In the
pharmaceutical world, week of September 21, 2015 was interesting. Martin
Shkreli (1) of Turing Pharmaceuticals raised the price of an old
drug (Daraprim) from $13.50 to $750.00 per tablet overnight. Suddenly the high
price move is being abhorred. Shkreli’s move and rationale has been
equated to greed and arrogance. This has led to all kinds of pro and con comments
in press (2,3,4,5,6). Even politicians, who generally are significantly
influenced by the pharma lobby jumped out and called for price restraint (7).
His explanation for the price increase included from need to make money
irrespective of the past selling price to pay for his acquisition of the drug
license, lack of customer service and need to pay for high R&D costs to
customer service (8). Most likely Shkreli has no clue of the
manufacturing cost and what is involved. Having been around for the last sixty
years, no R&D is involved. I am not sure what kind of customer service was
missing.
Question “why
suddenly drug prices are being increased by high multiples?” Dr. Peter B. Bach (9) from Sloan Kettering makes
interesting points “To criticize drug pricing is to raise a more difficult
question: Is any price too high to save or extend a life? But in the U.S.,
prices are rising not because they must, but because they can. No entity holds
them down. Instead, state and federal regulations require nearly every insurer
to provide access to all cancer drugs, which means the companies can charge
what they like. Doctors, meanwhile, are trained not to consider the cost of a
treatment when making medication choices.” He makes very constructive
suggestion on drug pricing “If we want innovation, and we certainly do, the
solution to affording it lies in paying only for its value.”
Recently
other companies have joined to increase their prices (7,10). Suggested global price variability ($900 to $30,000) for
six month Tuberculosis course is astounding (11). There have been
other price increases over the years but they were not publicized.
Most of the pharma conversation
in press is generally about preservation/increase of revenue, profits and justification
of high R&D costs to develop new drugs even if they were for less than
100,000 patients (about 14 patients per million) worldwide. Drug with sales of
one billion dollars per year is considered a blockbuster success even if there
are 10,000 patients worldwide (one to two patients per million) paying $100,000
per patient.
Like in every
business, pharma also has R&D and manufacturing costs. R&D costs are
considered the untouchables. No one wants to accept any other explanation of
these high costs as the press information, even if it is wrong, is considered sacrosanct.
Discussion of inefficiencies in R&D is off-limits from any conversation.
At times pharma’s high
cost are blamed on manufacturing and regulations (12). There is no
mention of any effort to lower manufacturing costs or marketing costs. Very few
understand the cost breakdown. This is due to lack of understanding of how to
calculate the factory costs of the APIs and their formulations. Every inefficiency
cost of manufacturing process is passed on to the patients. Patients pay, as
they want to live.
Irony is that in
the last few years pharma companies have not developed many drugs for a large
patient base (e.g. more than five million) worldwide. Whatever has been
developed, as stated above, is for small patient base. They are expensive and covered
by mutually subsidized healthcare systems or pay from their own pocket. Some physicians
and pharmacy benefit managers are balking to prescribe or cover these drugs (13).
Price of Hepatitis C virus has been questioned.
In the United
States, due to political influence, Medicare cannot negotiate prices. In many other
countries, there are price controls and negotiated pricing with national
healthcare purchasing. Pharma companies definitely do not like that. Generics love
the high prices they can get for their products in the developed countries even
after repeated product quality mishaps.
There is no
question that innovation is needed in pharmaceuticals. However, the question is
“are these innovations for the selected elite?”
Drugs
are supposed to be beneficial for masses. However, with current drug prices,
pharma companies while making profits are driving families to bankruptcies. High
prices are definitely not giving pharma a good name. Is this the legacy pharmaceutical
companies want? I do not believe so.
It
is my conjecture that for pharma to move from about 10-15 patients per million (=about
85,000 patients out of 7.2 billion global population) and high priced drugs to 7,000
patients per million or higher number (=about 5 million patients out of 7.2
billion) and affordable drugs, significant effort would be needed to discover
drugs that are highly effective (no me-too) for common diseases. If such drugs
are discovered they would also be an opportunity for significant manufacturing
technology innovations.
Pharma
(14) might achieve its projected $1.3 trillion sales in the next few
years but it would have to pick its patient base. Would it be 10-15 patients
per million, mostly in the developed countries or 7,000 patients per million
worldwide? Do you think the later would happen?
Girish
Malhotra, PE
EPCOT
International
1. My Lunch
With Shkreli: What We Should Learn From Pharma's Latest Monster: http://www.forbes.com/sites/matthewherper/2015/09/24/my-lunch-with-shkreli-what-we-should-learn-from-pharmas-latest-monster/
accessed September 26, 2015
2. Turing to Cut Price of Drug Daraprim After Increase Sparks
Outcry: http://www.wsj.com/articles/turing-to-cut-price-of-drug-daraprim-after-increase-sparks-outcry-1442970732
accessed September 26, 2015
3. The Assault on Drug Innovation: http://www.wsj.com/articles/the-assault-on-drug-innovation-1442964103#livefyre-comment,
accessed September 26, 2015
4. New Weapon in Push to Lower U.S. Biotech Drug Prices: http://www.wsj.com/articles/new-weapon-in-push-to-lower-u-s-biotech-drug-prices-1442965627?tesla=y
accessed September 26, 2015
5. What Cancer Doctors Don’t Know About Cancer Drugs: http://www.wsj.com/articles/what-cancer-doctors-dont-know-about-cancer-drugs-1442961874 accessed September 26, 2015
6. Biotech exec Martin Shkreli has history of tough tactics: https://www.bostonglobe.com/business/2015/09/25/how-martin-shkreli-biotech-pariah-put-cancer-patients-risk/fxjUV8alj28LESmmOF7IbO/story.html
accessed September 26, 2015
7. Lawmakers Seek Answers on Valeant’s Price Increases http://www.wsj.com/articles/congressional-democrats-seek-subpoena-of-valeant-over-drug-prices-1443468385
accessed September 29, 2015
8. Drug Goes
From $13.50 to $750 Overnight: http://www.bloomberg.com/news/videos/2015-09-21/why-turing-increased-price-of-daraprim-over-500-
accessed September 26, 2015
9. Bach,
Peter M. Seeking a cure for drug-price insanity, Fortune
Magazine http://fortune.com/2015/09/17/rising-drug-prices/
Accessed September 25, 2015
10. Lupin
diabetes drug price up by 200% in US http://www.business-standard.com/article/companies/lupin-diabetes-drug-price-up-by-200-in-us-115092400935_1.html
accessed September 29, 2015
11. Dishman
to supply API for Janssen Pharma's TB drug Sirturo: http://www.business-standard.com/content/b2b-pharma/dishman-to-supply-api-for-janssen-pharma-s-tb-drug-sirturo-115092900626_1.html?src=email
accessed September 29, 2015
12. Gottlieb,
Scott: A Clintonian Misdirection on Drug Prices, http://www.wsj.com/articles/a-clintonian-misdirection-on-drug-prices-1443568738
Accessed September 30, 2015
13. Top U.S. doctors say pricey cholesterol drugs best for limited
group: http://www.reuters.com/article/2015/09/24/us-usa-healthcare-cholesterol-idUSKCN0RO2DD20150924
accessed September 29, 2015
14. Malhotra,
Girish: Manufacturing technologies and their part, Chemica-Oggi-Chemistry
Today, Vol. 33(5), pg.28-31, September/October 2015