it.
Right now a lot of people are looking at this business plan with envy. In fact, this kind of generic trickery is status quo - see the "reformulations" of generics and then stopping production of that generic. The system is broken if it allows this kind of thing. What we need is a system that's not broken and that can't be gamed this easily. The current regulation model guarantees companies like Turing doing exactly this.
Sadly, online discussions often degenerate into witch-hunts with the assumption that if we stop this one guy, then everything will be fine. I guess its much less emotionally satisfying to discuss systemic political or regulatory issues.
From an economic and policy perspective, unfortunately, Turing is doing everything right.
This is an economically misguided point of view. Free market decision-making can only be argued to be optimal in a free market system, which pharma is not, a distinction which the decision-makers certainly were intelligent enough to understand. Free market mechanisms either need to be put in place, or we need to stop allowing its actors to behave as though it were one. As it stands, even from an economics point of view, this sort of behavior is simply immoral.
It gives economics a bad name when you try to argue that such decision-making is economically defensible. It is never economically optimal to make decisions that can directly lead to the deaths of citizens in the host society, in exchange for higher profits. The reading of free market theory with which most people, including its founder, would agree, is one where the goal is to maximize utility, not wealth. This is a vitally important distinction, and one that the layperson often overlooks. Without it, a free market system becomes nothing more than a war of sociopaths. [1]
Sadly, online discussions often degenerate into witch-hunts with the assumption that if we stop this one guy, then everything will be fine.
It's not sad at all. People are understandably outraged, as it is a natural human reaction to such callous life-and-death decision-making. If you truly believe in your statement, I'd reflect on why you are unable to relate to the majority of people around the internet who are very angry about this.
I'm not sure I understand the point about economics being about utility vs. wealth. If its free market then aren't people free to choose between utility vs. wealth and in such case pure free market don't have much defense against a few sciopaths trampling all over the not so sociopaths?
Since all markets are human inventions--there's no "free market" particle--what you're getting at is:
Let's invent a system that makes explicit the choice of dollars over human lives, and let's call that "the free market".
And of course, since freedom is one of those ideas that, in popular use, has been oversimplified to uselessness (e.g. freedom is good, more freedom is more good, without nuance), this "free market" thing sounds like inevitably good--the more freedom, the better, right?
Even if it makes us uncomfortable, how can you say no to the "free market"? Even if, as you yourself seem to acknowledge is vulnerable to sociopathic manipulation, if (some, maybe only a few, maybe even those sociopaths) people want to build a system that normalizes choosing dollars over lives, how can you resist the "free market"?
Easy: it's all human inventions, and I for one don't want sociopaths telling me how to build an economy.
I hate to agree that this sort of manipulation is inevitable in a free market, but I do. It's either that, or broadly, no more cheap #$%^ on Amazon. So what do you pick? Occasional sociopaths or social good at the expense of everything else getting more expensive?
Because assuming the majority loves buying cheap #$@!, this seems like an absolute poster child for the US government to step in and countergame him by directly funding and fast-forwarding new generics. Just announcing such intent ought to be be enough to ruin Martin Shkreli's career, no?
That's easy, I'd pick social good. If I had my way in building a system, I'd absolutely work to make it as least vulnerable to manipulation by sociopaths as possible. Not being a sociopath (and I'm not saying that you are, either), I really can't see a downside to picking social good over lower-cost shit from Amazon.
Building those sociopathic levers in by design? No way.
Ohh I prefer regulation with the hope for honest regulators. I was trying to understand the parents angle.
As for the enlightened self interest its really tricky. Enlightenment isn't easy and if that directly conflicts with his primary job (for business earning money) its much more difficult to address that. Also it forces enormous amount of co-ordination on the side of the customers which is difficult to achieve in every little matter. On the other hand a regulars primary job at least is to think the overall good. Now whether we can choose a proper regular or regulator having a second interest (corruption) is a different matter. The fact that we choose wrong regulator (aka the customers of regular cannot wisely choose even that) only makes me think free market can never be as rosy as some paints it to be.
It's almost never pointed out that Adam Smith, in his free market theory, was arguing for the efficacy of "enlightened" self-interest. I encourage readers to research this aspect of his theory, and how it contrasts with "unenlightened" self-interest. I think most reasonable people would agree that Adam Smith would categorize this CEO's behavior as unenlightened.
