Sure, while everyone was feeling smug about Shkreli being thrown in jail, we ignored the actual problem. It was a huge distraction and I would guess manufactured.
> It’s an off-patent, decades old drug ... It costs pennies to make and generates little profit. Only a few thousand patients need it each year.
Sounds like the old price of $13 was way too cheap. Given that its off patent and still no one else wants to make it I'd think the new $750 prices is probably not crazy.
Assuming you're not one unlucky enough to need it, sure, it makes perfect sense.
<blunt>
But if you're unlucky enough to have a baby that gets toxoplasmosis, you're fucked. The people backing the insurance which is paying that new price are fucked. But it's OK that this is a net negative for society, because the company is now making a 'proper' amount profit off it, right?
Turing Pharma (Shkreli's company) only raised the price for insurance companies. If you could not afford it, you were provided it for free or at a steep discount.
The outrage at Shkreli is misdirected. Be outraged at the system, not someone acting rationally within the system. If you're upset drugs are too expensive, argue and work towards non-profit manufacturing. If drugs aren't profitable, they cannot be manufactured. Equipment, technicians, supply chains, and FDA regulatory compliance all cost money.
"In one breath, he calls himself a capitalist and in the next an altruist—the latter because, he claims, his real goal is to invent new drugs for rare diseases. Turing recently announced discounts of Daraprim for hospitals, and Shkreli says that for people without insurance it will cost only $1 a pill. For everyone else, insurance, which he argues is paid for by corporate America’s profits, will cover the cost. “I’m like Robin Hood,” he continues. “I’m taking Walmart’s money and doing research for diseases no one cares about.”"
"Turing said it would offer smaller bottles of 30 tablets to make it easier and cheaper for hospitals to carry the drug, and free sample packages for doctors needing to treat patients in emergency situations. The company estimates that "nearly all patients will receive Daraprim for $10 or less out-of-pocket per prescription.
While Turing is dropping the price for hospitals, it is not reducing the list price of Daraprim at pharmacies, because that would not help patients, Retzlaff said."
"Additionally for the outpatient setting, Turing will continue to:
* Participate in federal and state programs such as Medicaid and the Section 340B discount program having costs as low as $1 per 100-pill bottle, which currently account for about two-thirds of Daraprim sales. (!!!)
* Commit to patients with commercial insurance that their out-of-pocket obligation will be no more than $10 per prescription when Turing's co-pay program is used.
* Contribute to Patient Services Inc (PSI), a longstanding independent charity that provides financial assistance for Medicare patients' cost-sharing requirements on toxoplasmosis therapies, consistent with PSI's advisory opinion from the HHS Office of Inspector General.
* Provide Daraprim free-of-charge to uninsured, qualified patients with demonstrated income at or below 500% of the federal poverty level through our Patient Assistance Program."
This is the core reason that Shkreli got raked over the coals. He went on television and clearly broadcast that he didn't care about the rules or conventions of the ruling class. He was going to make the noise he felt proper, and he was in a position with too much influence to tolerate such noise-making -- that's besides his failure to cave to their pressure to lower the price back down and/or provide some other form of damage control when faced with media pressure, as most executives would've (resulting in a win for insurance companies).
Shkreli was naive to believe that he could signal his non-compliant thought process without becoming a target for those who are seriously invested in maintaining the status quo. The people who work to maintain this careful balance between public exploitation and complacency immediately recognized it as something they couldn't tolerate and set up to paint him as the sniveling, greedy bad guy who liked watching babies die.
Everyone should pay attention. Anyone who does anything more complex than collecting a standard W2 paycheck can easily be brought up on a variety of white-collar charges (and those who just collect a paycheck can be brought up moderately easily).
Shkreli is an example of why you have to be careful what you say and can't just come out and let the cold hard truth do the talking for you. Spinmasters and assailants are lurking out there, and they will turn nasty quick if they interpret a threat.
