Service of Side Effects of Drug Prices

October 19th, 2015

Categories: Medicine, Pharmaceutical, Prices


High prices 2

I read about the fallout of dodgy if legal pricing practices by big pharma from three viewpoints in recent weeks causing both curious and predictable side effects.

James Surowiecki wrote “Taking on the Drug Profiteers,” in The New Yorker, about the infamous Martin Shkreli and concluded that the problem with Shkreli’s exploiting loopholes in the pricing of drugs is “not with the man but the system that has let him thrive.” Shkreli, who owns Turin Pharmaceuticals, raised the price of Daraprim from $13.50 to $750 a pill because he could. This is “rent seeking,” that Surowiecki defined as “increasing profits not by adding real value for customers but by exploiting loopholes.” Daraprim, first sold in 1953, treats toxoplasmosis. After public uproar Shkreli lowered the price of the drug that among other things treats AIDS and malaria. 

Big pharma 1It’s not the only example of the rent-seeking model, he wrote, adding to the list Thiola, to treat kidney disease. The company that makes it is also owned by Shkreli. Last year the price increased “twenty fold.” A company called K-V Pharmaceutical increased the price for a shot that thwarts preterm births from $15 to $1,500. “There have also been alarming increases in the pries of common drugs like doxycyclene. Generic-drug makers have been merging with each other, leaving fewer competitors.”

Innocent people who are sick aren’t the only victims according to Michelle Celarier’s article, “Stuck in the Mud,” in the New York Post last week. She wrote about battered portfolios of some “hotshot hedge fund activists” and big pharma accounted for one of the headaches. She reported Bill Ackman of Pershing Fund’s “5.7 percent stake in Canadian pharmaceutical giant Valeant, which announced late Wednesday that it is under investigation by federal prosecutors in New York and Massachusetts regarding pricing of drugs,” as one of the problems. “Valeant has lost 36 percent of its value since Aug. 1.” Pershing Fund is down $600 million as a result.

big pharma 3The Wall Street Journal dug a bit deeper into drug pricing. In “Valeant Probe Reprises Focus on Drug Pricing,” Jonathan D. Rockoff reported that pharmaceutical companies paid $3 billion + in fines in the last 10 years “to resolve pricing cases.” I can hear Jackie Gleason in his role in the “Honeymooners” referring to “a mere bag of shells.” According to Google, the global industry represents $300 billion a year.

The fines are largely due to overcharges to Medicare and Medicaid. According to the law, a company must offer Medicaid its best rate. Merck didn’t do that.with Zocor–a cholesterol lowering drug and a painkiller no longer on the market, Vioxx. Merck settled at $650 million. [But how much did it make?] Rockoff listed other examples in the past but you get the idea. Pfizer’s Wyeth division is currently being investigated for overcharging Medicaid for heartburn medicine Protonix.

That’s not all. Big pharma gives money to charities that in turn pay for the prescriptions of needy patients. Valeant spent $544 million in 2014 and anticipates $630 million this year. That’s legal. What’s not is when the charity directs the patient to a certain drug. That’s considered a kickback. Let’s get real: Who wouldn’t promote the products of a company that supports your charity/your job?

What do you think of a corporate model that takes advantage of loopholes to raise prices dramatically to make money to the detriment of its often desperate customers? Do you think relatively tiny fees act as the slightest deterrent to a corporation intent on making a profit by skirting the law? What about Valeant giving $millions to charity that comes back in business for its products?


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9 Responses to “Service of Side Effects of Drug Prices”

  1. ASK Said:

    While I am not big on government price controls, I was outraged by the ability of one company to effect such a dramatic price increase for a drug that’s been around since the ’50s. But now I am wondering what the drug-pricing loopholes are and why they exist. It appears that none of these articles addressed this…

  2. hb Said:

    It is a fundamental of nature that human beings in their endless battle for survival, must take advantage of every opportunity possible to achieve whatever advantage (power and wealth) possible over their fellow human beings.

    In the capitalist system in which we live, the drug companies and their managements are only “doing what comes naturally” when they take advantage of the public. In a democracy, it is the duty of our elected leaders to protect us from excessively rapacious corporate greed, and why they pass laws such as the Glass Steagall Act, and create agencies such as the Food and Drug Administration and the Internal Revenue Service. The problem comes when big corporations and those who control them acquire such overriding power that they are able to “influence” our leaders to rescind laws and defang watch dog agencies.

    This, of course, is what has happened in the United States (and, for that matter in the western world) over the past thirty-five years and why you have stories to tell such as the ones above.

    “Big drugs” will argue, in self-defense, that the advances made in medicine over the past few decades under the free enterprise system would never have come to be had medicine been under the control of the state and its vast bureaucracy.

    They have a point, but the pendulum has swung too far. “Big drugs” must be reigned in.

  3. Martha Takayama Said:

    I found your posting today a timely wake-up call. Today’s Boston Globe had a front page article stating, “When a Bain Capital hedge fund made a big investment in Spark Therapeutics Inc. last year, the bet was not only that the company would win approval of a breakthrough medicine but that it would be able to command a premium price”. Sparks seemed to be successfully developing the first gene therapy to be approved in the U.S. for a rare eye disease, but at the same time investors’ possibilities of enormous profit per patient per treatment seemed to be increasingly uncertain.” We are in a scrutinized environment for drug prices,” said Matthew McPherron, managing director of Bain’s Boston-based Brookside Capital fund. He expressed concern over a sufficient return.

