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The Most Unconscionable Drug Price Hike I Have Yet Seen

There’s a drug called Thiola (tiopronin) that most people have never heard of. It’s on my list of “smaller than aspirin” drugs, and I’d never heard of it until I put that one together. But thanks to a little company called Retrophin, we all get to hear about it now.
It’s used to treat cystinuria, a rare disease that causes painful kidney complications, namely unusual kidney stones of pure cystine. And until recently, tiopronin (as a small, nearly forgotten drug for an orphan indication) was rather cheap. It was sold by a small company in Texas, Mission Pharmacal, until Retrophin bought the marketing rights earlier this year (a move complicated by the company’s CEO, investor Martin Shkreli, who may have let the news of the deal leak on his Twitter account).
That link mentions part of Shkreli’s business plan as “acquiring the rights to obsolete remedies Shkreli says can be put to new and lucrative purposes”, and by gosh, that’s certainly accurate. Retrophin is increasing the price of Thiola from $1.50 per pill to over $30 per pill. Because they can – they stated when they bought the drug that their first move would be to raise the price. New dosages are formulations are also mentioned, but the first thing is to jack the price up as high as it can be jacked. Note that patients take several pills per day. Shkreli is probably chortling at those Mission Pharmacal hicks who didn’t realize what a gold mine they were sitting on.
Now, there have been somewhat similar cases in recent years. Colchicine’s price went straight up, and (infamously) so did the progesterone formulation marketed as Makena. But in both those cases, the small companies involved took the compound back through the FDA, under an agency-approved program to get marketing exclusivity. I’ve argued here (see those last two links) that this idea has backfired several times, and that the benefit from the clinical re-evaluation and re-approval of these drugs has not been worth their vastly increased cost. I think that drug companies should be able to set the price of their drugs, because they have a lot of failures to make up for, but this FDA loophole gives people a chance to do minimal development at minimal risk and be handed a license to print money in return.
But this isn’t even one of those cases. It’s worse. Retrophin hasn’t done any new trials, and they haven’t had to. They’ve just bought someone else’s old drug that they believed could be sold for twenty times its price, and have put that plan right into action. No development costs, no risks whatsoever – just slap a new sticker on it and put your hands over your ears. This is exactly the sort of thing that makes people go into fist-clenching rages about the drug industry, and with damn good reason. This one enrages me, and I do drug research for a living.
So thank you, Martin Shkreli. You’ve accelerated the progress of the giant hammer that’s coming down on on all of us over drug pricing, and helped drag the reputation of the pharmaceutical industry even further into the swamp. But what the hell do you care, right? You’re going to be raking in the cash. The only thing I can say about Shkreli and Retrophin is that they make the rest of the industry look good in comparison. Some comparison.
Update: There are some interesting IP aspects to this situation. As pointed out in the comments section, this compound has no exclusivity left and is off patent. So what’s to stop someone else from filing an ANDA, showing bioequivalence, and competing on price (since there seems to be an awful lot of room in there)?
Simon Lackner on Twitter sent me to this presentation from Retrophin on their purchase of the Thiola license. In it, you can see that their plan for this: “Similar to Chenodal, Retrophin will move Thiola into closed distribution”. Chenodal was the company’s previous brainstorm of this sort, when they bought Manchester Pharmaceuticals, details of which can be seen on this presentation. What they say on that one is “Closed distribution system does not allow for generics to access product for bioequivalence study. ANDA filings are impossible unless generic company illegally penetrates specialty distributor. Recent Celgene v. Lannett case establishes precedent.” So let’s go back and take a look at Celgene v. Lannett.
That was a long-running dispute between the two companies over Lannett’s desire to market a generic equivalent of Celgene’s thalidomide. Lannett brought suit, accusing Celgene of using the drug’s Risk Evaluation and Mitigation Strategy (REMS) improperly to deny potential competitors access to their product (which is needed to do a head-to-head comparison for an ANDA filing). As you can imagine, the REMS for thalidomide is pretty extensive and detailed! But there was no court decision in the case. The companies reached an out-of-court settlement before it went to trial in 2012, although I have to say that that Retrophin slide makes it sound like there’s some sort of legal precedent that was set. There wasn’t. The limits of REMS restrictions to deny access to a given drug are still an open question.
In late 2012, Acetelion and Apotex went at it over the same issue, this time over access to Tracleer (bosentan). The Federal Trade Commission filed an amicus brief, warning that companies could be abusing the REMS process to keep out competition. That case was also dismissed, though, after the two companies reached an out-of-court settlement of their own, removing another chance for a legal opinion on the subject.
But the issue is very much alive. Earlier this year, Mylan went after Celgene, also over thalidomide (and its follow-up, lenalidomide). Their complaint:

Celgene, a branded drug manufacturer, has used REMS as a pretext to prevent Mylan from acquiring the necessary samples to conduct bioequivalence studies, even after the FDA determined that Mylan’s safety protocols were acceptable to conduct those studies. In furtherance of its scheme to monopolize and restrain trade, Celgene implemented certain distribution restrictions that significantly limit drug product availability.