Watch your back out there. Shkreli is a peer of many of us who read HN. It can happen to you, too.
That makes insurance more expensive. Do you think insurance companies are some bottomless reserve of money hoarded by evil tycoons? This reasoning is why medical costs spiral out of control.
It's true that the system encourages this behavior through poorly designed incentives, but outrage and publicity is the only check on this. So the outrage is perfectly well-placed.
> Do you think insurance companies are some bottomless reserve of money hoarded by evil tycoons?
Yes, absolutely. To the extent that "evil tycoons" exist in the real human world and are not just propagandist's caricatures, anyway.
Medical insurers provide near-zero tangible value and are the main reason that the medical system is FUBAR'd. I understand that there are many good people working for insurers because they need to put food on the table, and I sympathize with that, and I probably would take such employment myself if necessary.
But we should not pretend that medical insurers are good or that they are entitled to anything. The belief that they deserve a place in the economy is immensely destructive. They are paper pushers who leech from the providers administering medical care, the patients receiving it, and literally everyone in between, including the state and the patient's employer(s).
We do not have to accept medical insurers, nor pretend their role is legitimate. I personally believe most types of medical insurance should be immediately and completely outlawed.
> That makes insurance more expensive. Do you think insurance companies are some bottomless reserve of money hoarded by evil tycoons? This reasoning is why medical costs spiral out of control.
Yes, they are. They are permitted to raise premiums "as much as necessary" due to a lack of cost controls, and the ACA/Obamacare simply subsidizes insurance with little eye towards costs. They get their admin skim regardless. Your blame is misplaced.
If you want your drugs affordable, manufacture them without a profit motive (through a government sponsored entity, for example). Use government funding through the NIH, the NSF, and DARPA for drug development. Put cost controls in place and use Medicare as a single payer system. If you leave any room for profiting, someone will find a way to exploit it. That's capitalism.
I don't see anyone still outraged at insurance companies and Big Pharma, or doing anything about it. Shkreli was made an example of, and everyone went on with their day, grumbling that the system is still broken.
You don't have enough information to determine if it's a net negative to society. You don't even have enough information to determine it's a net negative for the unfortunate baby with toxoplasmosis, since at $13 there might not be any supply. Since it's out of patent, you're free to start manufacturing and selling it at $13 if you want.
> you're free to start manufacturing and selling it...if you want.
This common apologetic ignores the real-world cost of infrastructure, overhead, and accruing a user-base that an existing company has already established.
It excuses irresponsibility and negligence of the public trust. Nobody would say, for instance, "corrupt politician? You're free to stage a revolution, overthrow the existing state, draft a constitution, establish a sovereign power and diplomatic ties with other states if you want"
No, we know how absurd and ridiculous that is, so we have tried to create reasonable mechanisms for dealing with political corruption through the ballot box and removing barriers to entry for legitimate challengers.
But in business, this trope is implying "You're free to abandon your career, study chemical engineering, get financing to start a lab, hire a large staff of experts, buy the machinery, run an advertising campaign, establish the customer base ..."
It changes the frame of reference from abuse and incompetence on important matters to essentially shaming people for not starting multiple successful industrial capitalist enterprises in their leisure time.
There needs to be more reasonable mechanisms for dealing with abuses of power then requiring such expensive and elaborate responses. Otherwise most abuses go unchallenged.
> But in business, this trope is implying "You're free to abandon your career, study chemical engineering, get financing to start a lab, hire a large staff of experts, buy the machinery, run an advertising campaign, establish the customer base ..."
On the other hand, this trope also implies that you have to pay for all of this, and perphaps $13 is not a good price for the drug.
What is an appropriate price for this drug?
You say it's abuse and incompetence, but could it be that you're wrong and it's a rational decision?
Abuse and incompetence can be perfectly "rational" depending on what you value in life.
And the point was about existing infrastructure. The drug existed, and made money, at $13, using paid for infrastructure that did other things, made other drugs as well, run by an existing staff that had other tasks.
