Pharmaceutical CEO Buys Patent to Life-Saving Drug, Raises Price by 5,500%

© Josh Sager – September 2015

Last month, CorePharma sold the marketing rights for the drug Daraprim to a relatively small company called Turning Pharmaceuticals. In normal circumstances, this would be completely uneventful, as Daraprim is a generic drug with a long history of success, thus prices should be stable and side-effects should be known. Unfortunately, Turning Pharmaceuticals is run by Martin Shkreli, an ex-hedge-fund manager, who decided that Daraprim was a perfect tool to extort the sick. He raised the price of Daraprim from $13.50 per tablet to $750 (a 5,555% increase) overnight, with no legitimate justification—the costs of production remain the same and there is no shortage of ingredients to produce the drug.

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Turning Pharmaceutical’s decision to increase the price of this drug is even more extreme when we consider that CorePharma raised the price of Daraprim from $1 a pill to $13.50 a pill when it bought rights to the drug in 2010. This translates to a price increase of 75,000% over just 5 years, with no legitimate justification.

Daraprim was developed 62 years ago as a generic drug to treat various severe parasitic infections. It is extremely effective and is commonly used to treat toxoplasmosis, malaria, and a variety of infections that can arise from AIDS (as part of a cocktail). According to the UN, Daraprim (under the chemical name Pyrimethamine) is an “essential medicine” that every health care system should be able to provide to those in need.

Because there is no current alternative to Daraprim (it’s a generic drug with no competitors), Turning Pharmaceuticals has a virtual monopoly that forces consumers to pay its prices. Shkreli’s decision to increase profits is a pure example of corporate greed triumphing over human life and should be condemned by everybody.

In defense of his profiteering, Shkreli has claimed that this price increase is necessary to fund new research. While it is true that a vast majority of the costs associated with pharmaceuticals are associated with developing new drugs, not producing existing compounds (the actual value of the materials in pills is usually extremely low), Shkreli’s use of this argument falls apart under basic logic. In addition to the fact that there is no need to develop a new version of this vital drug, any “new” drug that Turning developed using these funds would be held under patent and sold for massive profits.

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In effect, Shkreli is arguing that he should be allowed to use another person’s work (Gertrude Belle Elion created the drug over 60 years ago) to blackmail sick people into paying for his corporation’s future development costs.

The government must act to punish this type of profiteering—while Turning Pharmaceuticals’ conduct is technically legal, it is a danger to public safety and indicative of the conduct that has dramatically inflated healthcare costs in our nation.

I propose using the eminent domain powers of the US government to seize the manufacturing rights for Daraprin from Turning Pharmaceuticals. They would be compensated for this, but the compensation should be hard-capped at $55 million, which is the amount of money they paid for the rights in the free market just last month. After the government seizes the rights to the drug, it should either begin producing it using public facilities to sell it at-cost, or should contract production out to a private producer.

Legally, the government has the right to use eminent domain in this manner but has been extremely hesitant to do so. Whenever this tactic is brought up, big-pharma argues that such a seizure would set a terrible precedent which would destroy the incentive to develop new drugs (and they back this argument up with MASSIVE donations to both parties). If eminent domain is used in this case, such arguments will almost certainly be used again, but they will likely fall flat in the face of the public outrage.

While relatively few Americans will ever take Daraprin, most Americans hate corporate greed and can see how such obvious and unjustified price increases are unfair. In face of this, the smart decision for other pharmaceutical companies would be to distance themselves from Turner and to point to them as the bad apple that doesn’t define the bunch—this isolation and lack of peer support renders Turner vulnerable and makes it much more likely that an eminent domain seizure would be successful.

7 thoughts on “Pharmaceutical CEO Buys Patent to Life-Saving Drug, Raises Price by 5,500%

  1. It isn’t just for AIDS, it can be important for cancer patients too. I think the insurance lobby needs to take this on, since they will ultimately end up paying the majority of these costs. I thought drug patents expired after a certain time. How can a 60 year old drug have a patent?

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  2. I really like to idea of using eminent domain – just concerned that the “moneyed interests” will find a way to squelch it if their isn’t enough public support (that’s the key).

    Like

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