Democratic presidential candidate Hillary Clinton's plan to focus on the "price gouging" by pharmaceutical companies and the need for price regulation will only lead the industry further astray, according to Scott Gottlieb's, MD, recent article in The Wall Street Journal.
"What [Ms. Clinton] fails to comprehend is that the high drug prices she decries aren't the result of market forces gone wild. Rather, they are the result of bad regulation that has created market failures and shortages," Dr. Gottlieb, a physician and resident fellow at the American Enterprise Institute, wrote in the WSJ.
The primary issue Dr. Gottlieb takes with Ms. Clinton's approach to checking prescription drug prices is that her policies are focused mainly on new medicines that are priced high because they require a lot of risk and cost to develop, as opposed to generic drugs that are excessively expensive because investors are manipulating regulatory failures.
Dr. Gottlieb cites Turing Pharmaceuticals, which received significant media attention after news that it increased the price of the drug Daraprim, which has been used for decades to treat toxoplasmosis and more recently to treat AIDS and cancer patients, from $13.50 a tablet to $750 overnight.
In a Sept. 20 interview, Turing CEO Martin Shkreli said the decision to raise the price of the drug was made to keep the company in business and to fund research for new medicines. He has since backed away from the $750 price tag, saying Turing will announce a lower price for Daraprim in the next weeks.
The 5,000 percent inflation of Daraprim is an example of a drug company attempting to exploit a regulatory failure — something that is becoming increasingly prevalent as the Food and Drug Administration cancels the production of older generic medicine and barriers make the entry of generic drugs costlier, according to Dr. Gottlieb.
Turing had purchased the marketing rights to Daraprim from another company when it acquired the supply of the drug. Therefore, Turing didn't require substantial regulatory work to market the medicine, enabling it to rebrand the pill and increase the price.
If another drug company wanted to compete and sell the same medicine, it would be required to apply to the FDA for new generic drug approval. One of these applications used to cost $1 million, but today it can cost more than $20 million, according to Dr. Gottlieb. Because of this, old but niche drugs often have no competition from other generic entrants, allowing companies selling them to drive up prices to gain huge profits.
It takes an average of four resubmissions for a generic application to win approval, which could take 50 months, according to Dr. Gottlieb. It is entirely possible there are competitors to Daraprim waiting for FDA approval.
Additionally, increased scrutiny by the FDA on the manufacturing process of prescription drugs has led to the shutdown of U.S. drug plants, though with little attention as to how manufacturing capacity would be replaced. According to Dr. Gottlieb, slow approval times combined with fewer manufacturing facilities create temporary drug shortages and monopolies, "which can be exploited by shrewd investors."
"If Mrs. Clinton is serious about helping patients, she should focus on lowering the cost and time necessary for generic-drug entry, thus reducing the chance of perpetual monopolies for old, off-patent drugs like Daraprim," Dr. Gottlieb wrote.