You don't buy a car to drive 1 mile or start a restaurant to serve 1 meal.
Instead, an existing company should make a competitor, say Imprimis Pharmaceuticals, which did so in 2015 for $1.00 each.
This is fundamentally about abusing power and position for profit and saying others should get the same power and position to stop the abuse.
My only contention is that isn't reality and the world doesn't work that way.
There are reasonable mechanisms in place. Patents expire and there's many capable manufacturers. If you think there's a need for a charity in this space, go get the funding. The difficulty of getting this funding and the scale of funding that would be required would be a strong indicator to you if whether you have reasonable expectations for existing manufacturers or not.
Healthcare is such an emotionally driven topic. It's the only industry where people have the audacity to say that companies should make a drug for cheap, losing money in the process, because it save a small handful of people per year.
Yet this logic can be applied to anything. Should food companies make healthy food cheaper at a loss so that more people get the nutrients they need and thus live longer?
The only argument I can see a company going towards is opportunity cost, where they could be using facilities to create more profit, however that simply continues to highlight a problem with how we allow things to be structured, a failure of or complete lack of necessary safeguards.
A similar company, Valeant bought drug companies, raised prices and slashed R&D.
Bid for Allergan Puts Valeant's Research and Development Cuts Under Scrutiny
$53 Billion Bid Puts Focus on Strategy of Shedding Research Operations and Making Money Selling Products
The orphan drug company sold for a reason. It's a false assumption to assume the product would've continued to be available at the same price indefinitely.
Which is what I am talking about regarding a lack of a fail-safe, whereby public intervention could takeover and maintain production - so either companies can be honest with their costs and take a reasonable profit, or things move to the fail-safe; what would trigger that mechanism would have to be figured out/decided.
For out of patent drugs, nothing is stopping you from funding such a fail-safe. The problem is you'll run into the question of is this the most social benefit for your dollar spend. I suspect not, but that's for you to decide.
Perhaps sold because the parent company wouldn't want to be associated with immoral activity like price gouging, however could sell at a higher amount to someone willing to start gouging; who initiates these transactions would also be interesting to look at.
There are bigger problems in the system hidden here. Just because a drug is off patent, does not means anybody can make it. Each potential manufacturer has to still request and receive permission from the FDA to produce the drug.
If you are exactly copying a drug that has already been proven, safe there shouldn't be much safety concerns. So the FDA approval is not supposed to test whether the actual chemical formulation is safe (as this is already proven) but that the process of manufacturing is safe and reliable.
In a rational world, this should be a very quick approval. But in reality it is a very slow approval because congress and the FDA administration intentionally keep the department of the FDA that handles generic approvals understaffed. Thus there are massive backlogs and waiting lists to get a generic drug approved.
Or it's not worth spinning up another line for 50% of a small market. There's huge NRE costs to making that happen.
When we're literally talking about medicine, I don't have a lot of patience for increasing costs to 'what the market will bear'. There's obvious market failures occurring.
Maybe there should be a charity or government dept making this stuff. For those margins I'd expect a generic shop in India/China to be able to make them.
> Nice. How come no one can ship it across the pond and stock it then?
Because reimporting prescription drugs (manufactured in the US and sold abroad) is illegal. There was a bill that would have allowed this, but it was voted down in the Senate last January.
To be entirely honest, if that bill ever did pass, there would be serious pressure political pressure on European governments to ban re-exports of prescription drugs from the EU. The current barrier to trade is what enables European governments to set low prices for prescriptions while still maintaining the same level of profits for European pharmaceutical companies - the latter simply raise their prices in the US to make up the difference.
America subsidizes more than just healthcare development for Europe. Our massive military budget provides global security/stability for all of our allies. No strong need to have a large expensive standing army if your ally has that covered.
>So the examples of European healthcare working well are (somewhat) contingent on price gouging Americans?
