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Business and Markets

Thiola, Retrophin, Martin Shkrell, Reddit, and More

Well, it was not a dull evening around the In the Pipeline headquarters last night. I submitted a link to Reddit for my post yesterday about Retrophin and Thiola, and that blew up onto that site’s front page. The Corante server melted under the impact, which isn’t too surprising, since it’s struggling at the best of times. (A site move really is coming, and no, I can’t wait, either, at this point.)
But then, to my great surprise, Martin Shkreli (CEO of Retrophin) showed up in the Reddit thread, doing an impromptu AMA (Ask Me Anything), which I have to say takes quite a bit of aplomb (or perhaps foolhardiness – I don’t think too many other CEOs of any publicly traded corporations would have done it). But not too long after that, the entire thread vanished off the front page, and off of r/News, the subreddit where I’d submitted it.
Then I got a message from one of the moderators of r/News, saying that I’d been banned from it, and going on to say that I would likely be banned from the site as a whole. After having been on Reddit for seven years, that took me by surprise. As best I can figure, the thread itself was reported to r/Spam by someone, and the automated system took over from there. Over the years, I’ve submitted links to my blog posts, and Reddit, or some parts of it, anyway, has been notoriously touchy about that. The last time I submitted such a link, though, was back in February (and before that, August of 2013), so I’m not exactly a human spam-bot. We’ll see what happens. Update: I was banned for some hours, but I’ve been reinstated.
But back to Retrophin, Thiola, and Martin Shrkeli. The entire Reddit thread can still be read here, via a direct link, although it can’t be found in r/News any more. If you look for a user named “martinshkreli”, you can see where he gets into the fray (I’m “dblowe” on the site, or perhaps I was?). You’ll note that he gives out his cell phone, office phone, and e-mail, which again is not your usual CEO move – you have to give him that, although it does seem a bit problematic from a regulatory/compliance angle. So what arguments does he make for the Thiola price increase?
From what I can see, they boil down to this: patients themselves aren’t going to be paying this increased price – insurance companies are. And Retrophin is actually going to be working on new formulations for the drug, which no one has done previously. He seems to have implied that the previous company (Mission Pharmacal) was reluctant to raise the price and take the public outcry, and stated (correctly) that Mission was having trouble keeping the drug in supply. He claims that the current price is still “pretty low”, and that he does not expect any pushback from the eventual payers. There was also quite a bit about the company’s dedication to patients, their work on other rare diseases, and so on.
He and I didn’t cross paths much in the thread. I tried asking a few direct questions, but they weren’t picked up on, so my take on Shkreli’s answers will show up here. He’s correct that the drug’s availability was erratic, and he may well be correct that its price was too low for a company to deal with it properly. But if so, that does make you wonder what Mission Pharmacal was up to, and how they were sourcing the material.
He’s also correct that Retrophin is planning to work on new formulations of the drug. But when you look at the company’s investor presentation about Thiola, all that comes under a slide marked “Distribution and Intellectual Property”. The plan seems to be that they’ll introduce 250mg and 500mg dosages, at which time they’ll discontinue the current 100mg formulation. Later on, they’ll try to introduce a time-release formulation, at which time they’ll discontinue the 250mg and 500mg forms. You can argue that this is helping patients, but you can also argue that it’s making it as difficult as possible for anyone else to show bioequivalence and enter the market as well, assuming that anyone wants to.
And as I mentioned yesterday, the company does seem to care about someone else entering the market. My questions to Shkreli about the “closed distribution” model mentioned on the company’s slides went unanswered, but the only interpretation I can give them is that Retrophin plans to use the FDA’s risk management system to deny any competitors access to their formulations, in order to try to keep themselves as the sole supplier of Thiola in perpetuity. Patents at least expire: regulatory rent-seeking is forever.
Also left out of Shkreli’s comments on Reddit are the issues on the company’s slide titled “Pharmacoeconomics”, where it says (vis-a-vis the other drug for cystinuria, penicillamine):

Current pricing of Thiola® – $4,000 PPPY
– Penicillamine pricing- $80,000-$140,000
• Thiola could support a significant price increase