The problem is that the economic system that not only allows this, but incentivizes it. Witch hunting isn't going to fix a fundamentally broken economic system. We need to admit that our system is not optimal, and fix it. Rational people are always going to act in their own best self-interest.
That brokenness is entirely dependent on what you mean by self-interest. I recommend reading up on the concept of "enlightened self-interest," which was popular during Adam Smith's era, and theoretically leads to far less "broken" systemic outcomes.
>It is never economically optimal to make decisions that can directly lead to the deaths of citizens in the host society, in exchange for higher profits.
When the short term profits are great and the long term costs are too far for you to personally realize... it seems to make great sense.
Now it may not be optimal for society at large, but that doesn't matter when society at large isn't making the decision. For the one choosing, short of laws to punish them and with methods to launder any social guilt, it is economically optimal.
The reading of free market theory with which most people, including its founder, would agree, is one where the goal is to maximize utility, not wealth. This is a vitally important distinction, and one that the layperson often overlooks.
I would argue that human life is not limitless in utility and the free market establishes a price range on it.
Like it or not, there is a price tag on the utility of a human life. If you need to spend 100k per year on drugs to live and you cannot make 100k per year, then the free market has decided that your life is not worth the cost because you are not creating 100k worth of value to trade 100k worth of drugs you are taking out of the market.
I don't think it is reasonable to say that a market in which you arbitrarily decide that a human life has unlimited utlity is a "free" market at all. We can all agree that jacking up the price of a life-saving drug to save more money is despicable, but we would be lying to ourselves if we pretended this wasn't part of the free market.
The sentence "If you need to spend 100k per year on drugs to live and you cannot make 100k per year, then the free market has decided that your life is not worth the cost because you are not creating 100k worth of value to trade 100k worth of drugs you are taking out of the market" is simply not true.
The free market doesn't say anything about the worth of a life being only equal to how much an individual can earn. It says the market price of something is equal to what people are willing to pay for it. We have things like insurance that allow us to have more medical care than we could afford as individuals, and that is completely within the concept of a free market.
I did not mention insurance to simplify the discussion. Why would I bother listing all the possible situations that don't even change the outcome?
Of course you can buy insurance as a sort of reverse lottery to cover your costs. But you paid into that insurance and it is not required to cover everything. The co-pays/insurance can also bankrupt you.
And my main point still stands. If you cannot afford the cost of life saving medication, with or without insurance, then the free market has decided that your life is worth less than the cost of medication.
Saying the free market doesn't put a cost on human life and that it doesn't encourage price gouging is simply false.
I suppose the statement you are latching onto is where I said that it is never economically optimal to allow someone to die in exchange for higher profit, so allow me to clarify.
In this case, it seems nearly impossible to make a concrete case that links this monopolistically-determined price increase to something that comes close to morally justifying the potential loss of human lives.
And as we know, pharma is not a free market in general, and is certainly not in this specific case, so the idea of the free market setting the price on lives seems inapplicable here.
I don't see how pharma is not a free market in this case.
The drug in question isn't even protected by a patent anymore. Other companies are free to create a generic version of it.
Government regulation has nothing to do with this. The free market has everything to do with this. The price of a life saving drug is worth either all your money or however much the seller wants to charge for it, as decided by the free market.
This is a monopoly, which is, by definition, not subject to the price discovery mechanism of the free market.
If you mean that eventually, some sort of force will break up the monopoly and find the true free market price point at the intersection of supply and demand, that is cold comfort to those who may die before that state transition completes.
One of reasons Turing paid $55 million for Daraprim, rather than just produce the chemical compound pyrimethamine, is because it's an approved Medicare drug.
I'm not old enough to use medicare so I don't know the details.
But I am willing to bet that if someone started making a cheaper generic version of Daraprim, it would put on the approved list. The reason pyrimethamine isn't on the list is because no one wanted to make a generic version that hardly anyone uses for $1 per pill.
And even if it wasn't, the drug was being sold for $1 per pill just a few years ago. You can easily pay that without any insurance at all.
It is not patented, and no law forces you to only use the brand Daraprim. If someone created a generic replacement, it would be on the fast track to be approved like every other generic.
I don't think you or ken47 have more than a layman's understanding of the subject.
Daraprim is a brand name. Pyrimethamine is the active ingredient.
