A REAL U.S. DRUG PROBLEM

Pharma exec Martin Shkreli may be an ass, but he’s only taking advantage of the FDA’s regulatory zeal

Avoiding toxoplasmosis generally comes down to washing your hands after handling soiled kitty litter and cooking meat properly. It isn’t the easiest parasitic disease to get sick from, which is probably why so few people do. Even fewer end up hospitalized for it: A couple thousand every year in North America, mostly people with compromised immune systems, such as AIDS patients. Statistically then, there is a very good chance none of us will ever have to patronize the products of Martin Shkreli, the now infamous CEO of Turing Pharmaceuticals.

That’s a relief, because Shkreli is an ass. Not because he decided to jack up the price of his company’s toxoplasmosis medication, Daraprim, by 5,456% overnight. But because he defended it so bunglingly. Shkreli opened the door for politicians like Hillary Clinton and Bernie Sanders — a far sleazier class than pharmaceutical executives — to threaten new laws against “price gouging.” The iShares Nasdaq Biotechnology Index soon began tanking at length, while Shkreli taunted his critics online by quoting Eminem lyrics. And not even very good Eminem lyrics.

The media was naturally eager to tap maximum pathos out of a scandal starring a bratty tycoon straight from central casting. They called Daraprim an “AIDS drug,” which it really isn’t, and one that patients absolutely require, which they don’t necessarily. Daraprim is the brand name for pyrimethamine, a drug whose patent expired decades ago, which means that generic forms are technically up for grabs. Overseas, identical versions sell for pennies. But not in the U.S. And the mischief-maker isn’t Shkreli: it’s the Food and Drug Administration, which granted Daraprim a pointless opportunity to monopolize the market.

Daraprim has been prescribed in the U.S. for so long that it was “grandfathered” into current FDA regulations. For generations, the drug had been treating the effects of cat-poo poisoning just fine, without doctors needing extensive trials to verify it. But apparently unwilling to have certain drugs out of regulatory compliance, even long-proven medicines, the FDA has been offering an incentive to put certain compounds under its influence: Any company willing to do the trials to bring a grandfathered drug into compliance wins the rich prize of “market exclusivity,” which is what Daraprim now enjoys.

There’s an inherent logic to granting new drugs a reasonable period of exclusivity: monopoly profits are a powerful incentive to keep coming up with more life-prolonging medicines. But Turing didn’t develop Daraprim. Neither did the previous owner, Core Pharma, which had already raised prices 1,300% after buying the drug from GlaxoSmithKline in 2010. What Shkreli apparently wanted to get his paws on was less about the lure of Daraprim itself, and more about the government-granted monopoly — one that’s entirely unnecessary and benefits patients not at all.

Shkreli’s only legitimate defence is that there are plenty of companies scurrying to bring grandfathered, off-patent drugs into FDA compliance — or purchase ones already enjoying “market exclusivity” — to crank up the price. One drug, 3,4-diaminopyridine, used to treat a rare neuromuscular disorder, was largely given away for free until Catalyst Pharmaceuticals began trials with a plan to charge US$6,000 a month for a treatment course. As Shkreli might have at least pointed out, that is a rational economic response to the warped incentives created by Washington. Patients would have been better off if the FDA had left Daraprim to be price clobbered by generics, as has happened elsewhere.

Clinton and Sanders may find Shkreli an easier creep to target, but the bigger creep here is the regulatory kind.

APPARENTLY UNWILLING TO

HAVE CERTAIN DRUGS OUT OF

REGULATORY COMPLIANCE, EVEN

LONG-PROVEN MEDICINES, THE FDA HAS BEEN

OFFERING AN INCENTIVE TO PUT SUCH COMPOUNDS

UNDER ITS INFLUENCE

NOVEMBER 2015