In September, the internet was collectively scandalized by the news that drug manufacturer Turing Pharmaceuticals, under the leadership of the personally obnoxious Martin Shkreli, raised the price of a medicine called Daraprim from $13.50 to $750 a pill.
The decision to so dramatically jack up the price of a drug used to treat malaria, as well as complications associated with immune system depression in cancer and AIDS patients, was widely criticized—and also widely hailed as a failure of the free market.
Rare’s Corie W. Stephens ably demolished that latter claim: In the pharmaceutical market, she explained, FDA regulations are “granting exclusivity to politically favored companies, and through this monopoly enacted by force of law, banning the type of market that would yield lower-priced alternatives.”
Indeed, the labyrinthine restrictions on drug sales “enacted by the very politicians allegedly outraged by the results of the system they’ve implemented, favors people like Shkreli. All the while, legitimate entrepreneurs can’t compete, thanks to laws built to favor certain politically connected corporations over others.”
As Whalen concludes, “This system is quite literally the opposite of a free market.”
In fact, not only is the free market not at fault for this price spike, but now it has actually offered a $1 per pill alternative—an even lower price than Daraprim sold for before Shkreli got involved.
How can Imprimis, the manufacturer offering the new drug, sell its product so cheaply? By going around the very FDA regulations that allowed Daraprim’s price to skyrocket (emphasis added):
Imprimis Pharmaceuticals CEO Mark L. Baum told The San Diego Union-Tribune Thursday that his company’s response provides a market-based answer to prohibitive drug pricing. Imprimis uses ingredients that are FDA-approved and compounding operations that are FDA-inspected, but its formulations are not FDA-approved; filing for approval would take several years and cost millions, Baum said. Instead, the drugs are sold legally through doctor’s prescriptions to specific patients. Imprimis is selling its compounded formulations of pyrimethamine and leucovorin for as low as $99 per bottle of 100 capsules, and Baum said that by not filing for FDA approval, the company can make a profit even when selling pills for less than $1 each.
While the Daraprim price increased has received considerable attention thanks to its dramatic jump, this is hardly the only case of FDA intervention jacking up prescription drug prices. It’s great news that people who need this medicine now have an affordable, custom alternative.
But what about people who need all the other medicines the FDA’s rules have put out of reach? If we had an actually free market, it probably wouldn’t take a media storm for cheaper alternatives to pop up all over the place.