When you create a generic, it must be checked that it is roughly equivalent to the approved version. Meaning there are no impurities and you digest the drug about the same rate which is determined mostly by the inactive ingredients. This process is relatively fast, often taking 1 year or less compared to the decades it takes to approve a new drug. And if you are going to be saving medicare millions of dollars, you can bet it is going to be put at the top of their todo list and will probably be tested within days.
To say that this is a government monopoly because you can't sell your drug from day 0 without any testing is quite a stretch.
>I don't see how pharma is not a free market in this case.
It's a monopoly because it has government-granted monopolistic power. Generics can go through the approval process and be granted similar power, making a duopoly.
That doesn't change the fact that it is a monopoly right now and definitely not a free market. Seems like someone has a case of confirmation bias.
>I'd reflect on why you are unable to relate to the majority of people around the internet who are very angry about this.
The same way I don't relate to the "Obama is a Muslim" narrative on the internet or "9/11 was an inside job" narrative. I think appealing to outrage culture on the internet isn't the bulletproof argument you think it is.
For I agree with drzaiuslordofthenukedfallenearthgetyourhandsoffmeyourdamneddirtygorilla even though I think I'm not a sociopath. And that's because I also think this is an excellent case for the government to step in and provide the strong parental middle-finger to Martin Shkreli that he deserves so we can still get the free market that does bring so much good and yet also punish the sociopaths who exploit its unavoidable corner cases like this. See Goedel's incompleteness theorem about why, broadly, there will always be corner cases (yeah yeah inconsistent statements in any consistent system, sue me).
See also I prefer Obamacare because all the other attainable alternatives are worse (In the same way I would prefer single-payer like medicare, but unless Bernie Sanders is our next president, we're not getting it).
It's way down there in the article, but Turing's distributor (Impax) is tampering with the generic approval process. They use a controlled distribution strategy where you need to buy it directly from them, and they won't sell it to anyone who uses it for approval testing. Without the namebrand drug, there's no way to prove that your generic is equally efficacious, and thus no generic approvals and no competition.
You'd need a prescription to get it. And I don't believe it's legal for a person with the prescription to sell or give prescribed medicine to other other people.
Easier said than done, as toxoplasmosis promotes risky behavior of the sort that tends to be incompatible with a research career.
Of course the real problem here is the subversion of the controlled-distribution mechanism to serve a private rather than a public end, a tragedy of the regulatory commons if you like. The basic idea here is good; you don't want drugs like thalidomide being freely prescribed because if they find their way to a pregnant woman consumption is likely to result in horrific birth deformities. This is an abstraction to many Americans because the FDA restricted Thalidomide early, but growing up in Europe I became aware of it from quite a young age because there was a small-but-distinct demographic cohort of people with characteristic deformities.
But what's happening here is the drug manufacturer falsely claiming that there's a serious public health risk in order to get into the controlled-distribution system, and then using that to prevent any potential competitors from entering the market. I imagine that if the FDA had declined to make any of these drugs controlled-distribution then the strategic response would have been to hire a PR firm to plant stories about how the FDA doesn't care about medical vulnerabilities.
I would disagree that many people are looking at this business plan with envy. CEO's of "real" pharma companies know this business model is possible, but no one bothers with it. I think this is partly out of ethical standards (yes, CEO's, even pharma CEO's, can possess this) and partly out of knowing the inevitable backlash makes it not worth it for the business and their personal reputation. Again, while KV isn't a perfect example, their brazenness ultimately bankrupted them, and most of the industry took note. So what you get is a process that only attracts extremely reckless and unethical people like Martin Shkreli, who unfortunately exist in this world. But there demonstrably are not 1,000 other guys trying to take Martin's place, he is an outlier.
Finding ways to make generics super-profitable is definitely common. Turing is, arguably, the ugliest of the bunch, but there's more than enough ugly to go around. Your mythical "honest and kindly pharma CEO who wants nothing but for everyone to have cheap drugs" doesn't exist. Its Shkreli's all the way down:
Bill Moyers: For example, last February, before its patent expired on Namenda, its widely used drug to treat Alzheimer’s, Forest Laboratories announced it would stop selling the existing tablet form in favor of new extended-release capsules called Namenda XR.
The capsules were just a reformulated version of the tablet. But even the minor change prevented pharmacists from substituting generic versions of the tablet.
Result: Higher profits for Forest Labs and higher costs for you and me.
