Hedge Fund Manager Buys Rights To Critical Drug, Hikes Price By 5000%
This is enough to make anyone sick.
Specialists in infectious disease are protesting a gigantic overnight increase in the price of a 62-year-old drug that is the standard of care for treating a life-threatening parasitic infection.The hedge fund manager responsible for the price increase is named Martin Shkreli. Shkreli has a reputation as some type of wunderkind, having started his own hedge fund company while still in his 20's. Shkreli has already drawn attention for urging the FDA not to approve drugs made by companies whose stocks Shkreli was shorting. In July 20012, Citizens for Responsibility and Ethics in Washington called for an investigation of Shkreli and others whom it charged were manipulating the prices of drug company stocks through blog posts intended to spread negative and purportedly misleading information about certain drugs. According to CREW, Mr. Shkreli has acknowledged he has no medical expertise whatsoever. His company stands to increase sales in the magnitude of tens or even hundreds of millions of dollars from the price increase, according to the article.
The drug, called Daraprim, was acquired in August by Turing Pharmaceuticals, a start-up run by a former hedge fund manager. Turing immediately raised the price to $750 a tablet from $13.50, bringing the annual cost of treatment for some patients to hundreds of thousands of dollars.
The Infectious Diseases Society of America and the HIV Medicine Association sent a joint letter to Turing earlier this month calling the price increase on Daraprim “unjustifiable for the medically vulnerable patient population” and “unsustainable for the health care system.” An organization representing the directors of state AIDS programs has also been looking into the price increase, according to doctors and patient advocates.The history of Daraprim provides an interesting case study into everything that is wrong with the U.S. health care system.
Daraprim, known generically as pyrimethamine, is used mainly to treat toxoplasmosis, a parasite infection that can cause serious or even life-threatening problems for babies born to women who become infected during pregnancy, and also for those with compromised immune systems, like AIDS patients and certain cancer patients.
Daraprim, which is also used to treat malaria, was approved by the F.D.A. in 1953 and has long been made by GlaxoSmithKline. Glaxo sold United States marketing rights in 2010 to CorePharma. Last year, Impax Laboratories agreed to buy Core and affiliated companies for $700 million. In August, Impax sold Daraprim to Turing for $55 million, a deal announced the same day Turing said it had raised $90 million from Mr. Shkreli and other investors in its first round of financing.Shkreli may also be able to prevent generic duplication of the drug by controlling its distribution, a tactic which prevents other companies from getting enough of the drug to test.
Ultimately, the problem really isn't Mr. Shkreli. He's just a shark doing what sharks do. The problem is that when vital drug treatments and health care are consigned to the whims of the "free market," people like Shkreli are equally free to charge whatever they want to vulnerable patients by claiming, as here, that the distribution is small enough to warrant "specialty status" for such drugs:
Turing’s price increase could bring sales to tens or even hundreds of millions of dollars a year if use remains constant. Medicaid and certain hospitals will be able to get the drug inexpensively under federal rules for discounts and rebates. But private insurers, Medicare and hospitalized patients would have to pay closer to the list price.Shkreli claims that the higher cost for the drug is necessary for his new company to develop better treatments for toxoplasmosis, a claim which doctors quoted in the Times article call hollow as the side effects for Daraprim are manageable and there is no "clamoring" for a substitute. Interestingly, Shkreli's is the same type of claim pharmaceutical companies made in responseto efforts to allow Medicare to negotiate prescription drug prices.
Toxoplasmosis affects nearly half of the world's population and is generally not viewed as a serious health problem for most. The people for whom it is a serious problem and life-threatening are those infected with HIV, those diagnosed with AIDS, cancer patients, or who have otherwise compromised immune systems. These are often the people who can least afford to bear ridiculously inflated drug costs imposed solely to line the pockets of hedge fund managers.
Dr. [Judith] Aberg of Mount Sinai said some hospitals will now find Daraprim too expensive to keep in stock, possibly resulting in treatment delays. She said that Mount Sinai is continuing to use the drug, but each use now requires a special review.
“This seems to be all profit driven for somebody,” she said, “and I just think it’s a very dangerous process.”