It's more related to the development of new healthcare technologies/medicine. Once a drug is developed it's super cheap to produce and distribute. Getting it developed is where $X billion is spent. If the US incentivized global pharmaceutical companies less by allowing for less profit, the drugs we have now would still exist but new development would probably decrease significantly. That said there are most likely solutions to this problem (government research into medicine instead of for-profit etc).
> Eh, you can find it in Brazil, made locally (so no reimporting issues),
The US doesn't permit importing those drugs period (regardless of where they're manufactured).
The topic is generally referred to as "reimporting", and in this case the drug is manufactured by a US company, but it doesn't matter if the drug was manufactured by a Brazilian company; it can't be imported from that manufacturer to the US.
> Sounds like the old price of $13 was way too cheap. Given that its off patent and still no one else wants to make it I'd think the new $750 prices is probably not crazy.
On top of that, there was an investigative article a while back that tried to measure the actual effects on patients.
Turns out, they weren't able to find any patients who themselves had to pay anything close to $750/pill for the drug. It's not prescribed that commonly in the US, and the only patients who needed it were all on insurance plans that covered it, subject to standard copays and deductibles. Many of the patients already meet their annual maximum deductible anyway, due to the other medical care they already have to receive, so the marginal cost to them was $0. In other words, raising the price of the drug literally did not increase the price that those patients had to pay by one cent.
I'm aware that this has a complicated and implicit impact on prices elsewhere, but that's the real problem: medical billing is ridiculously convoluted, and focusing on the price of a single drug - especially the price that isn't actually paid by any consumer - is missing the real problem that needs to be fixed.
But they are still paying it, it's just obfuscated.
Since the ACA capped profit percentages, the insurance companies have been looking for ways to increase pay outs, os they can increase total revenue, and then total profit. That perverse incentive is one of the reasons why insurance premiums have been going up so much the past few years.
> But they are still paying it, it's just obfuscated.
They're not still paying it. Collectively, yes, the insurers are passing the cost on to the insured population. But the number of people taking that drug is tiny[0], so it amortizes very quickly. For the patients taking the drug, the effect on their own premiums from that price increase is less than a penny.
This is what I'm talking about when I say that medical billing is the real problem: the effects are non-obvious and highly-interconnected. You're right about the perverse incentive created by the MLR; and that's just the tip of the iceberg.
The issue is systemic. Yeah, this drug only has a few people, another drug only has a few other people, etc. But looking at it from a per drug perspective is not seeing the forest through the trees.
Seriously, average premiums increased in my state 26.7% last year. It's because of systemic issues that this a perfect example of a facet of.
> The issue is systemic. Yeah, this drug only has a few people, another drug only has a few other people, etc. But looking at it from a per drug perspective is not seeing the forest through the trees.
I don't understand, because it sounds like you're trying to argue with what I'm saying, but we're literally making the same point.
Shkreli makes for an easy target because he's the absolute caricature of a villain. But at the same time, focusing on this drug misses the point. Even if Shkreli cut the price of the drug to $0, there would be no measurable effect on patients. And while not everyone is as overtly malevolent as Shkreli is, the incentives that cause this sort of behavior aren't caused by the pharmaceutical companies (nor can they really be fixed by the pharmaceutical companies - at least not systemically - because they're just responding to the incentives that have already been created).
The problem is that the media coverage of the issue is like 99,5% Shrkeli, his smug face and lacking social skills. Look at the title of this post alone - and we're on the rational, reflecting side of the internet here
True, but there was at least an attempt before at cost containment, as they could directly capture that revenue and increase their profitability. Now there's both no incentive for cost containment measures beyond what's needed to hit their maximum allowed profitability percentage and a direct disincentive to spend more than is needed in this area, since it'd eat into the limited amount administrative overheard allowed by the MLR[1].
