A rejoinder worth reading on labor markets by George Mason economist Bryan Caplan to the pseudonymous “Scott Alexander,” who writes the popular Slate Star Codex blog [Caplan first, second, third posts, all responding to this critique-of-libertarianism FAQ] If you don’t read Alexander, some of his top posts are here (especially strong on questions of medicine/health care and the way social justice language has developed into a tool of power). Also check out his recent post on the Daraprim mess and the wider failure of generic drug regulation [earlier on which].
As you probably know if you follow the news, a man named Martin Shkreli in charge of a startup firm called Turing Pharmaceuticals bought the rights to a drug called pyrimethamine (brand name Daraprim), used in the treatment of AIDS and malaria, and announced that he was jacking up its price from $13.60 to $750. Massive outrage resulted, which has echoed through social media for the past week.
Pyrimethamine is long since off patent. It is not difficult to manufacture, and sells cheaply in Europe. But under the distinctive food and drug laws of the United States you can’t just start turning out pills in your factory to compete with Shkreli, at least not without compiling and submitting a huge pile of regulatory paper with the U.S. Food and Drug Administration. This calls on the services of lawyers and scientists, costs a lot of money, and takes time, and you might or might not be able to recover the costs from the relatively small pool of users.
The FDA grants market exclusivity to companies that are willing to take “grandfathered” compounds into compliance with their current regulatory framework, and that’s led to some ridiculous situations with drugs like colchicine and progesterone. (Perhaps the worst example is a company that’s using this technique to get ahold of a drug that’s currently being provided at no charge whatsoever).
Among laws that used the “marketing exclusivity” technique to award monopolies on older drugs, on the logic that otherwise no one would step forward to handle the heavy costs of getting those drugs regulatory clearance, were the Drug Price Competition and Patent Term Restoration Act of 1984, better known as the Hatch-Waxman Act, originally introduced by Sen. Charles Mathias (R-Md.), and the Orphan Drug Act of 1983, introduced by Rep. Henry Waxman (D-Calif.) (We covered the issue briefly in this 2011 post.) In various ways that backers appear not to have foreseen, opportunistic actors have succeeded in seizing the legal-monopoly status made available for various compounds without always providing as much public benefit in return as had been expected. To enforce their legal monopoly, some of these companies sue rival drugmakers to force them to pull their competing offerings off the market.
Underlying it all — but seldom asked — was whether the gigantic costs of regulatory approval are really a necessary evil. Libertarian-minded critics were especially inclined to question whether hugely expensive studies and paperwork should really be required in the case of grandfathered or “generally recognized as safe” drugs, many of which have been familiar to the medical profession for decades or even centuries, allowing for a collective sense to emerge of their safety and effectiveness. But the view that progressives tended to champion — which prevailed — was that older compounds and those used for rare diseases should be held to no less stringent a standard than any other, and should either be withdrawn from the market or have their safety and effectiveness proved at someone’s expense.
At the Niskanen Center, Will Wilkinson ties together several of these themes. “Martin Shkreli… bought himself a monopoly made entirely of health-and-safety red tape,” he notes. The most-hated businessperson of the year is “cashing in precisely because the American pharmaceutical market is so far from free.”
Meanwhile, today’s moralistic politicians denounce the resulting fiasco without acknowledging the role of yesterday’s moralistic politicians in helping to bring it about (cross-posted in adapted form at Cato at Liberty).
