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Making Drugs Affordable
Remember Martin Shkreli, the pharmaceutical executive who jacked up the prices of an off-patent drug used by some AIDS patients last year and who was recently perp-walked for securities fraud? The Left treated his arrest as a victory for the common man, but it hasn’t made pyrimethamine, the active ingredient in Daraprim, any more available to those who need it.
Mark Baum, however, has done just that: Since last year’s media fiasco, the compounding pharmacy he runs has been selling drugs with the same chemical properties (with an added, relevant vitamin) for about a $1 a pill. That’s among the reasons why Shkreli’s antics didn’t lead to a pile of dead bodies.
The reason Baum’s company has been able to do this so quickly and inexpensively is because compounding pharmaceuticals are not subject to the same regulatory scrutiny as generic manufacturers and are often able to charge prices closer to the costs of manufacture.
Once the patent on a drug expires, other pharmaceutical companies are allowed to produce it. However, generics are still subject to the same manufacturing standards as the original drug and operate under a presumption of guilt; i.e., once the patent expires, manufacturers still have to prove to the FDA that their generic drug is bioequivalent to the patented drug before anything can be sold. (It’s as if, once the copyright expired, you weren’t allowed to reprint Tom Sawyer under that name until you’d demonstrated to the Manuscript and Book Administration that the text is identical to the original.)
In contrast, compounding pharmacies — who produce custom-made drugs to order — are not subject to the same presumptions of guilt: Assuming they have the rights to a chemical or can find one in the public domain, they can sell prescription drugs without first having to get FDA approval for each novel concoction. Unlike generics, they operate under a presumption of innocence.
While compounders have much greater flexibility, they have two catches. First — by both their nature and the presumption of innocence — they have fewer protections against risk, as FDA regulations do likely contribute to safety standards. In Massachusetts, there was a scandal a few years back about a slip-shod compounder that was implicated in dozens of deaths in the region. On the flip side, even a drug manufacturer with an impeccable record and multiple Nobel-prize winners on staff would have to pass a lengthy series of tests before being allowed to bring a tried-and-tested drug to market. Second, compounded drugs are generally not reimbursable through Medicare.
In his WSJ piece, Baum makes three proposals: allowing Medicare to reimburse for compounded drugs; provide incentives for doctors to prescribe less-expensive drugs; and:
Allow compounded copies of generics. Drugs approved by the FDA nevertheless have to go through a long and costly new FDA approval process before another manufacturer can bring the generic version to market. The agency instead should establish standards for generics producers and compounded-drug producers to copy drugs that have been off-patent for more than five years. This would increase patients’ choices for safe and reasonably priced drugs.
In other words, have the FDA switch its off-brand focus from prohibitive regulation under a presumption of guilt to protection against fraud under a presumption of innocence. That’s more likely to help people get the medication they need — and at no additional cost — than any budget busting proposal Sanders or Clinton will ever offer.
Published in Culture, Healthcare
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See how that works, you just bust someone on unrelated charges because he stepped out of ideological lines, and he becomes the capitalist bad guy. Obama does it again!
Does the FDA do more harm than good? In this age of information and unlimited tort, is there not a much better way to deal with all of these issues.
Do we want to draw legal and regulatory attention to this “loophole” in the FDA? The far more likely outcome is that compounders suffer under the same crushing regulations as drug manufacturers.
Couple things on this. One is that the FDA’s role should be limited to assessing whether the new drug does no harm. Whether it’s effective should be beyond its purview and left to the market and to actual doctors in actual practice to determine whether it’s worth the price charged.
The other is that once the drug has been proven not harmful, both by legitimate initial testing and by its empirical performance while its patent is in effect, all a compounder or a genericist should have to show is a) he’s making what he claims to be making, and b) in the manner of a restaurant license, that he’s doing so in a clean and safe manner. Both of these are easily satisfied with an inspection of the premises. Further testing, FDA stalling, or incumbent manufacturer interference is unnecessary.
Eric Hines
The drug industry is caught in something of a pincers movement. On one side, federal policies from Hatch Waxman to the Affordable Care Act [sic] are designed to put downward pressure on drug prices; on the other, regulators never stop turning the quality ratchet on the drug supply chain. The result: drug shortages and “market failures” such as Turing Pharmaceuticals.
The issue with Daraprim pricing is that any new entrant must spend years and invest tens of millions of dollars to gear up to compete, in full view of the market, while Turing can afford to maintain market share by slashing prices the day after approval. Knowing this, no company will make the enormous investments to challenge the incumbent.
Compounding is a possible solution to this dilemma. I wish Mark Baum godspeed.
Good catch. In this day and age staying under the Fed’s radar is the only way to do business.