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Necessity and the Right to Control Distribution: The $750/Pill AIDS Medication

October 17, 2015

8,000 people, along with the rest of the world, were shocked when they woke up one morning last month.  Daraprim, a medication used to treat toxoplasmosis, jumped from $13.50 per pill to $750.00 per pill.  The extreme price jump came shortly after Turing Pharmaceuticals acquired the exclusive distribution rights from Impax Laboratories for $55,000,000.  Even at $750 per pill, Turing’s founder and CEO, Martin Shkreli, claims it is still under priced. 

Daraprim is the trade name for Pyrimethamine and was originally approved by the FDA in 1953.  The Nobel Prize-winning American scientist, Gertrude Elion developed Daraprim at Burroughs-Wellcome (now GlaxoSmithKline) to combat malaria.  More recently, Daraprim is being used to treat toxoplasmosis. 

Toxoplasmosis is a parasitic disease that usually causes no symptoms in otherwise healthy adults.  However, in individuals with weakened immune systems, toxoplasmosis can cause severe symptoms such as seizures, poor coordination, and eye problems.  AIDS patients and cancer patients, whose chemotherapy has weakened their immune system, are among the prime candidates for being prescribed Daraprim.  Daraprim cures toxoplasmosis with a course of treatment lasting roughly four to six months.  A typical course of treatment now costs $75,000.

Since the market is relatively small, roughly 8,000 prescriptions in 2015, a generic substitute is not available even though the drug’s patent has long expired.  Currently, the FDA’s drug approval system is backlogged and it takes about six years to bring a generic to market.

Shkreli and Turing have been under ridicule since the 5500% price increase.  Shkreli conceded that Turing purchased the distribution rights of Daraprim with the intention to immediately raise the price.  Shkreli claims Turing has a program in place to make Daraprim available to qualified patients for $1.00 per pill, though a single instance couldn’t be located.  Shkreli claims that Daraprim being sold at $13.50 per pill is not profitable and Turing’s price increase to $750 per pill makes it reasonably profitable.  Further, Shkerli claims Daraprim’s price increase allows Turing to invest in other research and development to find alternatives to Daraprim and other, new drugs.

Under contract and distribution right laws in the U.S., any company can control the price at which a consumer or distributer purchases a product from the manufacturing company or authorized distributor.  This creates a mechanism to protect the company’s financial interest in the products it sells.  Additionally, this helps protect against the distribution of counterfeit goods being passed off as authentic.  

One policy behind the right to control sale price is the same promoted by intellectual property laws in the U.S.: to reward those who provide useful products to people – even if it prices the products well beyond the cost of manufacture and development.  Currently, the generic biotech industry uses bargaining power to help lower the price point at which a generic sells.  That is, if an acceptable price cannot be reached though bargaining, the would-be distributor solicits another manufacturer to bargain with.  In the case of Daraprim however, there are no other manufacturers. 

Examining the system as a whole, why shouldn’t a company be able to set a price according to what the market will bare?  Generally, in our pseudo free market economy, price is predominantly influenced by supply and demand.  If the basis for that demand were taken into consideration, companies may be discouraged from investing into new products. For example, a pharmaceutical company would be discouraged from investing a large amount of resources into developing a drug that cures cancer because it may not be able to sell that drug at a price that would allow it to recoup its cost. 

As many reading this could probably relate, I believe I have a strong argument that my computer, a MacBook, has become an integral component of my life as a law student.  I would posit that it is even considered a necessity.  Should Apple be forced to sell me a MacBook at a lower price because replacing my computer for $2200 is unreasonable?  No, Apple shouldn’t.  Personally, if I was infected with toxoplasmosis or malaria and I was forced to beg, borrow, and steal to secure the $75,000 cost of treatment, I would.  In doing so, I would be thankful and grateful that Daraprim exists.  If I couldn’t, I would use whatever money I could come up with to through the best going away party I could muster.