Daraprim Update: One Pill Leaves You Busted, The Other Costs Nothing At All

While Valeant was the most prominent casualty of a dramatic drop across the entire biotech/spec pharma space, the plunge started over a month ago when the NYT brought attention to what it dubbed “price gouging” at Martin Shkreli’s Turing Pharma which raised the price of its only drug, Daraprim, by over 5000% from $13.50 to $750 overnight. This price increase, and the media storm that followed, prompted none other than Hillary Clinton to get involved in the debate of what should be a “fair price” for drugs, going so far as to propose price caps.

One of the consequences of this episode was to make Shkreli into a media and industry outcast, infuriating not only such natural advertising media outlets at CNBC, but also his industry peers who have seen their value tumble in the aftermath of the (long overdue) close attention paid by regulators into pricing practices.

But at least he had one thing going: a business model that afforded him solid margins, because despite promising to cut the price of the scandalous Daraprim, Turing did not do that.

Now, however, even that may be in jeopardy following news that San Diego-based specialty drug maker Imprimis Pharmaceuticals, says it can make a close, customized version of Daraprim for a paltry $1 a pill, NBC reports. That’s a big contrast to the $750-a-dose that Shkreli said Turing was going to start charging for the same drug.

What makes Shkreli’s price hike particularly disturbing is that there is nothing in Daraprim, known generically as pyrimethamine, that makes it expensive to produce: it’s been around since 1953 and has been generic for decades. It’s prescribed for a range of parasitic infections but is especially used by patients infected with HIV who are vulnerable to toxoplasmosis.

Turing bought Daraprim from Impax Laboratories in August for $55 million and raised the price from $13.50 a tablet to $750. It had originally been made and sold by GlaxoSmithKline for about $1 a tablet.

The Infectious Diseases Society of America and the HIV Medicine Association estimated it would cost $336,000 a year to treat someone with toxoplasmosis at the $750 price, a cost which incidentally would be mostly absorbed by the various health insurance, Obamacare and Medicare buffers which spread the astronomical cost of drugs across the entire US population, thus allowing “executives” like Shkreli to assume there is no limit to how high drug prices may go.

The problem arises when competitors, eager for a piece of the pie, demonstrate just how cheap drug production truly is.

“While we respect Turing’s right to charge patients and insurance companies whatever it believes is appropriate, there may be more cost-effective compounded options for medications, such as Daraprim, for patients, physicians, insurance companies and pharmacy benefit managers to consider,” Imprimis CEO Mark Baum said in a statement.

“This is not the first time a sole supply generic drug — especially one that has been approved for use as long as Daraprim — has had its price increased suddenly and to a level that may make it unaffordable,” Baum said.

“In response to this recent case and others that we will soon identify, Imprimis is forming a new program called Imprimis Cares which is aligned to our corporate mission of making novel and customizable medicines available to physicians and patients today at accessible prices,” Baum said.

Shkreli had said the money from the increase would be used to develop better treatment for toxoplasmosis that have fewer side effects, and that drugs like Daraprim will not exist if small companies cannot get a return on their investment.

It now looks like Daraprim will not exist but for a much simpler reason: a better drug will soon be available for a tiny fraction of the cost.

“Imprimis is now offering customizable compounded formulations of pyrimethamine and leucovorin in oral capsules starting as low as $99.00 for a 100 count bottle, or at a cost of under a dollar per capsule.”

The more instances of such comparable “price discovery” emerge, the more angry and violent the public’s reaction will be to “astronomical” price increases by Turing’s industry peers, which while undisputedly negative for spec pharma revenues and valuations, will at least result in some “price deflationary” benefits for the US consumer.