[1]locked up thx to andrey at flickr creative commons
Ever since Martin Shkreli accelerated the national debate over prescription drug pricing, there has been confusion over how he slammed the door on lower-cost generic versions of his pricey pill.
After all, the drug, known as Daraprim, has been around for 62 years and no longer has patent protection. So wouldn’t his big boost in price – Shkreli’s Turing Pharmaceutical raised the cost from $13.50 to $750 a pill – entice generic drug makers to produce their own versions for a hefty profit?
Maybe it would. But Shkreli won’t let that happen.
Turing is using a so-called controlled distribution system that prevents generic drug makers from purchasing Daraprim. And without sufficient supplies, a generic drug maker is unlikely to have enough medicine to run clinical tests needed for FDA approval. A generic medicine must be bioequivalent with a brand-name drug – it must produce the same sort of effect in a patient.
So how is a generic drug maker boxed out?
Turing maintains a select list of qualified buyers that includes the specialty pharmacy unit at Walgreen, the big drug-store chain, which fills individual prescriptions. The only other names on the list include select hospitals and clinics. Meanwhile, all Daraprim shipments are made by a division of a major wholesaler that must clear any other purchase requests with Turing.
“If someone else calls and asks for 50 bottles of Daraprim, they would have to come to me for approval,” explained Jon Haas, director of patient access at Turing. “Once they’re set up as an approved purchasing agent, they can purchase as much as they want… It’s not unique to Turing, though. It’s a typical model in the industry.”
In general, that is correct. Drug makers often use such a distribution system to control shipments and there are various reasons for doing so. Some medicines may require special handling or storage. Sometimes, a company may have limited supplies and wants to avoid shortages or is trying to thwart counterfeiting, according to Adam Fein of Pembroke Consulting, who tracks pharmaceutical distribution.
In other circumstances, a drug maker is required by the FDA to control distribution as part of a so-called risk mitigation plan that is devised in conjunction with a regulatory product approval. In these cases, a drug maker is trying to avoid harmful side effects or abuse. By tightly controlling distribution, a drug maker hopes to ensure its medication is prescribed appropriately and also used properly by patients.
Turing did not inherit such a risk program when it purchased Daraprim for $55 million this past summer. And we should note that Impax Laboratories, which sold the drug to Turing, had put a controlled distribution program in place earlier this year. But Haas acknowledged that a generic drug maker trying to order the pill would not be welcomed.
“Most likely I would block that purchase,” he told us. “We spent a lot of money for this drug. We would like to do our best to avoid generic competition. It’s inevitable. They seem to figure out a way [to make generics], no matter what. But I’m certainly not going to make it easier for them. We’re spending millions and millions in research to find a better Daraprim, if you will.”
In any event, he added, he has not yet received any requests from a generic drug maker.
Arguably, one reason may be the small patient population for Daraprim. The medicine treats a rare parasitic infection known as toxoplasmosis, which can be fatal, especially for people with AIDS or who have weak immune systems. The U.S. market is estimated to be just 2,000 or so patients.
And while $750 a pill is certainly much more than what was charged previously, the financial incentive may not be all that strong. Remember that generic competition would likely lower the price, perhaps, to a level that does not yield the sort of profits desired after making the investment to win FDA approval.
“I hate to call it a closed distribution system, though,” said Haas. “So we call it controlled.”