> Except that it doesn't seem to be true. Health insurance premiums have been rising for decades, almost (though not quite) as stubbornly reliable as an eastern sunrise. And it turns out that these increases actually slowed after the Affordable Care Act became law in 2010. That's according to data collected by the U.S. Department of Health and Human Services, which tracks a range of topics around spending on health care in its Medical Expenditure Panel Survey. The survey tracks the health insurance offered by private firms big and small, and in all cases, the average rate of premium growth from the time the law passed in 2010 through 2015 was actually lower than from 2004 to 2010. And premium growth was lowest for firms with fewer than 50 employees.
> There was no incentive before ACA to control prices either.
Sure there was. Profit = revenue - costs. Previously, lowering costs - particularly claims - was a direct way to improve profits.
Now, the formula is more complicated, because 80% of costs must be spent on claims. Lowering claims directly reduces the maximum amount of profit you can make. There's still an incentive to reduce non-medical costs, but there's an incentive to increase medical costs, or shift non-medical costs to medical costs, in order to satisfy the 80% rule.
This is a point I don't see raised nearly often enough. If their profit potential is capped at a percentage of total revenue, they have absolutely no incentive to truly attempt to reign in costs. As out of control costs can be used as evidence that, through no fault of their own, they need to increase rates substantially year after year.
> Turns out, they weren't able to find any patients who themselves had to pay anything close to $750/pill for the drug. It's not prescribed that commonly in the US, and the only patients who needed it were all on insurance plans that covered it, subject to standard copays and deductibles.
it's not uncommon for a doctor to ask, "are you on insurance? otherwise this drug would be too expensive for you". there is no statistic on how often this happens.
This kind of thinking is wrong, stupid and dangerous. Yes we still pay $750. If someone's insurance pays $750 for a pill then all the people on that policy will end up paying it. This is true whether these people use one of the ACA insurance plans or not.
Saying "oh duh medical billing is just so complicated and convoluted, i guess the money just comes out of the ether." is wrong. It is actually not that complicated. If a drug company charges medical insurance companies really high prices, all people that pay medical insurance (even those not using that particular drug) end up paying these high prices through their premiums.
Interesting side note, one of hte companies that Shkreli tried to buy was KBIO. This became exhibit #1 for people to point to whenever someone ask them why they don't short a stock if they are so sure of their convictions.
The stock went from $0.90/share to as high as $45/share overnight. If you were short you were very screwed as your broker bought you in at h igh prices that dropped pretty quickly after that.
Never hold a short overnight unless you are really really sure and even then never hold a short overnight no matter what if its a penny stock. They are just too volatile and can see 500% + price spikes.
This has already happened. Daraprim (Pyrimethamine) is available today in India for pennies.[1] You can't import it into the United States without breaking the law. The American public should be outraged at the FDA for disallowing drug importation and their overwhelmingly onerous ANDA policy.
The issue is more the licensing and initial inspections rather than actual production.
And I'm a big fan of these inspections. As bad as some of our prescription distribution is, it's nothing compared to India/China and their customer nations. You're borderline lucky to get the right drug, that's been manufactured to spec, and has been stored properly.
> It costs pennies to make and generates little profit. Only a few thousand patients need it each year.
And it is covered by insurance. This is exactly how one leverages inefficiencies of the insurance market place - insurance companies cover it and they are charged that rate.
Not for the uninsured, or the underinsured (with enormous deductibles) -- and that's the real problem. With a national socialized program, they could negotiate the prices while ensuring everyone who needs it can get it.
So far, all the investigations failed to find uninsured people who got hit with this charge. They have found people lamenting that if such people had no insurance, then it would have been very expensive for them
Of curse you can't find people who directly paid such an outrageous cost, we're talking about people who by definition can't afford medical insurance. What on earth makes you think any of them can afford $750 a pill? That's the whole point of this issue, it's not that people get gouged which is bad enough, it prices people out of getting the vital treatment they need even though the true economic cost of the treatment is trivial.
