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By Karl Smith

Lots of handwringing over the soaring price of Makena, a drug designed to prevent babies from being born too early. The long and the short is that independent pharmacists have been producing this compound on site for years. Those pharmacists typically sold the drug for around $15.

However, recently a biotech company just won FDA approval for the drug, put it under patent and promptly sold the patent to a pharmaceutical company. The pharmaceutical company raised the price to $1,500 a shot.

Kevin Drum offers a sober take

The FDA required Hologic (HOLX) to perform some additional studies before Makena was approved, including a follow-up post-approval study that will run through 2018. Maybe this is worth $200 million. I don’t know. But I wonder if Medicaid will pony up $25,000 for this shiny new version of 17P? I wonder how many low-income mothers will no longer have access to it? I wonder if our pharmaceutical approval system is completely screwed up?

Oh yes, yes it is.

As always this started with the best of intentions. From the Daily Mail.

Shockingly, the rise comes after campaigners from The March of Dimes and many obstetricians supported the monopolised licence, assuming it would increase availability and quality of the drug.

Independent compounding pharmacists are modern day apothecaries. As such, the quality of their drugs is not always guaranteed. Nonetheless reputation is a huge issue. My compounding pharmacist has his full name in the title of shop precisely because people trust the man himself.

This is precisely how the market should regulate quality. Folks who are good things develop a reputation for being good. Not only does that give them a strong incentive not to screw up but it helps the community identify the people who are actually talented in the production of drugs.

On the other hand a complex bureaucratic practice for approving drugs is slow, inefficient and channels excesses profits towards people who know how to work the system.

Source: Who Ate My Prosperity: A Pre-Term Drug Edition