Page 18 - Martin Shkreli Case Study

Price Competition

In the face of his massive
price hike, the obvious
solution is for someone to
undercut his price -
especially since Daraprim
is fairly simple to make -
but thanks to the complex
rules governing drug sales

in the U.S., that’s not so
easy. A potential competitor would have to go through the arduous
process of getting approval from the Food and Drug Administration
(F.D.A.) by showing that its drug is equivalent to Daraprim. This is
difficult, because Shkreli’s company, Turing Pharmaceuticals, tightly
controls its distribution, making it hard to get the samples to do testing.
Only about 15 percent of drugs that begin clinical trials are ever
approved by the F.D.A.

On October 22, 2015, San Diego-based Imprimis Pharmaceuticals Inc.,
which mixes approved drug ingredients to fill individual patient
prescriptions, said it would begin selling a very similar, but not identical
drug to Daraprim, for $1 per pill (a 100-capsule bottle for $99)

"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,"
Imprimis CEO Mark Baum said.

Unlike Daraprim, Imprimis's formulation in itself is not FDA approved,
and can only be used when prescribed by a doctor for a particular
patient.

“An undated presentation highlighted Mr. Shkreli’s experience with other
prescription drug price increases, including Daraprim, Chenodal, and
Thiola. The presentation stated: “increased Chenodal price 5x with no
pushback from payors ... Licensing of Thiola … Increased price 21x with
no pushback from payors … Acquisition of Daraprim … Increased price
43x with no pushback from payors.” (4)

Turing, in late November, said it would cut the price of Daraprim by up to
50% for some patients.