Drug Goes From $13.50 a Tablet to $750, Overnight


#21

And where does the health and wellbeing of actual humans come into play? Because we can play rhetorical games with the nature of capitalism all we want, but that issue is still there, lingering in the background like a soon-to-be ghost. . .

What the company has done may not be strictly illegal, and may not even become so due to the arguments you raise, Timex. I’m not sure I can bridge the gap between that potential truth and it being “okay” in any meaningful sense of the word, however.


#22

Well, at this point is a company choosing having a huge profit margin against the health of those who can’t afford the medicines. Since the drug sells in Europe at 5 euros, and that’s profitable, the US price of $13.50 alredy was (at the very least) a %100 profit margin. So now we are at the very least at 5,555.55% profit margin with the price hike.

Of course, the drug was being produced and profitable already, so the price increase is not to keep the drug in the market, but to extract US patients as much money as they can (and probably leave a few who just plainly can’t afford it on the way). Meanwhile the medicine will keep being sold (at a profit) abroad. It is unlikely US comsumption will increase with the new price.

If you think that’s ok when talking medicine, that’s your call. In some places people have a constitutional right to healtcare that is subservient to a corporation right to insane profit margins.

This behavior (or the lack of controls) damages US patients for the benefit of a predatory company. How that’s even remotely ok is beyond me.


#23

As some of you know I dislike call outs, mobbing etc but with this chap I’m just going to go over here and check out this wall intently for a while so wont be able to watch anyone…


#24

With all due respect I’m pretty familiar with this industry. I’m not suggesting that drugs in general have their patents broken, just the gross cases where someone buys a patent and multiplies the price dramatically. Obviously the previous patent-holder was already profiting off the drug, so a price multiplication can only be based on an attempt to exploit the insurance industry. So IMO good companies like Vertex should keep their legitimate profits because they are actually investing in R&D and doing groundbreaking work. I’m talking about cases like the many reported in recent years (and in the NY Times article) where the price increase has absolutely nothing to do with recovering sunken R&D costs. It’s about exerting monopoly control on a corrupt and submissive market.

Also, Timex, much as I like some of your positions, you’ve really become very snide and dismissive in direct replies lately, and it’s getting annoying.


#25

See, you are failing to account for the reality of the market though. As Juan astutely noted, the price they charge is based purely on the notion no company would get involved, since these exorbitant prices are purely artificial. As soon as there was competition this toolbag could lower prices again, undercutting the competition. Any pharmaceutical company would know this, so there really wouldn’t be profit for them to invest in manufacturing it.

Unrestrained capitalism is not an objectively good system. Saying there should be limits on this kind of behavior shouldn’t really be a controversial statement. ‘Free markets’ and ‘competition’ are not some magic panacea that cures all ills, and in this case is extremely unlikely to actually out any constraints on this market.

EDIT: Holy dogpiling Batman! Sorry Timex, you got a flood of replies there. I respect your thoughts a lot here, even though I disagree often. In this particular instance though, regarding operations of the free market, I do strongly take issue with letting the market ‘fix’ this. With certain things, healthcare being one of them, the market needs strong controls.


#26

Sorry man, but your position here is not one I can take seriously. You can’t just say, “Well, that guy paid for that patent, but I don’t like what he’s doing with it, so I’m going to violate it.” You are essentially just handwaving away the very notion of intellectual property. What kind of experience with the pharma industry leads you to that kind of position? The suggestion that purchasing IP somehow guarantees you to less rights than developing it yourself is nonsensical on its face, because you are then indirectly destroying the value of the IP that people develop (since you are destroying their ability to sell that IP).

You want to dictate to other folks what they can do with their own property. Sorry, but you don’t have that right. That’s why it’s their property, and not yours.

Couple all of that with the fact that in this case patents aren’t even involved at all, as the drug has not been under patent for decades.

See, you are failing to account for the reality of the market though. As Juan astutely noted, the price they charge is based purely on the notion no company would get involved, since these exorbitant prices are purely artificial. As soon as there was competition this toolbag could lower prices again, undercutting the competition. Any pharmaceutical company would know this, so there really wouldn’t be profit for them to invest in manufacturing it.

But if such a thing happened, then you’d have two competitors who would both have manufacturing facilities, and they would then compete in price. You’re right that he could cut his price down lower, thus reducing the profitability of the new competitor, but that’s just kind of how it works.

Unrestrained capitalism is not an objectively good system. Saying there should be limits on this kind of behavior shouldn’t really be a controversial statement. ‘Free markets’ and ‘competition’ are not some magic panacea that cures all ills, and in this case is extremely unlikely to actually out any constraints on this market.