And this is the plan that Retrophin has in mind – they say so quite clearly in those two presentations linked above. What their presentations don’t go into is that this strategy has been under constant legal attack. It also doesn’t go into another issue: the use of REMS at all. Thalidomide, of course, is under all kinds of restrictions and has plenty of hideous risks to manage. Bosentan’s not exactly powdered drink mix, either – patients require monthly liver function tests (risk of hepatoxicity) and monitoring of their hematocrit (risk of anemia). But what about Thiola/tiopronin? It’s not under any risk management restrictions that I can see. Its side effects seem to be mainly diarrhea and nausea, which does not put it into the “This drug is so dangerous that we can’t let any generic company get ahold of our pills” category. So how is Retrophin going to make this maneuver work?
Update: more on this issue here.

55 comments on “The Most Unconscionable Drug Price Hike I Have Yet Seen”

  1. melting_point

    In the current issue of Drug Discovery Today [19(8), 1033, 2014] Kinch, Haynesworth, Kinch & Hoyer report how 2/3 of FDA approved NME’s are currently are under the control of marketing organizations that have essentially zero interest in drug discovery or development.

  2. Anonymous

    Martin is a business man – no question. What is not mentioned in all of this is that he and his company are aggressively funding academic research around the globe to find cures for rare diseases (that he will undoubtedly profit from), but at the end of the day, science will move forward and cures will come faster. I don’t condone him charging these gaudy prices, but if it funds the other side of this enterprise, then there is some paying it forward. What percentage of the billions of $$ that pharma rakes in goes back their own and academic research?

  3. Matt

    I’ve worked with this compound. I don’t know if it’s related but there are a few recent twitter posts out there saying that there’s a current shortage of the drug – part of a price increase justification?
    And, there’s probably a good reason, but why can’t a generic manufacturer swoop in? It’s just the combination of glycine and thoilactic acid…. both of which are cheap as chips.

  4. Omphalos

    There’s nothing stopping a generic player from filing an ANDA and playing the game. According to the FDA Orange Book, Thiola is off patent and has no regulatory exclusivity remaining.

  5. andre

    uuups somebody is upseeet…

  6. simpl

    Nice look at the bargain basement of medicines. You can order tiopronin 250mg 100 tabs for €89, or 100mg 50 tabs at €39 in Germany. So a cheap supply is available, but probably not approved in the US.
    Looking at the difference in the two prices, the infrastructure part of the costs looks large (pharmacy charges, minimum prescription costs, small order sizes, shipping costs,…) – 5 cent cigars would cost 5 dollars over a pharmacy.
    So, selling old drugs is increasingly becoming unprofitable, which is why there are large-scale sell-offs of the factories and/or their older products, and supply shortages. And why health authorities are increasingly requiring the continued production of important medicines when firms report their intention to quit.
    Still, there is not yet much discussion on how to make an online pharaceutical supply of staple drugs accessible and safe, and much more on how to channel (i.e. block) it.
    It might even turn out that generic makers are a doomed business model, and not-for-profit state pharmacy cooperatives should be taking up the production slack. The penny drug business doesn’t have much to do with free markets, anyway.

  7. Morten G

    Seems like there could be a lot of money to be made by following in Retrophin and Questcor’s slipstream if you were exceptionally fast and flexible in setting up a GMP production pipeline. No patents to bust, just the issue of the initial cost of GMP. And continuous QA/QC.

  8. Philip

    @2 Anonymous, please point out a source for your statement that “he and his company are aggressively funding academic research around the globe to find cures for rare diseases”.
    I only know of Martin Shkreli as a person that seemed to have undue influence with the FDA when he shorted MNKD. I share Citizens for Responsibility and Ethics in Washington (CREW) view of the man. In other words, I think the world would be a better place with him in the gray bar hotel for a long time.
    I should thank him and FDA chemist Cheng Yi Liang for alerting me to the MNKD investment opportunity. I guess I need to add Adam to the thank you list as well.