Another technique is for drug companies to continue to aggressively advertise prescription brands long after their 20 year patents have expired, so patients ask their doctors for them. Many doctors will comply.
America is one of few advanced nations that allow direct advertising of prescription drugs.
A fourth tactic is for drug companies to pay the makers of generic drugs to delay their cheaper versions. These so-called “pay-for-delay” agreements generate big profits for both the proprietary manufacturers and the generics. But here again, you and I pay. The tactic costs us an estimated $3.5 billion a year.
Europe doesn’t allow these sorts of payoffs, but they’re legal in the United States because the major drug makers and generics have fought off any legislative attempts to stop them.
America is one of few advanced nations that allow direct advertising of prescription drugs.
To quote some comedian's take on this, 'in my country, your doctor tells you which drugs he wants to prescribe. In America, it's the other way around.' It's astonishing to me that direct-to-consumer pharmaceutical advertising is so rampant here, when somehow we managed to eliminate this for tobacco advertising without causing the 1st amendment to self-destruct. Besides the first-order consequences of medically ignorant consumers besieging their doctors with requests from drugs they can't even pronounce properly, it's also created this bizarre culture where illness is normative and every medical condition has to have a cute nickname or acronym - it can't be long before we start seeing people break up in soap operas because 'I love you...but my hep C isn't compatible with your A-fib!'
>I think this is partly out of ethical standards (yes, CEO's, even pharma CEO's, can possess this)
Not buying it. I'll buy the fallout argument, as that will hurt them monetarily, but I'm not guying them have any moral or ethical concerns with those being hurt by high drug prices.
What's more ethically questionable: spending billions in capital developing drugs to save lives, and trying to make money off that, or spending billions of capital on endeavors like entertainment services that don't save lives at all?
>spending billions in capital developing drugs to save lives
Loaded question. This assumes they are doing it to save lives instead of doing it to make money.
And doing it to make money, given the patent system, is the less ethical option when others would do it to save lives but are now forbidden to do such.
> Loaded question. This assumes they are doing it to save lives instead of doing it to make money.
Not really. It assumes that the drugs save lives. If you pay $X for drug that was developed to save your live or $X for an identical drug that was developed to do a job and turn a profit, it's the same $X and the same drug.
Why people are doing things is generally less important than that they are. This is one of those cases. Demanding a particular mindset when all other things are equal is a little bit silly.
And it does matter because of how one would react. If your end goal is saving lives, you wouldn't spend a lot working for a cure to baldness and you wouldn't buy rights to a drug and then jack up the price just because you could.
OK. Then what do you think is the correct course of action for someone whose goal is to save lives? As opposed to making money, adopting temporarily your implicit contention that the two are opposed.
Preferably a sustainable course of action that allows for future actions to take place. A one-shot is generally useless on any kind of real timescale.
Who cares why they're doing it--the point is that their money-making endeavors have the effect of saving lives, while other companies spend tons of capital on things that do not have the effect of saving lives.
And who is out there willing to spend billions developing new drugs while giving them away for free? The patent system certainly isn't stopping those people.
> The patent system certainly isn't stopping those people.
The patent system does prevent people from getting at lower costs. I continue to have hope for countries that invalidate drug patents, and for further methods to be developed to drive down the cost of drug production (so as to reduce the barrier to entry for drug production).
If the patent system doesn't stop the non-profit development of drugs, then the breaking of patents and the pirating of patented drugs should in no way significantly dent pharmaceutical company profits, right?
It's from 2011, a quick search didn't find a more current report:
"After collecting data on indicators, PATH project teams use an online tool to enter results, which are aggregated by phase of development. A team developing a malaria vaccine, for example, reports completion of clinical trials with children in Mozambique. This result is aggregated with data from other teams conducting clinical trials of other products.
Top-level 2011 findings include the following:
PATH had 199 technologies and products in our development pipeline in 2011. Fifty-one products moved forward one or more phases in the pipeline. Six products were registered, three were licensed, and two were prequalified by the World Health Organization.
PATH had activities in 68 developing countries. We trained more than 91,000 people in 2011 and worked on 101 policies, strategies, and guidelines. At the global level, eight guidelines and one strategy supported by PATH’s work were approved by global decision-making bodies. At the national level, 36 policies, strategies, and guidelines supported by PATH’s work were approved.
