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Martin Shkreli and the Imbeciles
It’s not often that I say, “Thank God the New Yorker cut right through all this leftist cant,” but let’s give them credit where it’s due. On this one, they’re exactly right. Everyone hates Martin Shkreli and everyone’s missing the point:
But was Shkreli’s performance actually more objectionable than that of the legislators who were performing alongside him? Elijah Cummings, of Maryland, is the ranking Democrat on the committee, and he used his allotted time to deliver a scolding. … Cummings acted as if Shkreli were the only thing preventing a broken system from being fixed. “I know you’re smiling, but I’m very serious, sir,” he said. “The way I see it, you can go down in history as the poster boy for greedy drug-company executives, or you can change the system—yeah, you.” Cummings has been in Congress since 1996, and he is a firm believer in the power of government to improve industry through regulation. And yet now he was begging the former C.E.O. of a relatively minor pharmaceutical company to “change the system”? …
The Republican-led committee was no more impressive. As if to establish that Turing was unnecessarily profitable, the committee released documents showing that the company had thrown a lavish party—fireworks included—and given some executives six-figure raises. (If this now counts as corporate behavior worthy of oversight and reform, the committee may soon find its schedule overbooked.) And then there was John Mica, a Republican from Florida, who has vowed to “keep the government out of patients’ sick beds.” Notwithstanding his skepticism of government intervention, he expressed alarm that some drug prices have “skyrocketed.” Even more than his colleagues, he seemed taken aback by the star witness’s recalcitrance, as if he couldn’t fathom why a private citizen wouldn’t be more deferential to his government—at one point, he threatened to move to hold Shkreli in contempt.
The Daraprim saga has as much to do with the Food and Drug Administration as with Shkreli: although the drug’s patent expired in the nineteen-fifties, the F.D.A. certification process for generic drugs is gruelling enough that, for the moment, whoever owns Daraprim has a virtual monopoly in America. (Overseas, it is much cheaper.) [My emphasis] …
Most of our Presidential candidates claim to disdain Washington politicians, but, on Thursday, Shkreli put that disdain into practice—and helped illustrate, to anyone paying attention, why it is so richly deserved.
The New Yorker’s conclusion is, I assume, meant ironically:
He is the American Dream, a rude reminder of the spirit that makes this country great, or at any rate exceptional. Shkreli for President! If voters in New Hampshire are truly intent on sending a message to the Washington establishment they claim to hate, they could—and probably will—do a lot worse.
Nah. You can view Shkreli’s performance as intellectually more consistent, morally more defensible, and less contemptuously disdainful of our intelligence than Congress’s and see Shkreli as a distasteful personality. But on the merits of it, anyone who sees Shkreli as the problem — as opposed to the F.D.A. certification process — is indeed an imbecile. Anyone who blames Shkreli for the high price of this drug instead of blaming those with the power to rein in the FDA and change this situation — to wit, Congress — is indeed an imbecile.
Shkreli scandalized America by saying it was hard to accept that these imbeciles represent the people in our government. No, it’s easy to accept that. What’s hard to accept is that these imbeciles do indeed represent the people.
Published in General, Healthcare, Law
Claire,
The FDA is the OPEC of drugs.
Regards,
Jim
When it comes to pharmaceuticals, the reputation is undeserved.
It’s interesting, because one of the important arguments for free markets is that they punish bigotry and prejudice. If I’m a Wall Street investment bank that refuses to hire people of Indian origin, I’ll be at a disadvantage against a competitor who does: He’ll have a larger group of talented people from whom to choose his employees. (Indeed, one of my friends is a mathematician of Bengali origin who grew up in the Tower Hamlets area of London. Having been harassed all his life by Paki-bashers or condescended to by earnest Labour do-gooders, he moved to New York after graduating and took a job working for a major investment bank. “No one here cares if you’re black,” I remember him saying to me. “The only thing that matters is whether you’re CoC-smart.” He made a fortune for the company that hired him, and I’m sure it’s entirely true that his aptitude was the only thing they cared about.) At the local level, this works: If you’re an investment bank that only hires white men, you’ll be at such an obvious competitive disadvantage against the one that hires Jews, Asians, and women that your bigotry will put you out of business.
But in an arena like this, it’s very easy to obscure from people what they’re losing because of their bigotry. As you put it, Americans are most likely to come into contact with India through outsourced tech support, but that’s by design: We’ve kept Indian pharma off our markets. In many parts of the developing world, India has an entirely different reputation, because it’s where their medication comes from, and that’s the only contact with India they have: They think of India as the “life-saving, inexpensive drug” people.