  9. Anon

    I know Martin Shkreli and he is a con artist. His short career is littered with run-ins with various regulators, numerous lawsuits against him, exceptionally poor business decisions, obfuscations about the truth, and just plain business failures. I suspect that Retrophin will go down in flames just like all of his past endeavors. If he’s lucky he’ll stay out of jail.

  10. anan

    The pharmaceutical industry justifies high prices for drugs to pay for costs of failures in R&D. How is this different? Retrophin appears to be developing drugs to treat rare diseases and will presumably use profits from thiola to fund those endeavors. True, Retrophin didn’t develop thiola, but they are taking risk in trying to sell it.
    Should pharmaceutical companies be forced to lower prices for their drugs once its R&D expenses have been covered? That probably wouldn’t result in too much research going forward.

  11. “drug for an orphan indication”
    I wonder if that is a reason a generic company has not gotten into manufacturing the drug and sell it cheaper that the scumbag? I thought the orphan drug protection is only for 7(?) years.

  12. Hap

    What risk are they taking? They didn’t figure out what worked in a disease, or test it (prove that it did work) – someone else did that. They took a drug that someone else did all the work for and bought it to raise the price. Doing it makes sure that enough people will get angry to put the FDA on the hook to make sure it can’t happen again, which will probabkly mean lots of drugs that could help people won’t get made. A good day’s work, if you can stomach it.
    On the other hand, there’s no reason someone else can’t make the drug and undersell them – ultimately, it will result in cystinuria patients getting screwed (the drug price might be $15 or $20/pill and not $1.50), but at least Retrophin won’t get as much as they were hoping for.
    Looking at Retrophin’s pipeline, there’s not much there that someone else didn’t make. Where’s all this R+D you’re talking about?

  13. dcx

    He’s interested in money, and nothing else. The more he can get with less work, the better. Here’s a link to a judgment that went against him for making a large speculative trade without money in his account… http://www.scribd.com/doc/225835093/Shkreli-Lehman-Complaint

  14. Dahm

    I’m a little confused. They can raise the price of this drug to whatever they want, but who’s going to pay? I can say my tee-shirt costs $5,000, but that doesn’t mean anything unless someone is willing and able to buy it at that price. So why haven’t insurance companies laughed in Retrophin’s face and said “no” to this obviously ridiculous price hike for Thiola???

  15. Dahm

    I’m a little confused. They can raise the price of this drug to whatever they want, but who’s going to pay? I can say my tee-shirt costs $5,000, but that doesn’t mean anything unless someone is willing and able to buy it at that price. So why haven’t insurance companies laughed in Retrophin’s face and said “no” to this obviously ridiculous price hike for Thiola???

  16. Big Mac Attack

    Tiopronin is under $200/kg from China. There’s no shortage as far as I can tell. If folks like Martin keep this up, I wouldn’t be surprised to see end-users bypassing the middlemen and going straight to Chinese API and Generics manufacturers for their drugs — I think that it’s starting to make sense to buy a lifetime supply at a discount. (Then have it characterized by LC/MS at a third party lab for less than $100, test for heavy metals, buy a milligram scale, and you’re done.)
    Aside: Seems like Martin and/or his PR people are highly active on this comment thread.

  17. Hap

    If anyone can prevent other generics making from obtaining samples of compound for testing, then it would seem like the idea of a generic can be negated by anyone with the willingess to do so. This seems like a loophole Congress (or the FDA) opened and which they’re going to have to close if they want this to stop. Depending on the drug, I would imagine states, the federal government, and insurance companies all have an interest in closing this particular loophole. Bigger pharmas might want to close it, too, unless they think that the loophole might be accessible to them (meaning that it won’t be closed quickly if they try to use it) and that the loss in reputation from its existence is worth less than the money to made exploiting it.

  18. a. nonymaus

    All economics are personal, and I can only imagine the rage that people will have for the guy who priced them into experiencing the pain of kidney stones. I hope Shkreli has a very good set of bodyguards. Then again, it could be useful for the market to set a precedent that could deter similar rent-seeking in the future.

  19. SteveM

    Re:#16 Hap “If anyone can prevent other generics making from obtaining samples of compound for testing…”
    Fix seems simple enough, mandate generic manufacturers file formulation info with the FDA who maintain it in an open source data base.
    Does that make sense?

  20. Hap

    @16: They could do that.
    I also wonder, though, if their investor presentations would put a crimp in any REMS restrictions; if Retrophin is on record as explaining their sales restrictions as a strategy to prevent generic competition, than saying later that sales restrictions are actually for safety purposes would seem to be false, and overridable in court.
    @17: I would have figured that someone buying the Chicago Tribune with its employees’ retirement money and then declaring bankruptcy (so that the employees are out jobs and retirements) would have caused a similar response, but it doesn’t seem to. I don’t know why.

