Big Pharma Caught Red-Handed... Part 2
If you've been following the Martin Shkreli/Turing Pharmaceuticals scandal, you've undoubtedly read about the $750 pill that made him infamous. But his story doesn't end there.
After founding Turing Pharmaceuticals — the company which now owns the $750 pill — he bought a second pharma company called KaloBios. This little company owns a drug used to treat a parasitic infection called Chagas Disease. Chagas is a tropical disease. It's very common in Central and South America, where a two-month treatment supply of the drug to treat it costs $50 to $100.
The drug has been around for decades but has never been FDA approved for sale in the U.S. Chagas is uncommon here, and there's simply not enough call for it. It is available through the CDC as an "experimental" drug, though — for free. All it takes to get it is some paperwork and a little patience.
After Shkreli bought KaloBios, however, he announced that he planned to raise the price to levels "similar to those of hepatitis C drugs." This means $80,000 to $100,000 for what currently costs $100 or less. He also said he planned to apply for FDA approval of the drug.
The huge price hikes are the part of the story that's grabbed the public's attention. But the rot goes deeper than that. We're missing the real point. The revenue that the "new and improved" pricing will bring in is less than pocket change to Big Pharma. The two drugs that Shkreli has bought have very small markets in the U.S. Even at $100,000 per course of treatment, they're a drop in the bucket.
The real prize is something completely different. And Shkreli's companies aren't the only predatory pharmaceuticals going after it.
It's a get-rich-quick scheme for Big Pharma — but it doesn't work how you think it does
Back in 2007 Big Government created something called the FDA Priority Review Voucher program. It was meant to tempt Big Pharma into coming up with drugs to treat "neglected" diseases instead of creating yet another statin or diabetes drug that doesn't work any better than what's already on the market.
There's a list of 16 diseases that have few if any treatment options — so-called "neglected" diseases. If a company gets FDA approval for a drug to treat one of these diseases, they also get a voucher that cuts their FDA approval time for another drug — any drug they want to use it for.
So for example, if a company developed a drug to treat Chavas Disease and they also had a new $1000-a-month statin in the works, getting FDA approval for the Chavas drug would net them a voucher that would get their pricey statin to market months earlier. But it gets better. Companies don't have to keep the vouchers themselves. They can sell them to other companies. And this can be very, very lucrative. Vouchers have already been sold for prices ranging from $125 million to $350 million.
That's a big incentive for earning a voucher even if your company doesn't plan to use it. That was the plan — create something so valuable to Big Pharma that it would actually do what it's supposed to — create drugs that really help people and don't just line pharma pockets. Big Pharma is focused on multi-billion dollar blockbuster drugs and has no interest in creating drugs for less common conditions. Vouchers were supposed to change that.
But the devil in in the details, and nowhere does it state that the drug which gets approval has to be a new drug. There are hundreds of drugs that work but have never been FDA approved, usually because it costs too much. So instead of inspiring innovation like it was supposed to, the voucher program has inspired companies to snap up cheap "experimental" drugs, or drugs used in other countries, and apply for FDA approval.
It's the Big Pharma version of cheating on an exam
Here's how the scheme works: a company finds an "experimental" drug for one of the 16 "neglected" diseases. They either buy the rights to the drug or just buy the company that makes it. Alternatively, they get a sample of a drug used in other countries but not approved here and reverse engineer it. These are often made by small companies who don't have the budget for FDA approval, which costs about $10 million. The drug is usually used to treat only a small number of people each year — 10,000 people or so.
Then they apply for FDA approval for the drug they just bought. They have to cover the cost of this, so they raise the price of the drug to insane levels — like $80,000 for a prescription that had cost $100 before. They provide the drug for free to the truly destitute. For those whose insurance refuses to play the game, they offer a "patient discount" program. And for the remainder — those whose insurance will cover it and those who make too much to qualify for the "discount" program, they charge the full price. This covers the FDA approval cost.
Once the drug gets approved, they get the coveted voucher, which they can turn around and sell for multiple hundreds of millions…all without spending a penny on research and development or marketing.
THIS is what Shkreli has been doing. He did it with KaloBios. He did it with his former company, Retrophin. And if he manages to stay out of prison for the securities fraud charge, he'll undoubtedly do it again.
But as much as we've enjoyed hating him, he's far from the only Pharma scumbag doing this. Like the overnight price hikes, it's becoming more common all the time. As long as there are still "experimental" drugs to buy up, or non-U.S. drugs that can be reverse engineered, it will continue unless and until the voucher program is changed.
Meanwhile, Big Pharma keeps its research focus on the things we don't need more of — like more vaccines for non-lethal diseases. Or yet another statin. On "me too" drugs that doesn't work any better than what's already on the market. It gives us 31 different flavors of the same old tired symptom medications instead of putting the effort where it needs to go — into finding real cures for the diseases we can't reverse through lifestyle changes.
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