By Simon Gottwalt. The recent price hike of Daraprim, a 62 year old medicine used against toxoplasmosis, created a massive public outcry against Turing Pharmaceuticals, who had just acquired the drug, and its CEO Martin Shkreli, making him “the most hated man in America”. How is it possible that the cost of a pill whose patent has long expired goes through the roof overnight?
To be sure: High prices of medicines are not a new phenomenon. This whole blog with all its more than 2000 articles deals with the issue. However, the hefty price tag is usually confined to new, patented medicines that are marketed under a monopoly. As soon as the exclusive marketing right of a drug expires, generic manufacturers enter the stage, bringing down prices with cheap copies of the molecule.
In fact, there are several companies that manufacture pyrimethamine (the molecule contained in Daraprim): In India a pill costs around $0.05, UK patients can get a tablet for $0.66. In the US it is now $750. It would be cheaper for a patient to fly to India and get a full year’s supply of the drug than purchasing a single pill in the US.
Interestingly, Turing has “only” raised the price by 5000% – from $13.50 to $750 per pill. A first price hike happened 5 years ago, after Core Pharma acquired marketing rights for Daraprim – at that time available for $1 a pill – from GSK. Thus, the price for Daraprim has risen by 75,000% in 5 years. Even before Shkreli, pyrimethamine was 20 times more expensive in the US than in the UK. How is such a price difference possible?
Even though Turing’s exclusive marketing of Daraprim is not protected by a patent, it has a de facto monopoly. Companies that sell pyrimethamine in other countries would have to file an “abbreviated new drug application” (ANDA) to get their generics registered in the US market. Although an ANDA is considerably cheaper and quicker than a regular new drug application (NDA), companies were reluctant to invest this money – too much risk, given the small market for Daraprim (sales in the US were $ 667,000 in 2010 and roughly $10 million in 2014) and the threat that Turing could lower prices again, once a competitor enters the arena.
Furthermore, Turing tries to secure this monopoly by tightly controlling Daraprim supply. In June 2015 – most likely as a condition of the sale to Turing – the previously widely available drug was put under a controlled distribution system called Daraprim Direct and henceforth obtainable only from a single source, Walgreen’s Specialty Pharmacy. This makes it harder and costlier for potential competitors to purchase Turing’s Daraprim which thy need for bioequivalence studies.
Worryingly, such price hikes in old medications in the US are not a new trick. Cycloserine, used to treat multidrug-resistant tuberculosis went from $500 to $10,800 after Rodelis bought it. Earlier this year, Valeant acquired the rights to the heart medicines Isuprel and Nitropress and raised the prices by 525% and 212%, respectively. And colchicine – which has been first used to treat gout by the ancient romans – became 50 times more expensive in 2009.
Shkreli’s actions provoked a massive shitstorm in social media – including this comparison with Jonas Salk, inventor of the polio vaccine
In the latter case a little-known FDA program called the “Unapproved Drugs Initiative” helped increase the prices. The program aims at “bringing old medications that were in use before the FDA’s instituted rigorous testing requirements for safety and efficacy into line with modern standards”. A laudable goal, but instead of funding the necessary clinical trials publicly, a foul deal was negotiated with pharmaceutical companies. These can carry out the studies and are in return rewarded with an exclusive marketing period of 3 to 7 years – the basis for the jump in colchicine prices. Generic competitors had been sued out of the market by URL Pharma after exclusivity was granted.
The waves made by the Daraprim case sparked a public debate on excessive drug pricing and remedies. US presidential candidate Hillary Clinton immediately announced to make a plan to tackle high prescription drug costs and antitrust claims are under discussion.
Luckily, there seems to be a loophole to compete against Turing: Imprimis Pharmaceuticals announced recently to offer pyrimethamine for $1 per pill again.
The author: Simon Gottwalt is Mercator Fellow on International Affairs. He currently works as a visiting expert with the Médecins Sans Frontières Campaign for Access to Essential Medicines in Delhi and explores how affordable prices for drugs can be achieved in India and beyond.