Did you hear the one about the capitalist who bought the rights to a drug, Daraprim, and raised the price per pill from $13.50 to $750?
He’s since backed down, but not before Hillary cited this as a reason for greater government regulation of drug prices.
But hold on, who is really at fault?
…If another company wanted to compete to sell the same medicine, 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. This means that old but “niche” drugs may not have competition from other generic entrants, creating an opening for companies to extract windfall profits by driving up the prices of drugs like Daraprim.
The FDA has a backlog of thousands of generic-drug applications. And it takes an average of four resubmissions for a generic application to finally win approval, partly owing to shortcomings in the applications and poor communication between the FDA and generic drug makers. It may well be that competitors to Daraprim are in the FDA’s large queue. On average, it takes about 50 months for the FDA to approve a single generic application.
The FDA’s recent crackdown on the manufacturing process of prescription drugs has also led to the shutdown of U.S. drug plants. Whatever the merits of the FDA’s heightened scrutiny, it has been done with little attention to how this manufacturing capacity would be replaced. The slow approval timelines, combined with closed manufacturing facilities, create temporary drug shortages and monopolies, which can be exploited by shrewd investors.
So the guv’mint did it, in Washington with the red tape.