The Shkreli  controversy: the frightening power of pharmaceutical companies

Carol O’Brien reports on the story of the dramatic rise in Daraprim’s price by 5500% and describes the greed driven desire of pharmaceutical companies to make a profit at the cost of human health and life.

SCITECHWhen Turing Pharmaceuticals bought the rights to a little-known drug called Daraprim this past September, it didn’t take long for the story to sweep across social media, evoking a particularly fiery response. Immediately after buying Daraprim, Turing raised the price for a single pill by an incredible 5500% – from $13.50 to $750. The price increase didn’t go down well with patients, and soon the controversy spiralled out of Turing’s control, with an onslaught of criticism exploding across the internet.

Daraprim is a drug that fights toxoplasmosis, a disease caused by the parasite Toxoplasma gondii. It’s a relatively common parasite, but in those with weakened immune systems, such as Aids and cancer patients, infection can cause serious or fatal illness. The CEO of Turing Pharmaceuticals, 32-year-old Martin Shkreli, was vocal in his defense of the increase, but by his own admission handled the controversy poorly. He was attacked on social media, shamed by politicians, and denounced by doctors. Turing’s share prices fell following the price increase. It wasn’t long before Shkreli buckled under the pressure, and backtracked, vowing to reduce the price. However, he still hasn’t said by when or how much. In the meantime, he’s been busy hiring a new PR firm, lawyers and lobbyists, and being as brash on twitter as ever.

Although Turing’s move hit the headlines, they were not the first pharmaceutical company to buy a drug and swiftly increase the price, nor are they likely be the last. Such behaviour appears to be a common tactic, endemic within the industry. Companies are on the lookout for opportunities to buy already developed drugs, particularly ones they believe are undervalued, and then increase the price. It’s an easy way to boost income without the years of effort required to research and develop a new drug, which can be seen as inefficient and risky.

Another company that has come under fire is Valeant Pharmaceuticals International. Last February they acquired the rights to two life-saving heart medications, Nitropress and Isuprel. On that very same day, they increased the prices by 212% and 525% respectively. An influential New York Times article last month exposed their their minimal spending on R&D, as well as their sales tactic of acquiring other pharmaceutical companies, laying off their staff, and raising prices. After the article, Valeant’s share prices dropped. Gilead Sciences increased the price of their hepatitis C drug, Sovaldi, more than twofold in 2011. An improved iteration of the drug, Harvoni, now costs $100,000 for the 12-week treatment. Because of the price, insurance companies are resisting pay outs to provide the drug, often deeming it necessary in only the most advanced liver disease cases.

Although Shkreli has been quiet of late, the pharmaceutical industry is still feeling the heat. They are facing a publicity crisis, at a time when “Big Pharma” already has a rocky reputation.

In the US, the huge public backlash over Daraprim didn’t escape the attention of next year’s presidential candidates. Democratic hopeful Senator Bernie Sanders was quick to take a stand on the controversy, writing a letter to Turing Pharmaceuticals denouncing their actions. He has since been a prominent target of Shkreli’s tweets. Hillary Clinton tweeted about the controversy not long after it broke, and issued a plan the following day. Among Clinton’s prominent proposals are restricting direct-to-consumer advertising by pharmaceutical companies, capping monthly prescription drug payments to $250 a person, and proposing that Americans should be allowed to purchase their drugs abroad (where they are often significantly cheaper). Not surprisingly, the pharmaceutical industry was quick to vocally oppose Clinton’s proposals. On the other side of the political divide, even the Republican candidate Donald Trump, surely an advocate of free-market capitalism if there ever was one, commented on Shkreli “He looks like a spoiled brat… He’s zero. He’s nothing. He ought to be ashamed of himself.” In the lead up to a presidential election year, the pricing of medicines in the US has now become a politically charged issue. Government intervention in the form of regulation to ensure affordable medicine would likely be a popular move with voters, but it’s doubtful anyone wishes to do battle with the monstrously powerful health insurance and pharmaceutical industries.

Turing and others have been quick to defend their actions. They claim that the cost of Daraprim is now in line with those for other rare diseases, and that the money earned will be used for research into new drugs a dubious claim, given the often scant budget allocation to r&d of these companies. They also insist that their medicines will be given free to those who cannot afford it, another claim that has been criticised.

Shkreli has commented “There’s this expectation that drug companies should act differently from other companies, because you have to buy their products. That notion needs to disappear.” Except there is a fundamental difference between pharmaceutical companies and other companies, in my mind at least. They specifically target vulnerable people. Their products are often a need rather than a luxury. Their customers are often highly emotionally fragile. It’s no wonder pharmaceuticals is such a reviled industry.

The business model of a pharmaceutical company looks something like this. They invent a drug, patent it, and sell it. When the patent runs out, 20 years later, it becomes available for any company to produce a generic version, and due to competition, the cost to the consumer usually drops dramatically. Daraprim has been around for 52 years though. Its patent ran out a long time ago. The issue here arises instead firstly because Turing Pharmaceuticals bought the exclusive marketing rights for Daraprim. In the US, they control all the supplies. Secondly, when a medicine has such a small target market, as Daraprim does, generic drug manufacturers often deem development of a competitor drug to not be worth the investment. However, if they do decide to go ahead with production, then generic makers need to prove their drug is equivalent to the branded drug. To do this, they need to get their hands on large amounts to test, something that can be difficult to do if the branded drug is under tightly controlled distribution.

Another twist in the Daraprim saga came late last month, when Imprimis Pharmaceuticals, a San Diego based company, announced that they were launching a low-cost alternative to Daraprim, apparently costing just $99 for a bottle of 100 pills. The catch here is that they are not offering an exact replica of Daraprim. The sole component of Daraprim is a compound called pyrimethamine. Imprimis are instead offering a combination of two compounds; pyrimethamine and leucovorin. Leucovorin helps reverse the negative effects of pyrimethamine on bone marrow. By combining the two in one pill, Imprimis can overcome the restrictions around Daraprim’s rights. Imprimis’ finished compound drug formula is not FDA-approved, but individually the compounds are, meaning that the new pill will be available by a doctor’s prescription to a specific patient.

While it is important to note the Daraprim price hike does not affect patients in Ireland, the issue is of interest nonetheless considering that the US is a powerhouse of biomedical and pharmaceutical research, meaning any major changes are likely to have global repercussions. Clearly pharmaceutical companies have to make a profit, and innovation should be rewarded, but too often the pricing of medicines seems ridiculously arbitrary. Many feel now is the time to question pharmaceutical companies to justify their prices, to think seriously about the faults in the system and the balance of incentivised versus predatory pricing.

Illustration by Sarah Morel