To celebrate the release of our new issue, all subscriptions are discounted this week.

Your Wallet or Your Life

A lifesaving drug's overnight price hike shows why we must fight for a radically different health care system.

A patient receiving prescription medication. a2micile / Flickr

Two individuals — both infected by the single-celled parasitic protozoa Toxoplasma gondii — “showed prompt, dramatic responses” after being started on a two-drug cocktail.

One of the drugs was pyrimethamine, also known by its brand name, daraprim. A recent dramatic medical advance? Not quite. This report — one of the earliest reported uses of the regimen for toxoplasmosis — appeared in the New England Journal of Medicine in 1957. Daraprim has been a first-line treatment for toxoplasmosis — a serious threat to the immunocompromised and to the newborns of infected women — ever since.

But when Turing Pharmaceuticals CEO Martin Shkreli saw daraprim, he didn’t see an immutably inexpensive, age-old drug — he saw a gold mine.

As the New York Times reported on Sunday, the former hedge fund manager’s pharmaceutical startup bought the drug last August. It then promptly raised the price fifty-five-fold, from $13.50 to $750 a tablet (in fact, it was a mere $1 a tab prior to an earlier acquisition).

The circumstances of this money grab — an enormous increase in the price of a relatively ancient drug often relied upon by AIDS patients — might seem particularly pernicious. Yet this “gigantic overnight increase,” as the Times called it, should not be viewed as an isolated incident. As a perspective in the New England Journal put it late last year:

It is well known that new brand­ name drugs are often expensive, but US health care is also witnessing a lesser­ known but growing and seemingly paradoxical phenomenon: certain older drugs, many of which are generic and not protected by patents or market exclusivity, are now also extremely expensive.

An article in the Times last year, for instance, described exploding prices for a wide variety of generics, including the aged antibiotic doxycycline, which went from $20 to $1,849 a bottle.

The phenomenon of soaring pharmaceutical price tags is also not limited to the genus of the generics. On the contrary, the big headline-earners in recent years have been for new, extremely high-priced “specialty” drugs, whose patents effectively permit monopolistic pricing.

And this is why the story of galloping prices for decades-old medications is so revealing. Big Pharma apologists have long argued that high drug prices are a reflection of the cost of paying for drug research and development. Government interference will invariably inhibit innovation, the argument goes — and in the end we’ll all suffer.

But $750-a-tablet daraprim disproves this well-honed PR defense: Turing Pharmaceutical didn’t spend a dime on developing the drug or testing it in clinical trials. It is simply pricing the drug, as the saying goes, at “what the market will bear.” The “market” of Toxoplasmosis-sufferers is, of course, a particularly vulnerable one. But this is the essential explanation for rising prices among both generic and patented drugs, drugs for asthma and hepatitis C and cystic fibrosis.

In other words, the massive spike in the cost of daraprim is a result of the political economy of American health care. The profiteering of Turing and like-minded companies aren’t aberrations that can be dealt with by case-by-case shaming (and anyways, Shkreli seems unbothered by such castigation). The fundamental flaw is the system, not one admittedly repugnant CEO.

What, then, would a more just pharmaceutical framework look like?

A good first step would be to get rid of the statute, enshrined in the 2003 Medicare and Modernization Act, that prevents Medicare from bargaining with drug companies over prices, a reform that was left out of the Affordable Care Act to appease Big Pharma. According to a 2013 estimate by Dean Baker of the Center for Economic and Policy Research, allowing Medicare to negotiate drug prices down to what Canada or Denmark pays would save hundreds of billions of dollars over a decade.

Of course, we don’t all have Medicare, so this would only go so far. A single-payer national health program — with universal coverage and comprehensive benefits including drugs — would directly negotiate prices with pharmaceutical companies for everyone in the country, thereby producing much larger savings. Such a program would also eliminate drug copayments, which function as a “tax on sickness” that, as study after study has shown, deters people from taking important medications.

These changes would go a long way towards rationalizing drug prices and unburdening the sick. However, deeper reform — aimed not only at lowering the cost of drugs, but also at improving their overall therapeutic potential — is needed.

Some notable exceptions notwithstanding, pharmaceutical development in recent years has been rather disappointing. In a 2012 article in the British Medical Journal, health policy scholars Donald Light and Joel Lexchin laid out this criticism well, arguing that the pharmaceutical industry’s flawed approach towards drug development produces “mostly minor variations on existing drugs” that are usually “not superior on clinical measures.” The pursuit of truly innovative new molecules, in other words, is discarded in favor of highly lucrative, derivative drugs — a consequence of a “hidden business model,” as they describe it, that spends an estimated $19 on marketing for every $1 on basic research.

One potent fix would be direct public sponsorship of drug development, with therapeutic impact — not profitability — as the overall aim. Drugs would essentially become a public good. Without patent production, they could be cheaply produced throughout the world, increasing their accessibility in even the poorest countries.

The “conquest of disease,” if clichéd, should be a fundamental goal for a just society — one that’s far too important to be left to the likes of Turing Pharmaceuticals.

Above all, we should see the soaring price of daraprim as a symptom of a much deeper malady: a system based on the notion that health is not a social right, but instead a commodity that, in the very process of enriching some, impoverishes others.