Personally, I think that’s the main reason for Retrophin’s interest. You’ll note that the price hike takes Thiola’s cost right up to the penicillamine region (the price of that one is another story all its own). But to a first approximation, that’s business. I’ve defended some drug company pricing decisions on this site before (although not all of them), so what’s different this time?
I’ve been thinking hard about that one, and here’s what I have so far. I think that pricing power of this sort is a powerful weapon. That’s the reason for the patent system – you get a monopoly on selling your invention, but it’s for a fixed period only, and in return you disclose what your invention is so that others can learn from it. And I think that this sort of pricing power should be a reward for actually producing an invention. That’s the incentive for going through all the work and expense, the (time-limited) pot of gold at the end of the rainbow. I have a much lower opinion of seeing someone ram through a big price increase just because, hey, they can. Thiola has nothing to do with the patent system – it’s off patent. What this situation looks like to me is regulatory rent-seeking. Celgene seems to be doing that too, with thalidomide (as mentioned yesterday), which is why they’re being taken to court. Retrophin is betting that Thiola just isn’t a big enough deal for anyone to go to that trouble, once they tell them to buzz off by using Celgene’s strategy.
Businesses can, though, charge what they think the market will bear, and Retrophin’s contribution to cystinuria therapy so far is to have realized that the market will bear a lot more than people had realized. But in an actual market, it would be easier for someone else to come in and compete on price. What Retrophin is planning is to use regulatory loopholes to keep anyone else from doing so, with no time limit until someone at the FDA does something about it. Cloaking this in a lot of noble-sounding talk about being the company that really cares about cystinuria patients is a bit stomach-turning. In my opinion.

31 comments on “Thiola, Retrophin, Martin Shkrell, Reddit, and More”

  1. anon says:

    not only did he get you removed the positive spin campaign started a couple hours later

  2. Hap says:

    Don’t the investor presentations make it problematic for someone to use REMS in that way? Thalidomide has enough safety problems to make restrictions for safety issues and restrictions to attempt to prevent generic competition difficult to separate. As noted yesterday, Thiola doesn’t have much in the way of safety issues, so restrictions on generic access can’t be for patient safety, and the explicitness of the presentations makes it clear (to a judge, the FDA, or Congress) exactly what it is for. (Depending on the side effects and effectiveness, companies might also argue that about the change in dosage and formulation, as well, although that would probably be less successful, unless they can pursue them over ceasing to provide the lower dosages). So any generic company who sues (either for access, or for penalties for lack of access) is going to have a high chance of winning, although if they did, they could simply take the money and run (rather than actually selling any Thiola). Eventually, though, if enough generic companies respond to the “Free Money” signs, Retrophin might regret its strategy.

  3. MarkySparky says:

    The mistake you made was submitting to r/news, which is a vile cesspool of conspiracy theories, “power”-addicted mods, and shameless vote brigading. The mod/admin structure is one of the biggest problems with the site, imo. If the wrong admin decides that you are just a spambot, there isn’t much you can do to fix it.
    I followed your thread (and r/bestof link) and it was a pretty classic case of reddit herd behavior. Martin Shkreli play it about perfectly to appeal to the average low-information user of r/news, and portrayed himself as a humble rare disease warrior. Once the reddit herd got it in their heads that he was a Great Man Who Takes Time To Do An AMA, they switched to full fawning mode.

  4. bad wolf says:

    I’m pretty sure the traditional economic justification for patent protection was that both treatments were supposed to trend to the lower value in competition, not that artificial barriers would be raised to allow both to inflate to an upper limit.
    (Note that penicillamine is now free to increase in turn, and this could all end up like the bots on Amazon that continually one-up the price of used books.)

  5. gattsuru says:

    That’s the reason for the patent system – you get a monopoly on selling your invention, but it’s for a fixed period only, and in return you disclose what your invention is so that others can learn from it. And I think that this sort of pricing power should be a reward for actually producing an invention.