More than 74.5 million people benefitted from PATH’s work. More than $100 million in funding was mobilized to scale up PATH-championed interventions.
PATH was awarded 83 grants valued at nearly $160 million."
Regarding the Gates Foundation, they don't directly research drugs, but contribute heavily to those working on polio, malaria, and HIV.
When J&J sells an antipsychotic with bad side-effects for off-label uses in contravention of an order not to, that's worth about 100,000 Justin Biebers.
Don't do that, that's a cop-out. Please answer the question directly. And, it's really not clear if everyone "knows better than that". Clearly state what is the "better" explanation (seriously, I'd love to hear the explanation), don't suggest he needs coffee or whatever -- that adds absolutely nothing of value to the conversation.
I don't know who you are, but my reaction is that a comment like this shouldn't be stated in the exact tone you've chosen/reacted with. (I looked through your past few comments, and a lot of them are the same way - "There is no shortage of scammy software companies like AVG, but what always cracked me up about AVG was their logo.")
I like the fact that HN is a particularly civil place - it's in the guidelines. Now granted, AVG or Martin Shkreli aren't a member of the HN community in a very narrow sense (though I'm sure AVG engineers read it), unlike a startup founder. But I would appreciate it if you would hedge your statements, lead with the facts, and make them subjective.
It may sound like reserved understatement if you do so, but people here know how to read between the lines. I don't object to any of the facts you've presented, in fact your view is appreciated here, and you don't have to be "neutral", you're not Wikipedia.
I just wish you would take a moment and phrase it more carefully. HN has a rule, no gratuitious negativity, and civil discourse. (Again I'd like to emphasize that I enjoyed reading your take and the facts you've presented.)
EDIT: This comment is now at -4. I'm sorry, downvoters are not following HN policy. "Simply put, Martin is a sociopathic criminal with a well-established, and consistent track record of deceit, recklessness, failure, and just plain old stupidity" without references, and "In all my years of investing, he is one of the most unique scumbags I've ever come across" is extremely inflammatory. As you can see from the number of replies that it has generated. We don't need to make HN reddit.
The facts speak for themselves - when they're presented.
I didn't downvote but I do disagree with you. It's a blunt opinion, but one supported by reference to the article and to the cited litigation, from someone with meaningful perspective as a professional investor - in the same way I'd be OK with a professional crypto researcher saying 'Product X is blatantly insecure, and Software Company Y is dishonest when it claims otherwise,' or any number of other contexts.
I'm with you on thinking one should be diplomatic most of the time absent full possession of the facts, but I don't think one should hedge one's personal experience as long as its appropriately qualified. In this case I saw an unusually blunt opinion, but one formed with additional information that I don't have access to. I don't take the opinion at face value, but it expands the scope of the discussion with additional data rather than being purely a reaction to the NYT article, not least because the author of the opinion is signaling a willingness to risk reputational damage by making such blunt statements.
I have absolutely no objection to the opinion and said about three times that I was glad to have read it. The exact same opinion can be worded in different ways. It's not about being diplomatic, it's about being informative versus inflammatory.
If you try to read it literally what does "one of the most unique scumbags I've ever come across" mean exactly? It's not possible to translate this into an informative statement - it contains too little information, and "one of the most unique" is not even an oxymoron, it just has no informative content. (Some people consider "most unique" to be a grammatical error.)
So if it's a reflection of the author's emotions, it should be stated in those terms. But if the author takes a moment, he (or she) can make it far more informative. This isn't reddit.
I found it meaningful insofar as the the poster was locating the subject far out on the tail of a normal distribution, and I've had enough contact with the hedge fund world to have a sense of the distribution in question (and how people express themselves in that social context). I do see your point but I guess we have different communication styles as I found the use of language more informative than inflammatory. De gustibus, non est disputandem.
Anyway, Martin is running the same playbook at Turing that he did at Retrophin, which is to find some old orphan drug and raise the price by orders of magnitude. It's believed insurers won't have a choice but to pay since there are no competitors. If you want to see how this has worked out in the past, feel free to google "KV Pharmaceuticals Makena" which did something similar a few years ago, only to have it bankrupt the company (which would be an outcome completely consistent with Martin's history and tactics).
For a fun read, check out the lawsuit filed against him by Retrophin. In all my years of investing, he is one of the most unique scumbags I've ever come across.
http://www.sec.gov/Archives/edgar/data/1438533/0001193125152...