Profiteering from the Poor



May 24, 2016

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Many of you will recall the highly publicized case last fall, of Martin Shkreli, CEO of Turing Pharmaceuticals, smirking and invoking his Fifth Amendment rights before a televised House Oversight Committee hearing. He had led his company to acquire a generic drug that had been available inexpensively for decades. The company immediately jacked up the price. As reported in Fortune Magazine:

Daraprim, a treatment for malaria and toxoplasmosis, is now 5,455% more expensive than it was only two months ago. The drug’s price jumped from $13.50 to $750 a pill, bringing the annual cost of treatment into the hundreds of thousands for some patients—and possibly out of reach for many.

 

Such unapologetic and unethical behavior by a major drug company has become common. Prices have skyrocketed on older drugs whose patents have expired, some of them on the World Health Organization’s essential medicine lists. Another good example is the antiparasitic drug albendazole, whose daily cost has jumped from about $5.92 in 2010 to $201.27 last year. One of my colleagues, who makes regular mission trips to Honduras, worries that the price increases will make the drug unavailable to the poor population he serves.

In fact, these price-gouging practices disproportionately hurt the poor.  A recent report in the New England Journal of Medicine (NEJM) put it this way:

What makes this business model particularly disturbing is that vulnerable patients — such as immigrants, refugees, and people of low socioeconomic status — are often disproportionately affected, since many of the medications are for tropical or opportunistic infections. These patients often have limited or no access to insurance, or have access only through public programs, so already stark health disparities are compounded.

 

Now I know you’ve heard the explanation for high prices usually offered by drug manufacturers: research and development (R&D) costs are high and risky. Yet here is the reality (from NEJM again):

Though some companies that have purchased and increased the price of niche medicines cite R&D as an explanation for high prices, it’s hard to find credible evidence of their involvement in substantial drug-development projects. Turing and Amedra state on their websites that they’re engaged in research, yet neither company lists substantial R&D activities or publications.

 

Let’s be clear: none of this is illegal, though it is highly unethical. The JAMA article concludes with this comment: “Timely market solutions that promote competition are needed when high prices result from monopolies.” In other words, drug companies will not do the right thing unless it aligns with their corporate self-interest. They will need a nudge from those who care about the poor.

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Fortune Magazine Article

WHO Essential Medicine Lists

NEJM Article (pdf)

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