The idea, “You get what you pay for” simply isn’t true in this case: We’ve got a massive protectionist wall up to protect our pharma industry. India’s got a huge competitive advantage in pharma that lies in its lower production and research costs, a much larger pool of low-cost technical and scientifically trained personnel, and a very large number of plants that are not only as good as the FDA-certified ones, they are in fact FDA-certified — they use the certification to advertise domestic sales and sales in other overseas markets. Manufacturing costs in India are 30 to 40 percent lower than those in the United States and Western Europe. Labor costs are one-seventh of that in the United States. And India can run ethically-queasy-making but scientifically very useful drug trials in ways no Western pharma company can, because there’s a huge population of very poor people who are willing to take risks Westerners aren’t.
Here’s a fascinating 2007 report from the US Trade Commission:
US pharma companies don’t want to compete against this — understandably, because they can’t. But they can take advantage of the way few people in America have had much contact with the Indian pharma sector, and they do. They use the FDA and the public’s willingness to believe that stuff from India isn’t of good quality instead of demanding a formal tariff wall, and they can, because of an information asymmetry: It’s easy to scare people into believing that things from India are “cheap, third world products.”
Sure. But as a casual Google search will tell you, it’s a country of 1.3 billion people. So their population of highly qualified drug manufacturers exceeds the population of highly qualified drug manufacturers in the United States.
There’s your de facto tariff wall.
This is the part I don’t get: I don’t know why there isn’t a huge black market for these drugs. (I don’t actually know that there isn’t one, but so far I’ve not seen any reporting on it; you’d expect to see dealers busted occasionally if it were happening.) Because this is the classic situation that creates black markets. The demand for lifesaving drugs has got to be highly inelastic: People value staying alive and not being sick more highly than pretty much anything else. There’s a huge supply of the drugs at a low price, and I assume it would be nearly impossible to keep the drugs from coming into the country. In fact, thinking about it, I’d bet anything people are making a lot of money by bringing them in; we’re just not hearing about it because it’s not easy to catch them.
The real tragedy of this isn’t just that people are paying far more than they need to for the drugs we know about. It’s that it will take longer to find the drugs we don’t yet know about. The more money we spend on Indian drugs, the better their pharma sector will do — the US is a huge market. And the better it does, the better the chances of it being innovative, particularly in the search for things like new antibiotics. India’s probably where all the big innovations in pharma are going to come from in the next half century, and we’ll get there faster if we support the growth of India’s pharma sector instead of putting up a wall to protect our industry.
In the case of patented drugs, the FDA allows pharma companies to run a 3rd degree price discrimination model against US consumers. Drugs are produced in the US and packaged and sold in a way that segments the market to earn rents. A price is determined for the US market, and then the manufacturer sells the rest on the world market at a lower price. Since the FDA bans the re-importation of drugs, US consumers cannot get access to very same US-manufactured drug at the lower cost.
Yup. That’s been my understanding. The rest of the world gets their drugs cheap because Americans are subsidizing them.
When the system is this rigged, it’s no wonder young people turn to “socialism” for their answers. In the land of super-abundance, they’ve no experience of empty shelves and lines at the pump that come with government price fixing.
Socialism kills.
No, they don’t — this is the argument used by many pharma companies to justify protectionism. “If we didn’t charge Americans more, poor people in Africa wouldn’t get medication.” It’s nonsense. We’re not subsidizing the Indian pharma sector. The only way this argument could be true is if the drug is a new one, i.e., still under patent. We are not subsidizing the production of old, generic drugs; we are not subsidizing Indian R&D; and the rest of the world gets their drugs cheaply because they buy them from countries that have a competitive advantage in manufacturing them. Indian pharma companies do what they do for the same reason everyone does: to make money.
That is something I’ve never thought of. Where do you learn about this?
I was in India, in part, to study this, thanks to a grant from the Manhattan Institute. But I was thinking about the problem 0h-so-theoretically until a dog bit my nose off in Delhi. That changed my perspective forever. I wrote about it here, and discussed the incident at some length here on Ricochet — and again, recently, in the context of yet another story of drug shortages in North America.
the most reviled person in America arrived on Capitol Hill for a short but memorable engagement with the most reviled institution in America. The institution was the U.S. Congress, which Americans say they hate—though not quite enough, apparently, to stop reëlecting its members.
Amen.
I’ve read some of this, but apparently not the part about how India does human experiments that we don’t do in the U.S. I’ll re-read. Thanks.
I’m not sure whether what I wrote about that made it into the final cut of the article, which was originally about 20,000 words long. I can find it in my draft material, probably. My point was that it was a queasy-making ethical dilemma, but that arguments against purchasing Indian drugs because of this represented moral vanity — much like arguments against purchasing goods assembled in sweatshops. People neither work in sweatshops nor volunteer for drug trials for fun; they do it because the alternative is, in their view, worse.
