Martin Shkreli is the epitome of everything the American consumer loves to hate.
Shkreli, formerly the CEO of privately held Turing Pharmaceuticals, found himself in the spotlight in Sept. 2015 after his company acquired the rights to Daraprim, a life-saving, infection-fighting drug for AIDS and cancer patients. Despite not changing the formulation of Daraprim (which happened to be more than six decades old), or altering its manufacturing process one iota, Shkreli raised its per-pill price from $13.50 to $750 overnight, a nearly 5,500% increase.
When questioned about the exorbitant price hike, Shkreli’s stance was that Turing was unprofitable, and that the only way to become profitable and to bankroll new research would be to raise drug prices.
In fact, when Shkreli fielded a question from a healthcare summit hosted by Forbes in Dec. 2015, he stated that his only regret about raising the price on Daraprim was that, “I probably would have raised prices higher, is probably what I should have done. I could have raised it higher and made more profits for our shareholders. Which is my primary duty.” Not surprisingly, Shkreli was labeled as the “Most Hated Man in America,” as well as “Pharma Bro,” by consumers who couldn’t stand his attitude or antics.
Martin Shkreli doles out some of the worst advice ever
Therefore, you can imagine the surprise when Shkreli, who’s currently out on a $5 million bond — he’s facing allegations of federal securities fraud in a case unrelated to his drug-pricing practices — was invited to a handful of speaking engagements in the Northeast, including Harvard University and UMass. What was he slated to discuss, you wonder? Aside from his experience as a hedge fund manager and CEO, Shkreli had advice on how to lower prescription drug prices, and also for President Trump.
Mind you, here’s a snippet of what Shkreli had to say in at the Forbes healthcare summit in 2015: “No one wants to say it, no one’s proud of it, but this is a capitalist society, capitalist system and capital rules, and my investors expect me to maximize profits, not to minimize them, or go half, or go 70 percent, but to go 100 percent of the profit curve that we’re all taught in MBA class.”
So what was this great advice Shkreli had for President Trump? Shkreli suggested that “Trump should start a drug company,” and that, “I would be proud to help implement this.” There it is folks, the dumbest advice we’ve probably ever heard about drug prices from a now-former CEO with potentially questionable ethics.
For what it’s worth, President Trump referred to pharmaceutical companies as “getting away with murder” with regard to their pricing practices, and he’s called for drug-pricing reforms on a couple of occasions throughout his campaign and early presidency. I doubt he would want anything to do with Shkreli’s “advice,” or his cavalier drug-pricing attitude.
The only thing Shkreli said that had merit
Martin Shkreli is probably one of the last people on this planet that should be discussing drug pricing. However, he did hit the nail on the head with one point: This is a capitalist society, and the checks and balances in place to thwart high prices on pharmaceutical products is inadequate.
To begin with, patent periods on branded therapeutics are exceptionally long — usually 20 years from the day the Food and Drug Administration (FDA) okays the start of human clinical trials for an investigational new drug — and brand-drug developers can tie up the launch of generic drugs in the legal system for years. What’s more, slight formulary changes and label expansion opportunities can further thwart the entrance of generic medicines that are often 80% cheaper than branded medicines.
Secondly, consumers in the U.S. demand pharmaceuticals at a considerably higher rate than any other country in the world. Even though drugs are an inelastic product (i.e., we can’t determine when we get sick, or what ailment we get), supply and demand still matters. As long as the U.S. has the highest demand for branded pharmaceuticals in the world, prices for these drugs will remain high.
Third, insurers and pharmacy-benefit managers (PBMs) have very little say on pricing. Though insurers and PBMs will exclude drugs from their approved formularies from time to time, the list of excluded drugs is usually in the dozens, while the list of approved therapies is in the thousands. Keeping in-demand drugs off the approved list means possibly losing members to a rival network, which is a bet insurers and PBMs don’t often make.
Arguably, the biggest issue is that the U.S. has no universal health plan. Without a universal health plan in place, the federal government has no ability to cap drug prices, or effectively guide them.
Only tackling half the issue
For his part, President Trump, as part of his seven-point healthcare reform released during his campaign, suggested allowing consumers to buy medicines in overseas markets and ship them back to the United States. Since most drug developers price their branded drugs more cheaply in overseas markets that have universal health plans in place, American consumers should be able to save a significant amount of money by purchasing these drugs from foreign countries.
The main issue with Trump’s suggestion is that it would require an insanely complex overhaul of the FDA, which currently oversees the manufacturing process of drugs in the United States. Bringing pharmaceuticals in from foreign countries skirts one of the primary safety roles of the FDA.
But the bigger issue is that trying to limit drug-price inflation post-launch is only half the issue. Sure, it would be nice if specialty therapeutics weren’t increased in price by 10% per year, but if cancer drugs are debuting with $100,000-plus annual price tags on pharmacy shelves, that’s the real problem!
Unfortunately, a solution isn’t so simple. Ideally, medicines would be reimbursed based on the benefits they provide. Therapies like Harvoni, Gilead Sciences‘ (NASDAQ:GILD) hepatitis C drug that’s now effectively curing more than 90% of the people it’s given to, would rightfully command a high price point. Conversely, cancer drugs that extend overall survival by three months may not deserve such lofty reimbursement.
The hurdle for the federal government and FDA is that there’s no way to really measure a drug’s “benefit” on a scalable platform — at least not yet. Without a sliding scale of benefits, there’s no way to accurately control the initial pricing of an approved drug.
If we can thank Shkreli for anything, it’s for making drug-price reform a front-and-center issue. But that’s about all the credit the “Most Hated Man in America” deserves.
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