By Dan Calabrese ——Bio and Archives--October 26, 2015
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Martin Shkreli's Turing Pharmaceuticals had quite a moment of infamy this week when, thinking they had cornered the market on a drug called Daraprim, the company sent its own stock price soaring by announcing it would raise the price of the drug from $13.50 per pill to $750.00 (!). Naturally, this gave rise to all kinds of denounciations from politicians and the media, along with claims that this sort of thing is exactly why we need government price controls - because otherwise we would all be helpless before the whims of capitalist madmen like Shkreli.Hillary Clinton regularly assails the 32-year-old by name and has made him the symbol of her plan for price controls on medical innovators. Even Marco Rubio has denounced the “pure profiteering” that he says will “bankrupt our system,” albeit with more nuance than Hillary. Never mind that Mr. Shkreli’s conduct is unrepresentative of the pharmaceutical industry, which takes enormous risks to invent new treatments and invests billions of dollars in research and development despite the U.S. Food and Drug Administration. Turing hasn’t discovered anything and Daraprim is the only product it sells.
Never mind, either, that Turing seems to be an artifact of the FDA: Normally other generic drug makers would compete with lower-cost alternatives and undercut Turing. But Mr. Shkreli has temporarily cornered the market because FDA approval to manufacture any given generic takes 50 months on average and the backlog for permission has climbed in recent years to about 4,000 applications. Well, not so fast. On Thursday, Imprimis Pharmaceuticals announced a new proprietary combination therapy that uses the same active ingredients as Daraprim. It will sell a 100-count bottle for $99, or 99 cents a tablet. Imprimis’s substitute will be available to physicians and patients because the company makes compound medications, or customizable drugs that are available by prescription when a commercial medicine does not meet an individual’s needs. Toxoplasmosis therapy and dosage are well understood, but compounders work outside the FDA’s regulatory orbit and don’t conduct clinical trials for an FDA label.What put Shkreli in a position to try this was the inefficiencies of the FDA approval process. He thought he had created a situation in which Turing, and only Turing, could sell the drug. So with a monopoly he could never have achieved without first manipulating federal regulators, Skhreli jacked up the price thinking he owned all the supply and demand was involuntary. But Shkreli didn't understand the system as well as he thought, and because Imprimis makes compound medications not subject to the same regulatory restrictions, it was able to seriously undercut Turing on price. Now you can choose between paying $750 a pill or 99 cents a pill. Hmm. I wonder which one most people will choose! The real lesson here is that, without the inefficiencies of the FDA mucking up the market, Skhreli and Turing would not have had the opportunity to try this in the first place. Fortunately, market forces worked and everybody's villain of the week had his head handed to him by the natural workings of the market without politicians having to do anything. Which is good, because every time they try to "solve" a problem like this, they inevitably make it and many other problems far worse. So, you suppose Hillary will be out on the campaign trail this coming week extolling the virtues of free market economics and the role it played in taking away Martin Shkreli's play? Yeah, me neither. As far as people like Hillary are concerned, if power-grubbing politicians didn't solve the problem, it hasn't been solved.
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Dan Calabrese’s column is distributed by HermanCain.com, which can be found at HermanCain
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