Certainly, unrestrained capitalism does not function… but this is nowhere near “unrestrained capitalism”. It’s not like you have either government imposed price controls, or unrestrained capitalism.

I just have a very strong aversion to the idea that the government or an outside actor should have the right to inject itself into private transactions and decide what it thinks is a “fair” price. Because price controls have a history of failing miserably. Ultimately because they’re based on some totally arbitrary notion of what constitutes a “fair” price. It has no basis in reality.

Maybe in this case it could be different, because the drug had previously existed at a much lower price. But I’m not seeing any real logical basis for the suggestion of price controls. I’m just seeing folks trying to impose their own views on transactions which do not involve them. And that undercuts the very notion of property rights, and thus essentially all rights.

This behavior (or the lack of controls) damages US patients for the benefit of a predatory company. How that’s even remotely ok is beyond me.

But again, this has nothing to do with patents. Anyone else COULD make this drug and sell it for whatever they want. It’s just that no other manufacturer finds it profitable to do so.

Hell, if they wanted to, the government could set up a manufacturing facility to produce it.


#27

My last post was a general statement about the patents and abuses described in the Times artticle. In this case the situation is as Juan describes. But yes, I think “intellectual property” needs massive reform. It has no special sanctity. For most of human history science got along fine without it. Today patents admittedly have some value and validity still, but they are being grossly abused across all fields, and especially in pharma.

We already have a general stance against monopolistic market control. If an appropriate regulatory agency deems that a company is abusing its patent-granted monopoly (patents needless to say are granted by the government, not by natural law) I see no reason those rights shouldn’t be taken away. It’s obviously in the interest of the state and of the people to do so, and the only interest served by allowing grotesque profiteering is the predatory rights-holder. There will certainly be no chilling effect on the companies that are actually doing new drug research, because they’re not the profiteers: the capital firms and hedge fund vultures are the ones doing the exploitation.


#28

First thing, I didn’t actually apologize for my tone, but I’m sorry. I was somewhat short, as some of your posts kind of rubbed me the wrong way. I didn’t really mean to be insulting, but was, so I apologize.

But yes, I think “intellectual property” needs massive reform. It has no special sanctity. For most of human history science got along fine without it. Today patents admittedly have some value and validity still, but they are being grossly abused across all fields, and especially in pharma.

This is a very naive view on intellectual property.
For most of human history, science didn’t exist at all.
Up until basically the past hundred years, the notion of intellectual property was largely a trivial notion as most things bought required physical means of production. Although even hundreds of years ago our founding fathers recognized the benefits of protecting the intellectual property of inventors.

Your suggestion that patents are “abused” is based largely upon the fact that people are doing stuff that you don’t think they should do. But upon what do you base your authority on such matters? You didn’t contribute to the development or production of any of those things. Why do you get to determine what constitutes fair usage of anything?

This is the ultimate problem with just trying to handwave away rights whenever it suits you. Because you are basing that action upon the assumption that such rights violations are ok, because YOU are the one who is deciding that those rights “don’t count” today. That you, somehow, are better equipped to decide what’s fair and what’s not.

But you aren’t better equipped to make such calls. Your opinion holds no significant value at all. Some other person may think that a different price is fair. How do you decide who’s right? You’re basically left with an arbitrary decision.

If you are taking property rights away from the inventors, or people who have purchased those rights through legitimate transactions, then you effectively lose any rational basis for who gets to be the decision maker in such things. Simultaneously, you destroy incentive for creation and production by saying, “Oh, if you invent something you can probably make some profit off of it…as much as some other arbitrary person decides is fair.”

It’s possible that in this case there may be some special factor which justifies the suggested abandonment of property rights, but I’m not seeing it yet. I’m seeing what seems to largely amount to an emotional argument based upon the instinctual response to a large hike in a price. And I appreciate that instinct, as I feel it too. But at the same time I am not so quick to impose arbitrary price controls on a manufacturer without having a very clear logical basis for exactly why it’s ok to do it in this specific case, and only this case.

We already have a general stance against monopolistic market control. If an appropriate regulatory agency deems that a company is abusing its patent-granted monopoly (patents needless to say are granted by the government, not by natural law) I see no reason those rights shouldn’t be taken away.

Certainly you will get no argument from me that prevention of monopolistic practices is a good and necessary thing that is required for a healthy market. But the idea that an arbitrary decision can be made to violate patents is damaging.