More: “if another company wanted to compete to sell the same medicine [Daraprim], it would need to apply for a new generic drug approval, by submitting an ‘Abbreviated New Drug Application’ to the FDA. Filing one of these applications with the FDA used to cost as little as $1 million; today it can run as high as $20 million, sometimes more. …On average, it takes about 50 months for the FDA to approve a single generic application.” [Scott Gottlieb, WSJ] To clarify what I should have spelled out above: while exclusivity grants under the 1983 and 1984 laws have been associated with price jumps for a range of older drugs, the ANDA obstacle to entry by itself accounts for Shkreli’s monopoly position, which he cleverly amplified by sharp practices described by Ronald Bailey: “First, he apparently talked Impax [a predecessor holder of the sole FDA rights to market Daraprim] into starving the wholesale market of the drug, so that when Turing completed its purchase of the rights there were no extra pills floating around. Next, he set up an exclusive distribution network as a way of preventing potential competitors from obtaining enough Daraprim to conduct [the equivalence] trials for the FDA” necessary to develop an ANDA so as eventually to challenge his regulatory monopoly. And Scott Alexander at Slate Star Codex adds the Daraprim episode to a list of calamitous failures of generic drug regulation.
“Never apologize, never explain” is not a maxim to recommend for a state’s top law enforcer, and that goes for New York’s Attorney General Eric Schneiderman, the subject of my recent City Journal piece. Early this year Schneiderman charged that herbal supplements on sale at GNC, Walmart and other major retailers, when subjected to special tests arranged by his office, were found to lack DNA associated with the advertised herbs. Within days close observers and experts in the field had deduced why Schneiderman’s tests had produced such remarkable results: he had relied on testing methods badly unsuited to identifying active ingredients in substances that, like most of the supplements, had undergone extensive processing [see, e.g., Nicola Twilley, New Yorker; Live Science; Bill Hammond, New York Daily News]
Other officials might have beat a timely retreat. Schneiderman’s office instead dug in, refusing to apologize, back down or even publicly disclose key facts about its testing methods. I’ve done a Cato Daily Podcast with Caleb Brown about the whole episode, including what is perhaps the most ominous aspect: such is the legal leverage of a New York attorney general that the targets chose to settle anyway. City Journal piece, again, here.
Missed this a couple of months back: how click-and-sue lead generators use Facebook, Big Data and call centers in India to rustle up plaintiffs for mass tort law firms [Bloomberg]
- Med mal something of a regional problem: nearly half of payouts are in Northeast, with New York alone paying out more than the entire Midwest [New Jersey Civil Justice Institute on Diederich Healthcare analysis] “Neurosurgeons were 50% more likely to practice defensive medicine in high-risk states compared with low-risk states” [Smith et al., Neurosurgery via NJCJI]
- New Paul Nolette book on state attorneys general Federalism On Trial includes history of suits led by New York’s Eliot Spitzer to redefine as “fraud” widely known drug-pricing practices that Congress had declined to ban or otherwise address. The resulting lucrative settlements also earmarked money to fund private critics of the pharmaceutical industry;
- City of Chicago signs on to one of the trial bar’s big current recruitment campaigns, suits seeking recoupment of costs of dealing with prescription opioid abuse [Drug & Device Law; earlier here, here, here]
- We here in Washington, D.C. take very seriously any violations of HIPAA, the health privacy law. Just kidding! If a union supporter pulls information from an employee medical database to help in an organizing drive, that might be overlooked [Jon Hyman on National Labor Relations Board administrative law judge decision in Rocky Mountain Eye Center]
- “Preferred Care defendants respond to New Mexico Attorney General’s lawsuit, argue it was filed at urging of Cohen Milstein law firm” [Legal NewsLine]
- Philadelphia police run warrant checks of hospital visitor lists, and as a result many persons with outstanding warrants avoid going to hospitals. So asserts sociologist Alice Goffman in her book On the Run, but the evidence is disputed [Sara Mayeux last August, Steven Lubet in review challenging the book more broadly on ethical and factual grounds, Goffman’s response]