My wife once made the mistake of ordering one of her prescription drugs from a site on the Internet. We now get one or two phone calls from Indian drug pushers every … single … day… for the last 10 years. Sometimes we actually have a nice conversation with someone from New Delhi. Yes, I know we should cancel that land line number but “all my friends know that number” (sigh)
Well, this confirms my belief that Indians are very eager to meet your pharmaceutical needs, and that it wouldn’t be difficult to order anything you wanted.
There are so many facets to the problem, and Congress is solving none of them.
I have personal knowledge of drug solutions that would save the lives (and quality of life) for millions of Americans. But because of the FDA rules and the ways in which the government makes innovation so very hard, I do not think they will see the light of day – to the detriment of people suffering from brain ailments that are deemed “incurable.”
Shkreli is a scumbag. But I got enormous pleasure from him calling Congress “imbeciles.” The label fits, and people in Washington need to understand that there is reason for contempt.
If I was invited to appear before Congress, I would be a no-show.
Here is a business model: Confidential Freight Forwarder. Someone who can be trusted to connect buyers and sellers without disclosing the transaction to anyone, or even the identity of the transactors to each other.
It is hard to buy something anonymously – but it should not be. There is an opportunity for the right entrepreneur.
I’m not as quick to jump on the bandwagon about Indian-made drugs. Ranbaxy, one of the largest manufacturers of generics, covered up very serious safety and manufacturing problems.
http://fortune.com/2013/05/15/dirty-medicine/
Claire, what you say is true for generics, I’m pretty sure. But, the re-importation ban skews the market to favor non-Americans for American produced pharmaceuticals. I remember reading several years ago that Canada places price controls on American drugs and then the US forbids Americans from buying the same drugs they’d get at home more cheaply from Canada.
Canadians who can afford the travel get themselves to America for timely, quality healthcare (or used to). Americans who can’t afford their drugs are stuck.
It’s probably true that fewer and fewer new drugs are coming to market every year, but that’s another issue.
And, yes, our congressmen are imbeciles.
In 2008. Would it be reasonable to keep German vehicles off the US market for the next decade because of the Volkswagen scandal?
I believe such services already exist. I’m trying to remember where I heard about it and what the goods in question were.
Once we put up a 45 percent tariff wall, this will be a yuuuuge growth industry.
I am sure it does – but not in any way that most of us would trust it.
It should be possible to contact the seller, shop, place an order, and receive delivery – with NONE of those steps logged. This is not a trivial challenge. But I think it will ultimately be necessary to be able to do this in order to preserve liberty.
I have had trouble making that point on some other aspects of U.S. health care and also on other issues regarding safety regulation and environmental regulation. Having specific information about how people in India deal with it could be very helpful.
Pretty sure GM, Chrysler, Ford, and their labor unions think it would be the reasonable thing to do. I think it would be the time to buy VW before they close the door.
Here is another example, the FDA is now prohibiting states from obtaining drugs for lethal injections manufactured in India.
So even when India is the only source of the needed drugs, the FDA is allowed, or even required, to interfere with state policies. No matter where you stand on the death penalty issue, it seems pretty foolish to allow federal regulators to interfere with constitutionally-approved state policies.
Claire,
I think we need to talk about this in a very deep way. Obviously, the FDA has set the American people up for an incredibly negative outcome. Why?
In a weird sense it does have to do with America’s role in the world. After WWII we were the only functioning industrial power. The Marshall Plan mentality where we intentionally held the dollar high to subsidize the rest of the world was the 1950s prime idea.
When the rest the of world became functional and in fact began to compete with us we were sluggish to respond. Finally, when Reagan was elected we stopped absurdly holding the dollar high as Europe and the Pacific Rim were eating our lunch. Another episode of this is our inordinately high corporate tax rate. Trump isn’t wrong on this, we are losing commerce at an alarming rate. We need to bring the corporate tax burden down to rough parity with rest of the world.
I think our FDA attitude is part of this ancient mindset. Our American pride is that we can pay the high prices to help the drug companies develop the drugs and then let other poor countries gain the advantage. It is the same prideful subsidize the world mentality.
This must come to an end. Americans need Health Care at reasonable prices. The ACA and Single Payer are not the way to get this. We need to deregulate the Health Insurance market and upend the FDA cartel that is forcing Americans to pay absurd drug prices.
You can’t help others if you yourself need help. We just need to be realistic.
Regards,
Jim
Yes. To put it as simply as possible, we need trade, not aid. That Americans can so easily be persuaded that the prices of drugs are high because we’re magnanimously paying for the whole world’s drugs — an absolute nonsense — means there are a lot of people who just aren’t getting it. India doesn’t need charity from us anymore.