    I guess you can separate based on initial production, but there seem to be so many levels of corporate purchasing and restructurings that this doesn’t strike me as a strong distinguishing point.
    The monopoly pricing power exists so that companies can benefit from investment that was both a) costly to initially develop and b) readily copied. Whether it be development, testing, or regulatory compliance.
    The trick is that’s not the case here. A competing Thiola manufacturer would need to invest in similarly to have similar capabilities.
    They might be able to justify a small increase in price since the previous manufacturers weren’t making enough for reliable supply, but a bump this large is begging for competition, and there’s no reason nor cause nor method for a government to discourage that competition.

  6. johnnyboy says:

    ” patients themselves aren’t going to be paying this increased price – insurance companies are”
    That of course is a completely bogus argument, as the insurance companies are not going to merely absorb the increased cost, they are just going to pass it back onto the policy buyer – be it the insuree, the employer or the government. In the end it’s essentially everyone that ends up paying straight into Shkreli’s pocket.

  7. Chris Croy says:

    What probably got you banned is that Reddit’s admins have started to enforce the rules against self-promotion with autistic rigor. From their rules page, What Is Spam?
    “NOT OK: Submitting only links to your blog or personal website.
    OK: Submitting links from a variety of sites and sources.
    OK: Submitting links from your own site, talking with redditors in the comments, and also submitting cool stuff from other sites.
    NOT OK: Posting the same comment repeatedly in multiple subreddits.”
    The way it’s currently enforced is that no more than 10% of your contributions may be links to your own site. Unless you’ve made at least 9 comments/other sites/ for every link you’ve submitted to your site, you ran afoul this rule. If you only ever submitted links to your own site, that would probably also be enough to raise their ire.

  8. Chris Croy@7: dear lord, why not just call that the “Mandatory Use of Sock Puppets” rule and be done with it?

  9. Davo says:

    @8 Now, how do I give an upvote over on this site?

  10. Steve says:

    If only you hadn’t accidentally posted those pics of Jennifer Lawrence instead of the structure of Thiola you’d probably still be on Reddit. 😉

  11. matt says:

    @Steve #10: actually, if only he’d posted pics of Jennifer Lawrence instead of links to his blog, he would have been voted through the roof. Sigh.

  12. earth23 says:

    Kudos Derek. I love the blog and your gumption – not just any professional can post on reddit.
    That said I protested your ban. Apparently, the mods of r/news don’t discuss bans:
    “from Kylde [M] via /r/news/ sent 7 hours ago
    we don’t discuss user-bans with other people”
    Best of luck in reactivating your account.

  13. @12: actually I’d say that perhaps this is Reddit’s loss, not Dr. Lowe’s. If they want to ban him over this, well, that’s a strong signal about what sort of content they actually want on their site. Read accordingly.

  14. Kates says:

    Thiola does not appear to have a REMS based upon this list on the FDA website.
    So any restricted distribution of the drug is probably voluntary on the part of the company, which would make this different from the Celgene case. If you visit the Retrophin website, it appears that all of their products are distributed this way – directly to patients from a single third party distributor.

  15. athEIst says:

    ask me anything……because I won’t reply.

  16. athEIst says:

    ask me anything……because I won’t reply.

  17. D.J. says:

    Looking at the /r/news guidelines, I see the following:
    Your post will likely be removed if it:
    is not news (or a meta post).
    is an opinion/analysis or advocacy piece.
    primarily concerns politics.
    has a title not taken from the article.
    has a pay wall or steals content.
    covers an already-submitted story.
    I could easily see it removed under the opinion/analysis piece criterion as well. So this might be a case of Right For The Wrong Reasons regarding the article removal from /r/news. The ban was stupid, pigheaded, and vile.

  18. Fat Old Man says:

    I agree that raising the price to that degree is a slimy thing to do. But that is the capitalist way. Someone did mention somewhere in one of these posts that there is no exclusivity on the drug, so anyone is free to file an ANDA for a generic equivalent. There is an estimate of how much it takes to develop a generic of $5-10 million (from GPhA, I think), and starting this October, there will be a 10 month goal date for approval for new ANDA filings. So if somebody can make this drug cheaper and make money from it they are free to do so.
    There is a list of all DMF’s (drug master files) on the FDA website. There are over 30 DMF’s for omeprazole. And I didn’t count the ones for esomeprazole, or the Na or Mg slts of omeprazole. So it can be done.

