Unfortunately, we have another example of “price of ancient generic drug shoots through roof”. Whenever this happens, the first thing to look at is the regulatory environment. After that you can go on about the greed of the company and its executives, the stupidity of the insurance companies, all the usual stuff, and you won’t necessarily be wrong about some of these. The statements of the latest CEO involved will make that easy (vide infra). But first look at how such price increases can even occur.
This time it’s nitrofurantoin, an antibiotic for bladder infections that’s been around since 1953. You don’t get much more generic than that. To be more specific, it’s the liquid formulation of the drug, and that’s what set off this latest spectacle. There are at least three generic companies that sell this product in this form, but the market has recently been disrupted by new FDA requirements for impurity levels. Manufacturers have had to pull their existing stocks and prepare new ones to the new specs, so there appears to be a (temporary) shortage, and one would expect the new liquid formulation to be more expensive once it’s back on the shelves, since it’s now harder to make.
I am not saying that the FDA’s new rules on this are wrong – not at all. But that’s the proximate cause of this latest increase. It’s worth noting that a bottle of the liquid formulation was not exactly cheap before all this, either – in the high-$400 range. (In case you’re wondering the price in the UK is similar). But Caspar Pharmaceuticals, one of the generic companies in this space, had taken their price up to $2,800. They did that quietly, though – did you hear about it? Has anyone out there heard of Caspar? What set off the headlines was a price hike by one of their competitors, Nostrum, who decided to come in at $2392 instead. (A quick note: people who work in drug discovery, which is what most people think of as “the drug industry”, will be saying “Who? What? Who are these people?” That’s because the list of small generic manufacturers is a pretty obscure part of the industry compared to the big research-driven companies, and operates on a different model (no research whatsoever, in general) and in a different regulatory environment. When this sort of thing happens, though, we’re all “pharma” in the headlines).
Nostrum’s CEO, Nirmal Mulye, has clearly been studying the Martin Shkreli Big Golden Book of Public Relations, because in response to questions about this new price he said that he was responding to the market, that their price was still below their competitor, and that it was “a moral requirement to make money when you can”. That gift to the headline writers having been delivered, the next step in the story was a response from the FDA’s Scott Gottlieb, who responded that “There’s no moral imperative to price gouge and take advantage of patients”. Whereupon Mulye declared that the FDA was “corrupt and incompetent” and likened their regulatory fees to highway robbery.
Definitely the look that you’d want for the drug industry these days – or any time at all, actually, since appearing greedy and pissed-off is a timeless classic that fits every occasion, right? But let’s break this situation down a bit:
- Mulye is basically correct that he’s there to maximize profits for his company. But his other comments undermine that position. Does it help the shareholders to call the FDA corrupt and incompetent? That’s like telling the state trooper who just pulled you over that you pay his salary.
- Gottlieb is basically correct that that there’s no “moral imperative” to take advantage of patients. But it would be more honest to admit the FDA’s role in causing shortages of some generic drugs at times, and in giving manufacturers ways (intended or not) to make insane price raises stick. To Gottlieb’s credit, though, he does seem to be addressing the latter problems (which are yet another set of regulatory issues).
- As Biocentury points out in that link above, there are several other manufacturers listed for liquid nitrofurantoin. and many of them have not (apparently) raised their prices. Keep in mind that they’re probably all getting the active drug itself from some supplier in China or India, and then working it up into the liquid formulation themselves (and now to the stricter FDA standards). One interesting detail is that there is a company (Amneal, whom I’d also never heard of) that seems to have had most of the market (>80%) for this exact product, but is “not currently manufacturing” it. Instant shortage. Did they stop because of the new FDA requirements, or was it something else? If you try to order the 230 mL bottles from the other suppliers at the listed $400-something, will they fill that request? Or back-order you, because no one ever orders it from them? Or tell you that the price is now $2500?
- How often does the liquid formulation have to be prescribed, versus the capsules? Because those are a lot cheaper (the manufacturing and QC for those hasn’t changed). It would be interesting to know what the shares of the nitrofurantoin market are by dosage form.
- It’s also worth noting that these price raises stick because insurance companies let them. They’re the real payers in the huge majority of cases. These small-volume drugs go through the roof, and it makes some small generic company or two a big profit, and the big insurance outfits just sort of roll their eyes because it’s not that big a deal to them, and would probably cost more to do something about than not. That’s a big part of how Mr. Mulye maximizes his profits.
So that’s how things stand. It’s not an uplifting thing to watch, for anyone involved – but that’s the state of the generic drug industry today. Let’s see if anyone does anything about it.