    Gross overcharges of Medicare and Medicaid, meaningless donations to charities for reimbursement for payment for prescriptions for the needy, and charities that promote specific drugs benefits showered on physicians in positions to promote particular medicine, are only part of the large and tangled labyrinth of inadequate vigilance with regards to the public’s health. The most grave manipulation, however, is the refusal to make medicines for communicable diseases such as aids available at reasonable and modest costs to other nations, thereby actually promoting epidemics.

    Most amazing is the incredible short-sightedness of this greedy behavior. Bacteria, mosquitoes, communicable diseases do not recognize expenditures, profits or geographic borders, or social class. The lack of vision on the part of investors and their chosen companies is actually noxious!

  4. Jeanne Byington Said:


    Your point about overseas diseases is apt as the world continues to shrink–epidemics have the potential of killing millions as you point out and we are not exempt from their moving here. Hopefully as we decrease spending on wars we might shift over some of those funds to paying for more medicines for people in countries without the means to help their citizens.

    I am concerned, as well if not more so, by the fallout from people who cheat Medicaid and Medicare. It affects people here whose coverage is reduced and in jeopardy because the general fund has been robbed by wealthy corporate predators who snitch $hundreds of millions and return only a few $millions when caught.

    As for Bain, at least it is backing a company that is researching new medicines. Research/FDA approval are costly. And a company –or those who back it–should be rewarded for same or the way our system works, it would not have the funds to get off the ground. By comparison, what appalled me about the Turin drug price increase was that it’s the poster child of rent seeking, what James Surowiecki defined as “increasing profits not by adding real value for customers but by exploiting loopholes.”

  5. Jeanne Byington Said:


    HB’s response, right below yours, answers why loopholes exist: Elected leaders aren’t doing their jobs because in order for many of them to have their positions, they depend on corporate support to fill their election coffers. With that comes blinders.

    What the loopholes are specialists are keenly aware: Corporations pay large sums for lawyers and others to find and take advantage of them. Only when an instance crops up that takes embarrassing advantage of the loopholes is MAYBE when something is done to close them. I tried to find out by a quick Google search how much less than $750 each Daraprim costs and wasn’t able to. The articles quoted Shkreli to say it would be less, but not what it would cost.

  6. Lucrezia Said:

    There is a huge push on the part of the pharmaceutical industry to put everyone on medication. Watch any TV channel for at least an hour and be treated to a pill parade ranging from indigestion remedies to testy bladders along with a wide variety of aches and pains — you name it.

    Despite well publicized corporate greed, not one peep is heard from those aspiring to be the next US President. The silence from far left to far right is louder than all issues combined.

    This leads to a couple of dismal thoughts: Politicians intimidated by corporate greed, and a public too stupid to take appropriate action.

  7. Jeanne Byington Said:


    Big pharma is right, as I responded to Martha, it is costly to research and introduce drugs here. But these examples don’t fit as they are “old” drugs that, in many cases, another company paid to introduce.

    The problem is that those who play these games with prices are not subject to suffer. They have so much money that they either have Rolls Royce insurance plans that pay for every and anything or they can write a check for a few $million for their drugs or their children’s, sibling’s or their parent’s pills if need be. And they must have no empathy for people who must watch loved ones suffer. Yikes. What a world.

  8. Jeanne Byington Said:


    Bernie Sanders has plenty to say about corporate greed. In the Huffington Post two days ago: “Sen. Bernie Sanders (I-Vt.) declined to accept a maximum campaign donation from the CEO of a company that increased the price of a drug used by HIV and AIDS patients by hundreds of dollars, choosing instead to donate the money to a Washington health clinic.

    “Martin Shkreli, CEO of Turing Pharmaceuticals, donated $2,700, the maximum allowed for individual donors, in September, he told Stat. While the Sanders campaign initially thanked Shkreli for his contribution, a campaign spokesman told Stat this week that it would donate the money to Whitman-Walker health clinic.”

    If you Google “Bernie Sanders and corporate greed” and the first thing that crops up is an article in which he’s reported to have said in the summer {and many times since}: “…meanwhile the wealthiest people and the largest corporations are doing phenomenally well. Today, 99 percent of all new income is going to the top 1 percent, while the top one-tenth of 1 percent own almost as much wealth as the bottom 40 percent. In the last two years, the wealthiest 14 people in this country increased their wealth by $157 billion. That increase is more than is owned by the bottom 130 million Americans — combined.”

    As for those ads, they must make hypochondriacs rejoice! They might discover something they never knew they suffered from so that they, as well as the companies pushing the products and TV stations and cable networks making the advert money, benefit and so do we: it gives us a chance to get a drink, clean the dishes or see what else is on the tube while they drone on.

  9. Raul Said:

    A great deal of all prescription drugs are seeing a hike in price and the decline, in my opinion, is probably very far off. I was searching online for a more cost effective method to get access to my prescription drugs and this place has much cheaper options and they are identical in effective ingredient values as the originals.Great strides are being made towards the fight against HIV. But, do we truly have 30 years that it typically takes to develop such drugs and then release them into the open market at prices so high that very few are able to attain the treatment?

    We need to exercise solidarity and demand to know why a generic is so transparent and cost-effective and why brand name drugs do not even need to consider doing the same.

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