[발췌] drug pricing, monopoly, rent-seeking

자료: Taking on the Drug Profiteers (James Surowiecki | NewYorker, Oct 2015)

※ 발췌 (excerpt):

( ... ) But Martin Shkreli, the CEO of Turing Phamaceuticals, managed it when his company said it was raising the price of a sixty-two-year-old lifesaving drug from $13.50 to $750 a pill. The move quickly became a major scandal; Shkreli was called "the most hated man in America." Yet the true scandal of Turing's profiteering scheme was that it was entirely legal.

Daraprim─which is used to treat toxoplasmosis, a condition that afflicts AIDS patients, among others─first came on the market back in 1953, so it has long since gone off patent. But what Shkreli recognized was that, even with a generic drug, regulatory barriers and a lack of competition can make big price hikes possible, In Daraprim's case, only one company had regulatory approval to sell the drug in the United States. So, in August, Turing bought those rights. Shkreli knew that, in principle, other companies could produce their own versions of Daraprim. But it seemed a fair bet that none of them would try. The market for Daraprim is smallㅡeight to twelve thousand prescriptions a year in the U.S.ㅡand any company that wanted to enter the market would have to go through the expensive and time-consuming process of getting F.D.A. approval. As it happens, several companies already make and sell a generic version of Daraprim abroad, but they weren't a worry, either, because they, too, would have to jump through the F.D.A.'s hoops to sell it here. Turing loaded the deck even further in its own favor by insisting on a model of "closed distribution" for the drug, restricting access to patients, doctors, and a limited number of distributors and pharmacies. In the unlikely event that another company wanted to produce Daraprim, it would be hard to buy enough of the drug to reverse-engineer.

Essentially, Shkreli exploiting rules devised to protect consumer safety in order to create a virtual monopoly and then charge whatever he wants. Monopolies are inherent to the drug industry in the U.S.: patients, in effect, are temporary monopolies. But we have patents because they give drug companies an incentive to invest in developing new drugs. There's no such justification in the case of Dararprim. Turing's price gouging does not reward innovation and it doesn't reflect the cost of production. In the United Kingdom, Daraprim sells for less than a dollar a pill.

Turing's business model is quintessential example of rent seeking: increasing profits not by adding real value for consumers but by exploiting loopholes. And, unfortunately, Turing is not alone. Last year, another company run by Shkreli acquired the rights to a kidney-disease drug called Thiola and raised the drug's price twentyfold. In 2011, K-V Pharmaceutical got F.D.A. approval and exclusive rights, it raised the price from around $15 to $1,500 an injection. There have also been alarming increase in the prices of common drugs like doxycycline. Generic-drug makers have been merging with each other, leaving fewer competitors. "Without price competition, the generic model fails," Gerald Anderson, a professor of public health at Johns Hopkins, told me. "Without competition, there are no market forces that limit price increases."

That doesn't mean there's nothing to be done. In place of closed distribution, the F.D.A. can require companies to make samples of their drugs available to competitors. ( ... ... )


자료 2: 5 Reasons Prescription Drug Prices Are So High in the U.S. (Sydney Lupkin | Time, Aug 2016)

※ 발췌 (excerpt):

The "most important factor" that drives prescription drug prices higher in the United States than anywhere else in the world is the existence of government-protected "monopoly" rights for drug manufacturers, researchers at Harvard Medical School report today.

The researchers reviewed thousands of studies published from January 2005 through July 2016 in an attempt to simplify and explain what has caused America's drug price crisis and how to solve it. They found that the problem has deep and complicated roots and published their findings in JAMA, the journal of the American Medical Association. The study was funded by the Laura and John Arnold Foundation with additional support provided by the Engelberg Foundation.

( ... ... )

Five key findings in the JAMA review:

1. Drug manufacturers in the U.S. set their own prices, and that’s not the norm elsewhere in the world.

( ... ... )

2. We allow “government-protected monopolies” for certain drugs, preventing generics from coming to market to reduce prices.

( ... ... )

3. The FDA takes a long time to approve generic drugs. ( ... )

4. Sometimes, state laws and other “well-intentioned” federal policies limit generics’ abilities to keep costs down. ( ... )

5. Drug prices aren’t really justified by R&D.

( ... ... )


자료 3: 'Rational Drug Pricing' (Mark Thoma | Economists' View, Sep 2015)

※ 발췌 (excerpt):

( ... ... ) Unfortunately, the current rules of the game in the U.S. pharmaceutical sector do not compensate for the weaknesses of patents. They amplify them. ... What should be done? Here are three key principles.

First, private R&D should certainly be protected by patents but only enough to elicit the needed R&D, not to produce outlandish profits. ...

Second, when the U.S. government pays for much of the R&D, it should share in the property rights. This should be a no-brainer, but in fact the NIH simply gives away most or all the intellectual property that it has financed, so the taxpayer pays part of the R&D bills but the returns are fully captured by private companies.

Third, when companies ... make profits from their U.S.-based research and U.S.-based production and sales, they should certainly pay U.S. taxes on their profits. The fact that the IRS lets them hide their profits in overseas tax

... ...