Pharmaceutical Pricing: The Free Market and Government Regulation on Drug Companies

Posted on by Avni J. Patel

Since Martin Shkreli announced that he would lower the price of Daraprim by an unnamed amount at some point in the future; as of this writing, he has not done so.1 Critics of Shkreli claim that the announcement to lower the price was merely a tactic to placate critics.2 Shkreli has responded by stating that such a price decrease will occur on December 25, 2015. He further states that the He said the decrease will be “modest,” and he might wait until other companies lower their prices to take any action.3

Following the media attention and outrage in reaction to the actions of Shkreli and Turing Pharmaceuticals, another drug company, Imprimis Pharmaceuticals Inc. has decided to sell a Daraprim competitor.4 Imprimis Pharmaceuticals is a San Diego-based compounding pharmaceutical company.5 As a compounding company, Imprimis does not develop new drugs but repurposes products already on the market to suit individual prescriptions.6 Imprimis Pharmaceuticals announced that its Daraprim competitor would contain the same active ingredients: pyrimethamine and leucovorin.7 The company plans to sell a 100-capsule bottle for $99 or about 99 cents per pill.8

Imprimis does not plan to stop there, it wants to take advantage of the free market system and apply it to the pharmaceutical industry to fight against Big Pharma and their pricing schemes.9 The 3.5-year-old drug compounding firm also plans to start making inexpensive versions of other generic drugs whose prices have skyrocketed.10 Imprimis Pharmaceuticals’ CEO, Mark Baum stated that the company is “looking at all of these cases where the sole-source generic companies are jacking the price way up.”11

The high price of prescription medicines in the U.S. is due to companies buying the rights to old, cheap medicines that are the only treatment for serious diseases and then hiking prices several fold, this method has triggered government investigations, politicians’ proposals to fight “price gouging,” heavy media scrutiny and a big slump in biotech stock prices.12 Recently, both houses of Congress have pursued the issue of price gouging by drugmakers — the practice of taking an older drug and drastically raising its price.13 For instance, the Senate Special Committee on Aging rallied bipartisan support for an investigation of four companies deemed the worst offenders: Valeant Pharmaceuticals, Turing Pharmaceuticals, Retrophin Inc., and Rodelis Therapeutics.14 The Democrats in the House of Representatives launched an Affordable Drug Pricing Task Force to address the issue.15 These investigations and subsequent hearings are promulgated for increased transparency into a drug’s wholesale price.16

However, the drug companies have not been willing to provide such information.17 Both Valeant and Turing have rebuffed requests for information on how they set their prices, stating that information of that kind is proprietary and confidential.18 Both Retrophin and Rodelis appear to be responding to the Senate’s requests.19 The Senate will hold its hearing on drug prices on December 9, 2015.20 If the Senate’s investigation is successful, it could set a new precedent for the way drugs are priced, changing the pharmaceutical industry as a whole.21

  1. Michael Sainato, Over 5000% Price Gouge Still Not Lowered by Turing Pharmaceuticals CEO, Martin Shkreli, Observer News, (Oct. 09, 2017, 3:07 PM), http://observer.com/2015/10/over-5000-price-gouge-still-not-lowered-by-turing-pharmaceuticals-ceo-martin-shkreli/. ↩

  2. Id. ↩

  3. Lydia Ramsey, Pharma CEO Martin Shkreli Says a New Price For the Drug He Hiked Could Be Here By Christmas — But It’ll Be Only a ‘Modest’ Decrease, Business Insider, (Nov. 4, 2015, 10:39 AM), http://www.businessinsider.com/martin-shkreli-on-daraprim-decrease-2015-11. ↩

  4. Jon Levine, You Can Now Buy the Drug Pharma Bro Martin Shkreli Hiked 5,000% for a Dollar, News.Mic, (Oct. 23, 2015), http://mic.com/articles/127246/you-can-now-buy-the-drug-pharma-bro-martin-shkreli-hiked-5-000-for-a-dollar#.gMHTSvDoA?utm_source=policymicFB&utm_medium=main&utm_campaign=social. ↩

  5. Id. ↩

  6. Id. ↩

  7. Id. ↩

  8. Id. ↩

  9. Linda Johnson, Drug Compounder Offers Cheap Version of Costly Turing Drug, Yahoo! Finance, (Oct. 22, 2015, 3:42 PM), http://finance.yahoo.com/news/drug-compounder-offers-cheap-version-194229044.html. ↩

  10. Id. ↩

  11. Id. ↩

  12. Id. ↩

  13. Lydia Ramsey, Martin Shkreli Is Still Refusing to Answer to the US Government For Jacking Up The Price of a Critical Drug, and He’s Not Alone, Business Insider, (Nov. 7, 2015, 9:26 AM), http://www.businessinsider.com/martin-shkreli-refuses-to-respond-to-congress-2015-11. ↩

  14. Id. ↩

  15. Id. ↩

  16. Id. ↩

  17. Id. ↩

  18. Id. ↩

  19. Id. ↩

  20. Id. ↩

  21. Id. ↩

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