  19. Thomas says:

    A patent should describe _everything_ needed to recreate the invention – I think that is the law.
    If it doesn’t the patent is invalid.
    At least that is the way it is supposed to be in Europe. That seems to stop this kind of shenanigans here.

  20. Thomas says:

    A patent is supposed to describe _everything_ needed to recreate the invention – I think that is the law.
    If it doesn’t the patent is invalid.
    At least that is the way it is supposed to be in Europe. That seems to stop this kind of shenanigans here.

  21. Mark says:

    Drug companies, like much of the medial industry, enjoy exemptions to price fixing and monopoly laws. Otherwise, this price increase would never fly. Some enterprising person could buy it overseas for far less and ship it in to the US. Don’t ever let anyone tell you there is a free market for prescription drugs, there isn’t. The Government have rigged the rules on the behest of the drug companies, to benefit the drug companies.

  22. Tockley Smoo says:

    I have some stock in an Australian pharma co, Clinuvel,
    which is hoping to bring a new drug to market soon- Scenesse, (aka afamelanotide) which would be the first effective treatment for a range of skin disorders- EPP, vitiligo, Hailey-Hailey disease and more. And guess who has launched a takeover and is up to 8% and climbing? Yep, Retrophin.

  23. M. Report says:

    A well-fought skirmish in a long-lost war;
    Lost so long ago that ‘patent’ and ‘company’
    are automatically linked, with no thought that
    an _individual_ might invent a new drug.
    Yes, an individual cannot, not because the task
    is impossible but because the regulatory capture of the patent process by companies is impossible.

  24. Anton says:

    You should be banned. You are trash

  25. Robert says:

    If insurance companies are paying the price increase, you are paying the price increase.

  26. simpl says:

    One further irony on the required testing of bioequivalence is that the business plan later involves a switch to a controlled release form which will for sure not be bioequivalent.
    I have occasionally seen testing against a non-commercial i.v. form, which showed up any absorption and 1st pass differences, but very often the peak value and decay profile were comparable. Maybe the FDA would accept that kind of design.
    Buying immediate release comparator in a foreign market is also acceptable to the FDA. (If the drug import is blocked, run the study outside US and import the document, which will not be so restricted).

  27. Anonymous says:

    As someone who needs this medication, I am very alarmed by this substantial increase. Thanks for shedding some light on the matter.

  28. Samuel Appel says:

    I believe that the same pricing manipulation occurred a few years ago, when generic lorazepam suddenly went up from pennies a pill to dollars. The market absorbed that rise just fine, and competition from other generic producers did not reduce the price. A positive externality of this ploy with thiola, is that cystinuria is getting publicity. We don’t yet know how many cystinurics there are, but new sufferers are coming to the International Cystinuria Foundation Facebook page weekly. It is a lonely, debilitating disease, that causes significant disability in the workplace, and often, renal failure. It has never, until now, had any kind of interest from Pharma, of the sort that might eventually lead to support of patient advocacy organizations, or development of new treatments. Frankly, if Retrophin makes a profit, then Teva may follow. The morality of gouging insurance companies, while charitably sparing the patient/consumer, may be up for discussion. I agree it ultimately passes costs on to society. I’m no fan of either Pharma or Insurance, but between them, I see a purpose for Pharma in the big scheme of things, but would happily see the insurance industry disappear overnight, in favor of single payer.
    Full disclosure- I am cystinuric, on the board of the International Cystinuria Foundation, and a physician.

  29. Vicki Boozer says:

    Did you ask about what is going to happen to all the poor animals that have been on Thiola and now will not be able to afford the huge price increase? I am having to have my precious doggie put to sleep because of bladder stone blockage in his ureter – I can’t afford 25.00 a pill (he needs 6 pills a day which I was able to afford when Mission pharm. handled this drug) How heartless can anyone be to know they are sentencing dogs to death by not providing this medicine at a more reasonable price.

  30. anon says:

    The Retrophin board fired Shkreli yesterday.

Comments are closed.