  21. Simon Lackner

    @18
    It’s my understanding that this is not just about the formulation info, it’s about obtaining drug samples for bioequivalency testing, and if the distribution system is closed, generics makers can’t buy.
    part of the $CELG defence seems to rest on the principle that, they can not be compeled to SELL THEIR PRODUCT, to a party they don’t want to sell to. (Which seems reasonable), so a FDA formulation database would not help in this case.
    If I find the time, I’ll post some more links to various law blogs etc in the evening.

  22. Sympa

    In my opinion this is a fundamental part of the problem in the economy.
    Business collects rights to rental – on patents or copyrights, trademarks and such. The people creating these get paid a one-off wage.
    This works if there is a balance. But if it is too hard too start a new business the wages will tend to zero while the rent income on the IP will be maximized. With the result being a very uneven distribution of wealth and income, and innovation grinding to a halt (why would one work is there is no money to be made? Better resell old IP!).
    This is what we see going on here. Starting new business too difficult because of trouble getting access to distributions, patent thickets, regulatory capture and whatnot.
    How to fix? I don’t know. Definitely NOT stronger IP protection. Perhaps keep more of the rights always at the inventor or author.
    And prevent stockpiling of IP. Sell that drug or music on its own in competition with other business who have different but similar products.

  23. SteveM

    Re: #20 Simon Lackner “It’s my understanding that this is not just about the formulation info, it’s about obtaining drug samples for bioequivalency testing”
    Then have the FDA also mandate submission of the pharmacological data used for bioequivalence comparisons and maintain that in the same database. Then a generic competitor wouldn’t need drug samples, they could just compare their pharma profiles with what is in the database. No samples needed.
    As an aside, apparently there are huge cost implications with these practices that could probably be circumvented with some dedicated smart thinking. I mean say the added cost to the taxpayers/insurance companies of this scheme is $50 Million a year. So Congress, FDA, whoever couldn’t come up with a regulatory solution that cost less that $50M to craft/implement?
    (Wait… Right…that money being used to buy weapons for a bunch of lunatics in Syria…)

  24. Anon

    Regulatory guys: Couldn’t one just get a buddy MD to write several scripts to employees of the CMC department at a company?

  25. NoDrugsNoJobs

    #21 – I don’t get it. The compound Thiola is not covered by any patents at all (at least Orange Book listed patents)

  26. Andy

    Derek,
    I thought you were onboard the idea that the worth of a drug was what consumers could be convinced to pay. If they can sell the thing for $30/pill then that’s the worth of it.
    Related, the utter lack of new antibiotic drug development is entirely due to undercharging for the worth of antibiotics. Cancer drugs can extend a patient’s life by 3 months for $15000 per pill, but an antibiotic that definitively WILL save your life has to cost less than $20. Go figure.

  27. Stonemaker

    I Have Cystinuria and Martian the Scumbag has made it so I cannot have the medication I need. Supposed to be on 19 pills a day and at 30 bucks a pill that’s not an option.. so I will continue to suffer with painful stones until its affordable.. Until then I hope he pisses out a painful stone.. karma!!!!

  28. #25 Andy –
    I’d rather apply that to companies that actually have R&D costs, but I’m sweating a bit to come up with a philosophical rationale for that one. And I did leave myself a loophole, saying that while companies could charge what they like, that it wasn’t always a good plan for them to do so.
    This sort of behavior just reeks of the worst sort of rent-seeking, and the company’s plan to use REMS as a way to tell everyone else to get lost, forever, is not exactly free-market behavior.

  29. DN

    Closed distribution is a minor hurdle. You just need to find a handful of angry patients who are willing to do crossover studies. A couple of hours calling angry medical genetics departments should fill out the patient roster quite nicely.

  30. DN

    Closed distribution is a minor hurdle. You just need to find a handful of angry patients who are willing to do crossover studies. A couple of hours calling angry medical genetics departments should fill out the patient roster quite nicely.

  31. Philip

    I hope the old saying about excess profits breeds ruinous competition holds true here. That way Derek can keep his free market beliefs and Stonemaker can get his medication at a price he/she can afford.
    Personally I do not see much of a free market in pharmaceuticals. If we followed the Andy Grove model, this problem with Martin Shkreli being greedy would not exist. Somebody would import the drug from China or other low cost provider and see it at half the price. That would repeat until the price was back to $1.50 or maybe lower. However it would bring up many other problems.
    As far as Martin Shkreli is concerned, I hope this investment tanks and all of his others as well.
    Greed should be rewarded with bankruptcy.