The faster we grasp this, the better it will be for us and the world, but not if we refuse to look at this for what it is and accept that no — no one’s been cheating us. No one’s been giving us a raw deal. They’ve been modernizing, industrializing, and catching up.
My newest Obamacare policy ($1200/mo.) pays 40% on non-generics up to a max of $500/per Rx, per mo. In addition, all require Prior Authorization (a particularly brutal form of torture). There are stringent rules on dosage and quantity. I am currently taking 3 name brand prescriptions, so that’s an additional $1500/month.
One of these is a migraine medication that I need to function. The patent for this was granted in 2002 and still no generic available in the US. I’m only permitted 9 pills/month although I need 16. Prior Authorization for 9 has still not been approved.
Since December, trying to obtain this prescription from outside the US has been a nightmare. ‘Canadian’ firms are actually in Turkey, Romania, etc., some won’t identify country of origin and, to purchase legally, some insist on a scan of your driver’s license. Many don’t accept credit cards (checks only!) and none seem to provide tracking.
Since I’ve started this process, I receive 10+ international calls a day, pushing various prescription scams. After extensive investigation, I finally ordered from the company that seemed the most reputable. My order came last week but I’m afraid to take it. It’s a generic, no familiar markings on the pills and no English at all on the packaging. This cost me $120, doesn’t go toward my yearly maximum and may have exposed me to identity fraud and more.
Boy, howdy, does this sound familiar!
I’ve found prior authorization such a hassle that it’s often become worthwhile to switch to less-effective/more-side-effecty meds, just to avoid the existential “headache” that comes with all that special pleading. We have a fair number of migraneurs on this site, as well as some people who know people who claim to know how to rate the reputability of these overseas ordering services. So you’re not alone.
Lack of English on the packaging has not bothered me when it was dispensed by the nice Pakistani pharmacist I knew and trusted, along with his own written instructions in English. But without his help, I would have been much more afraid, too.
Jeanne,
This sounds like a cause to me. Americans need relief from this kind of idiocy. If you want to ban a medication or restrict its use fine. Don’t let FDA create a cartel to make it so expensive that the average American goes bankrupt using it.
Regards,
Jim
Some info from the Times of India
http://timesofindia.com/home/sunday-times/deep-focus/The-pill-that-costs-9000-in-US-sells-for-70-in-India/articleshow/50883406.cms
Prior to my mother’s death two years ago, she was on medication for gout. I can’t remember the name of the medication but it had been on the market for many decades. Under her Medicare Advantage plan, she paid about $10 per month for the generic of the medication and had taken it for many years.
In January of 2010 or 2011, I went to the drug store to pick up her monthly medications and the price of the gout medicine had increased to several hundred dollars for a 30 day supply. The pharmacist told me that medication was no longer available in generic form despite having been on the market for almost 40 years. I thought this must be a mistake and refused the prescription.
After an investigation on the web, I discovered that the FDA had revoked the ability of some generic drug manufacturers to continue to make many generics unless they re-applied and conducted all the necessary trials for the medications. Using the original ‘recipe’ of these medications was deemed insufficient. Because these companies would have to comply with newer, onerous requirements required by the FDA, many companies decided it was not cost effective and discontinued manufacturing many medications, resulting in certain drugs becoming Name Brand only again.
I was flabbergasted and appalled. After letters and calls to my Represetative, Senators, newspapers, etc., brought no respite, I contacted the pharmaceutical company involved. They were “happy” to provide me with a coupon to get the medicine for $10/month for 14 uses after I filled out an application detailing my mother’s intimate medical and financial details.
After this and now my search for shadowy sources for medication I need to function as a productive citizen, I’m ready to vote for a single-issue candidate: Blow-up the FDA.
Does anyone know what the candidates have said about this issue? I know Hillary Clinton has (unsurprisingly) promised to “go after Turing.” (Shkreli’s company.)
There aren’t many single issues that seem to me worth voting for above all others, except foreign policy issues, given that mistakes in foreign policy have the potential genuinely to end our physical existence in the coming four years. But as a domestic policy issue, this one really merits prioritizing above others: people are already suffering, and perhaps dying, owing to lack of access to lifesaving drugs in America, and the solution is so clear — there’s no “that’s a hard problem to solve” about it, there’s no “confusing moral dilemma” about it. The drugs exist, and only the laws preventing people from importing them stand between them and the patients who need them. The magic words are “use at your own risk.”
If you allow markets to work, I’m sure very quickly private enterprise would give birth to an effective private inspection and rating system to help consumers decide how much risk they’re assuming.