The left is up in arms over the pharmaceutical CEO who raised prices for a drug mostly used by AIDS patients by more than 5,000 percent, but experts CNBC interviewed said regulatory barriers helped make it possible.
Founder and CEO of Turing Pharmaceutical, Martin Shkreli bought the generic drug Daraprim, which is used for parasitic infections in pregnant women and immunocompromised individuals. He hiked its cost from $13.50 a pill to $750, a whopping 5,455 percent.
Many were outraged by Shkreli’s price hike and pressured and ridiculed him for that increase. There was enough pressure, that NBC reported he will lower the price by an unstated amount. However many of his critics failed to point out how the lack of competition and regulatory barriers allowed him to raise the price by so much.
The left-wing media has been quick to mock Shkreli, and call for an increased government presence in the drug industry. The Daily Kos insisted that the federal government should be able to negotiate drug prices (otherwise known as price controls) and that this would best be accomplished through a single-payer healthcare system. The Daily Beast bemoaned the fact that the federal government was powerless to control the price of drugs. Salon churned out a story about the best Twitter responses to the controversy.
But these media sources miss the whole point of why somebody like Shkreli was able to do this, a point that CNBC’s Squawk Box covered well on Sept. 22. Squawk Box turned to AEI resident fellow, Dr. Scott Gottlieb who said, “The reason he was able to do that is because there was no other competition and I think is really emblematic of a regulatory failure.”
“The bottom line is that it used to cost about $1 million to file and end an application to bring a new generic drug to the market, now it could be well over $10 million,” Gottlieb added. “So you do have these cases where there are these temporary monopolies because it’s hard for the big generic drug companies to bring all these applications to the market. There’s also a big backlog at the FDA so I suspect that there’s generic drug applications sitting in FDA’s backlog that would bring generic competition to this particular drug and FDA just hasn’t approved those files.”
Perhaps noticing the public outcry over the price increase, Hillary Clinton seized the moment and said she would not stand for such increases in drug prices, tweeting out, “Price gouging like this in the specialty drug market is outrageous. Tomorrow I’ll lay out a plan to take it on. - H”
According to CNNMoney, her tweet led the price of Nasdaq Biotech stock to plummet 5 percent. The nine biggest losers in the Nasdaq 100 were all biotech stocks.
Jim Cramer, host of CNBC’s Mad Money, was also on Squawk Box on Sept. 22. He warned that we should not destroy the drug industry in our country because of a few bad actors. Discussing the matter with co-host Joe Kernen, Cramer said, “This is a blessed industry, anybody that thinks that it isn’t should just go look at other countries, it’s the envy.”
Cramer repeatedly urged against drastic changes calling it “the industry that we are best in the world” and that even “expensive” drugs here are “cheaper than if we had managed care.”
“[W]e have to defend it. We have to defend it,” Cramer said.
Gottlieb called for a much different plan than Clinton or the liberal media saying, “I think the way to deal with this isn’t to impose government price controls, per the announcement today from Mrs. Clinton, but to deal with the regulatory process to make it easier to bring competition to these drugs.”