  32. Philip

    I found it hard to believe that Martin Shkreli has a patent for a drug. So I looked it up and found 8,673,883. He is listed as an inventor.
    Just admitting I was wrong about the patent. I still think I am correct about the man.
    This will be my last post about him on this thread.

  33. NoDrugs:
    It isn’t a patent issue, the molecule is off patent but to get an ANDA up and running you need to show bioequivalence and the company won’t share that data at least that’s what I understand.

  34. Biotecher86

    What a wuss you are! Start a non profit and manufacture a generic if you think it is so easy to do. Stop whining and ranting that Martin and RTRX should make your non-profit cheap generic dream a reality. Sorry, but I hate it when whiners wuss out and try to apply THEIR dreams to someone else’s enterprise as if it is a moral obligation.

  35. Anon

    @Biotecher86,
    That’s not what he is arguing for. What he is saying is that Mission Pharmacal’s treatment of Thiola was occurring in a textbook where everyone was happy. Pharmacal was making a modest profit, patients had easy access to their drug, payers were given a reasonable price. This is exactly how you want things to work in this situation.
    Shkreli is just a carpet bagger. He sees that more money COULD be made in one corner of the ring and feels that if COULD be done, it SHOULD be done. He is going to end up destabilizing the equilibrium, definitely for that market and possibly for others.

  36. Biotecher86

    @Anon – OK well said. I still say that the expectation that a monopoly will perform charitably/altruistically just because a textbook says so is irrational. If a group of stakeholders wants a more equitable price they should step in, form a non-profit, and make the stuff. If you’re unwilling to start that crowdfunding project but you still want to whine about it then I maintain my charge of wussydom. Everyone wants someone else to do something altruistic for them, and if they don’t they complain. GO DO IT OR SHUT UP.

  37. Biotecher86

    @Anon – OK well said. I still say that the expectation that a monopoly will perform charitably/altruistically just because a textbook says so is irrational. If a group of stakeholders wants a more equitable price they should step in, form a non-profit, and make the stuff. If you’re unwilling to start that crowdfunding project but you still want to whine about it then I maintain my charge of wussydom. Everyone wants someone else to do something altruistic for them, and if they don’t they complain. GO DO IT OR SHUT UP.

  38. I like Big Mac Attack’s comment the best.

  39. Judyth Seiler

    Does ANYONE know why my usual $192 cost for a 90-day supply of Ursodiol (generic)NOW COSTS $3000????? Is there anyone to contact to report this outrage?

  40. bUSTER

    my dog also needed this medicine but now he’s dead thanks to corporate greed!

  41. Anemic

    Martin Skreli: A cursory search of the internet suggests he knows as much about drugs as gold trader knows about mining.

  42. Yadgyu

    Biotecher86 is correct. All of the people complaining, yes all of them, will take no physical action. Everyone these days is an Internet revolutionary. They think a few anonymous rants on a message board or even a few tweets will cause enough moral outrage to change the world. That is not reality. Changing reality takes physical labor.

  43. Marcel Kincaid

    Yagdu, Biotecher86, and Martin Shkreli are all psychopaths (and possibly the same person), Physical action is indeed called for, Short of what they actually deserve, being locked away for the protection of society would do.

  44. Marcel Kincaid

    “I’m a little confused.”

    That’s one word for it.

    “They can raise the price of this drug to whatever they want, but who’s going to pay?”

    Libertarianism seems in large part to depend on ignoring the existence of ransoms and other human realities.

    “I can say my tee-shirt costs $5,000, but that doesn’t mean anything unless someone is willing and able to buy it at that price. ”

    Yeah, your t-shirt and a drug for a life threatening or painful disease are equally valuable because there’s no intrinsic worth in libertarian happy fungible la la land,

  45. Marcel Kincaid

    “The pharmaceutical industry justifies high prices for drugs to pay for costs of failures in R&D. How is this different? Retrophin appears to be developing drugs to treat rare diseases and will presumably use profits from thiola to fund those endeavors. True, Retrophin didn’t develop thiola, but they are taking risk in trying to sell it.”

    Got any more lies to tell, “anan”, I mean Martin?

  46. Marcel Kincaid

    “What is not mentioned in all of this is that he and his company are aggressively funding academic research around the globe to find cures for rare diseases ”

    It’s only mentioned by liars.

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