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Martin Shkreli, CEO of Turing Pharmaceuticals, made news this week when he announced he would raise the price of a medication his company had acquired, Darapim (pyrimethamine), from $13.50 to $750 per pill.
Darapim, which has been on the market for 62 years, is an antiparasitic used to treat acute malaria and toxoplasmosis. It's also used off-label to prevent and treat opportunistic infections in AIDS patients. "Off label" simply means doctors use it for indications not reviewed by the FDA. For patients with these indications, the drug can be lifesaving.
Predictably, Shkreli's announcement caused a public uproar, and yesterday, the CEO backed off his position, promising to deliver the drug more cheaply. We have yet to see what the final number will be.
During the public protest, carried out largely online, one 21-word tweet stood out among the rest.
It came from Hillary Clinton and read, "Price gouging like this in the specialty drug market is outrageous. Tomorrow I'll lay out a plan to take it on."
In response, biotech ETFs dropped about 5%.
Here's what Clinton's plan turned out to include - and what it would really mean for your biotech holdings...
Clinton's Pharma Policy Proposal Needs Some Work
As promised, Clinton quickly followed up her brief tweet with a more substantial plan that included these points:
- Calling a halt to current direct-to-consumer advertising subsidies and redirecting that effort to investing more in research and development. This basically means you'll see less advertising for prescription drugs in the media. It would not affect the cost of most drugs, which are promoted by educating medical specialists, not the public.
- Capping monthly and annual out-of-pocket costs for prescription drugs. This is an issue for insurance companies, but more so for Medicare, and will mean closing the so-called "donut hole" - a coverage gap in Medicare prescription drug plans that cost consumers a lot of out-of-pocket money.
- Encouraging more competition among prescription drug makers in order to lower prices. Clinton would like to encourage more generic versions of specialty drugs, including the most expensive, called biologics (drugs derived from living entities such as bacteria or viruses). Although it may be possible to do this for some first-generation biologics, newer medications will likely remain protected, as they are incredibly expensive to develop, and R&D for many of them takes place not in big pharmaceutical companies, but in smaller, pre-profit biotechs. This is especially true for drugs that treat "orphan indications," that is, serious or life-threatening illnesses that are so rare it makes little economic sense to produce them unless you can charge high prices for them.
About the Author
Ernie Tremblay has more than 25 years of experience in following and analyzing the latest developments in health, medicine, and related technologies. He understands the FDA approval process, as well as the "hard science" behind new, experimental drugs and the market demand for them - and has a comprehensive grasp of the complex dynamics that determine whether a new drug will be a breakthrough winner, or just another casualty of the FDA approval process.