- Making contraceptive pill available over the counter without prescription should please supporters of birth control access, right? Funny you should ask [Elizabeth Nolan Brown, Reason, earlier]
West Virginia: “A state Supreme Court ruling says juries can decide if residents who have broken the law by obtaining and using prescription painkillers can sue physicians and pharmacies for their addictions.” [Chamber-backed W.V. Record]
- “Embattled Broward Health paid law firm $10.2 million; tab included a lawyer’s M&Ms” [Miami Herald]
- “Journalists were not very interested in the areas of vaccine policy that are actually debatable. They just wanted to find fools and laugh at them.” [Matt Welch]
- Wider access to pharmaceutically based drug rehabilitation may be sound policy. But is it compelled by the ADA? [Huffington Post via @sbagen]
- Kamala Harris carries water for the SEIU in a hospital deal, and Californians are the losers [John Cochrane]
- Drug case: “Hagens Berman argument ‘gives new meaning to frivolous,’ judge says; sanctions imposed” [ABA Journal]
- California: Kaiser Permanente “ordered to pay woman more than $28 million” [L.A. Times]
- “Bacteria can evolve. So can McDonald’s. Maybe federal policymakers can as well, before it’s too late.” [Steve Chapman]
…but counsel for the Maryland State Medical Society told a panel in Annapolis that doctors fear liability should they prescribe it. In recent years police and first responders have increasingly been trained in the use of the emergency drug Naloxone, which counteracts overdoses from heroin and opiates, and a proposed bill would allow physicians to prescribe the substance to users, family members, and others who might intervene in case of an overdose. [Rebecca Lessner, Maryland Reporter]
George Tolley, representing the Maryland Association of Justice, a trial lawyers group, asked that the immunity provision be taken out of the bill, over a concern that it would have “a domino effect” and could impact people administering other emergency drugs, such as for epilepsy and diabetes.
“If (doctors) exercise reasonable care, then they cannot be sued,” Tolley said.
Bill Sponsor Sen. Katherine Klausmeier, D-Baltimore County, responded “That’s the crux of this whole bill.”
- War on painkillers finds new casualty in ailing veterans [Washington Post, Brian Doherty]
- “Woman says ‘Fifty Shades of Grey’ lube doesn’t deliver, should be registered with FDA” [Legal NewsLine]
- “Robert F. Kennedy Jr.’s Twisted Anti-Vaxx History” [Russell Saunders, Daily Beast back in July]
- Using antitrust law, New York seeks to force maker to go on producing older formulation of drug [Ilya Shapiro on Cato brief in Second Circuit] Courts have mostly rejected claims of a duty to supply grounded in obligation to patients [James Beck, Drug & Device Law]
- “Patients see [biotech] startups and hope for a cure. Too many lawyers see them and hope for a payday.” [Standish M. Fleming, WSJ]
- Argument that policymakers undervalue pharmaceutical aids to heroin rehabilitation [Jason Cherkis]
- After suing the obvious defendants in New England Compounding Pharmacy contamination case, lawyers started in on the less obvious [Drug and Device Law, background on regulation-spurred rise of compounding pharmacies]
- King v. Burwell: next ObamaCare showdown at Supreme Court [Ilya Shapiro and Josh Blackman, David Bernstein on Cato brief, Adler v. Bagley Federalist video, Michael Greve with theory of Justice Kennedy riding off to Colorado with Dagny, earlier]
- “J&J says women being illegally solicited to join in mesh lawsuits” [Jessica Dye/Reuters, same on lawyers’ response, more on which]
- Invoking ACA, feds regulate non-profit hospitals to require periodic community needs assessment, limit collection methods [Treasury]
- Unless judges are vigilant, lawyers will take advantage of mass tort joinder to evade CAFA limits on forum-shopping [Steven Boranian, Drug & Device Law]
- Popular literature on IRBs/consent of research subjects can employ dubious definitions of “coercion” [Simon Whitney via Zachary Schrag]
- Qui tam lawyers vs. pharmaceutical companies, some empirical findings [Bill of Health]
- So that’s what “anatomical theatre” means: researcher checks into ostensible open-source medical journals and finds many “had suspicious addresses; one was actually inside a strip club.” [Fast Company on report finding that fake paper was accepted for publication by 17 journals]
- A student of David Henderson’s recalls the state of medicine under the Soviets: assignment to providers based on place of residence; the role of gifts, favors, and clout; how idealistic doctors became cynics; the black market as a safety valve. [EconLog]