Patents are meant to create a temporary monopoly. That’s their function. In exchange, they make that knowledge publicly available.

In the case of this drug, that utility is actually pretty nice… for instance, folks have said, “Well, this company tightly controls access to this drug, to prevent analysis.” That’s not really a legitimate argument, is it? I know exactly what that drug is. I know it’s exact formulation and chemical structure. I even know exactly how it’s synthesized. Because it was patented decades ago.

If someone else wanted to make this drug, they totally could. There is absolutely no mystery to it.


#29

How can you say I’m the one to make the decision? I called for a regulator to do it with open public hearings. Presumably the commission would be staffed by trade, business, and industry experts.


#30

That’s why I’m not talking about patents, but about price regulation.

The government already imposes limits on private property and sales, specially in cases of public safety and public health. You can’t sell assault weapons (I think). You can’t sell [I]harmful[/I] drugs. You can not sell an organ of yours. You can’t sell foods with too much salt in it in certain cities… Yes in those cases you are outright forbidden to sell something harmful, while in this case we are talking about avoiding predatory pricing of beneficial stuff. Compensating and encouraging predatory practices has nothing to do with encouraging competition. Quite the opossite. The lack of regulation makes these moves more profitable than bona fide investment and R&D, thus discouraging further research.

Regulations are certainly dangerous if overdone, and should be used with care and have checks so that they don’t stifle competition. But public safety and public health are precisely two of the areas when they are more needed (since they involve the rights of the greater population).


#31

Some states have laws against price gouging already. Gas during a crisis, for example.


#32

An arbitrary decision is not necessarily a bad decision.

Your children are entitled to free public education for thirteen years. That’s an arbitrary decision.

You are eligible for Medicare at the age of 65. That’s an arbitrary age.

I can’t drive faster than 20 mph around my local schools. An arbitrary speed.

You can’t have more than 15 parts per billion of lead in your drinking water. An arbitrary amount.

The purpose of democracy is to make arbitrary decisions that most of us can live with.


#33

Yeah, I could probably see this kind of law going into effect in this particular case, and not requiring far reaching things like general price controls. Mainly just saying, “Hey, you can’t immediately make a very specific and exploitative move in the market.” I don’t think I’d be opposed to that kind of limit. As I said, I appreciate the gut instinct that the moves by the guy involved in this case feel wrong. I’m just wary of jumping to the notion that the government be able to limit prices “because of reasons”.


#34

I think this article pretty much sums up what’s wrong with this picture:

In Europe, Canada, and Australia, governments view the market for cures as essentially uncompetitive and set the price as part of a bureaucratic process — similar to how electricity or water are priced in regulated US utility markets.

Other countries do this for drugs and medical care — but not other products, like phones or cars — because of something fundamentally unique about medication: if consumers can’t afford the product they could have worse odds of living. In some cases, they face quite certain odds of dying. So most governments have decided that keeping these products affordable is a good reason to introduce more government regulation.

“We have a system that says, ‘If it’s better, we have to provide this pill and you, the drug maker, get to name the price.’ It’s not a market. It’s a drug maker saying what they want.”


#35

You left out this very interesting line (just above your quote):

We are the only developed nation that lets drug makers set their own prices — maximizing profits the same way that sellers of chairs, mugs, shoes, or any other seller of manufactured goods would.


#36

If you removed that aspect from the international drug industry, do you believe everything else would stay the same?


#37

I lack the data. The question is whether US profit in pharma sales is bigger that the rest of the world combined (or at least a significant, say 25%, chunk), or whether even with the increased prices it is still only a fraction of total revenue. US drug companies sell worldwide. There has to be a profit in doing so, and I would guess a significant one?

I honestly have no idea, but I think you don’t either :P


#38

I think that simple logic would say that removing a huge amount of resources from the industry would have some non trivial impact on it.


#39

It depends. I dag the data:

So, NA, with 525 million people accounts for around $630 per citizen. Europe with a population of 740 million accounts for $391 per citizen (this is of course an oversimplification, since NA includes Canada and Europe includes Russia). If NA had European pricing on drugs and equivalent health care, we would see a decrease in revenue of $125 billion, or a reduction compared to the total market of 13.5%.

Which is significant (and bigger than I thought), but not extreme and probably well within current profit margins?

Edit: Profit margins are about 30%, with expenses in marketing doubling expenses in R&D.


#40

The CEO who pulled this is a real piece of work - stalking a former employee over a work dispute, and then being forced to resign as CEO of another drug company as a result.

And hey, he’s also the chairman of a professional LOL team.