A Lesson in Capitalism

A drug company bought the rights to a 62 year old drug, and raised the price for dosages from $13.50 to $750. Reaction from the left:
In what may go down in history as the textbook example of how dangerous an unregulated free market can be when a company decides it wants to be greedy, Turing Pharmaceuticals of New York hiked the cost of a powerful drug used to treat people with life-threatening illnesses like AIDS and cancer by over 5,000 percent overnight. Why? Because it will make the start-up company’s investors rich – and there is nothing patients and doctors could do about it.
Reaction from the right: "Time to build a factory to make that drug in India."

Who thinks the per-dose price is going to approach $13.50 again in the near future? Anyone want to bet it may even go under that?


douglas said...

The patents are expired. Other companies can make generics. The new owners are betting that they won't because too few patients need it. Also, it's going to cost $5000 a pill to the generic company to get pills to run tests against. So if the demand is such that investing a few grand to pass tests to be able to sell this drug for $7.50 a pill either doesn't work out, or it does, and soon, some drug company somewhere will be making their generic version of the drug.

This sort of thing happened when regulation forced drug companies that made inhalers switch to 'environmentally friendlier' propellants. Inhalers that had cost me $5-7 outright suddenly were $25 or more because the reformulation allowed for a new patent. Costs came down fairly shortly thereafter. The market will correct this case too, but will people publish articles about that when it happens? No, of course not.

MikeD said...

I heard one of the stupidest statements on the radio news about this topic this morning. There was a sound bite from some talking head who opined "Patients shouldn't have to pay a tax on their pills for future drug research."

Oh really? Cause if they don't, what IS going to pay for that drug research? Taxes everyone has to pay to the government (who is SO wonderful at distributing money properly) I suppose? I don't think people realize how expensive drug research is, and the fact that the rest of the world contributes next to nothing by way of it. Yes, drugs from Canada are cheaper. And Canada relies on the US to research and develop all those drugs they're selling. So too with Europe (who does have a little taxpayer funded research, but it's a drop in the bucket compared to the US), and Africa, , South America, Australia and most of Asia have next to no pharmaceutical research and development (Japan has about as much as the UK).

The vast majority of world drug research is paid for by Americans, because our government lets the pharmaceutical companies hold patents on the medicines for a number of years in order to recoup the costs of development and allow them to research other drugs. Is it unfair? Of course! But we can't exactly force other nations to do likewise, and if we don't do it, then I hope you expect no medicinal breakthroughs in the future, because no one will do the research if no one will pay for it.

Texan99 said...

Everyone admires Cuba's non-capitalist approach to medicine. We can all just get by on the new drugs developed in Cuba.

Elise said...

Late to this but here's a nice summation from Marginal Revolution via Megan McCardle:

Generic Drug Regulation and Pharmaceutical Price-Jacking

The drug is already being produced cheaply in India and the generics are approved in Europe:

It’s easy to see that this issue is almost entirely about the difficulty of obtaining generic drug approval in the United States because there are many suppliers in India and prices are incredibly cheap. The prices in [the list in the post] are in India rupees. 7 rupees is about 10 cents so the list is telling us that a single pill costs about 5 cents in India compared to $750 in the United States!