Readers might remember a small company called Catalyst Pharmaceuticals (NASDAQ:CPRX), who have had a business plan that goes something like this: take the known small molecule that's used for the rare disease Lambert-Eaton Myasthenic Syndrome LEMS, 3,4-diaminopyridine. Rebrand it as "Firdapse", and do the clinical work needed to get it officially recognized by the FDA (it's one of those therapies that's been grandfather in for many years). Oh, and charge a lot more than the current supplier, Jacobus Pharmaceuticals, who provide it for free. (It truly is a small market).
Well, that plan has been diverted somewhat. As mentioned in that 2013 post, Jacobus was planning a clinical trial of their own, and Catalyst was apparently taken by surprise when those results showed up last week in a poster presentation. Now no one's sure who will file with (or get approval from) the FDA first.
Jacobus Pharma decided to conduct a clinical trial of 3,4 Dap in LEMS and seek FDA approval as a way to stop Catalyst from profiting off LEMS patients with Firdapse, Laura Jacobus said in a 2013 interview. Laura runs the eponymously named drug company with her father David.
"Firdapse is not a new compound. It's the same drug we make. What Catalyst is doing is not the same as a company profiting from a new invention. What Catalyst is doing is making money off LEMS patients. They don't want to help LEMS patients, they just want to make money. If I worked for Catalyst, I wouldn't be able to sleep at night," said Laura Jacobus.
She has a point there about new inventions. As mentioned in those posts I linked to in the first paragraph, and in several others here over the years, many of these cases are unintended consequences that the FDA unleashed when it asked for older drugs to be put through the regulatory system. But that doesn't always have to be the case. Companies can buy up older approved drugs and just ram a new price home, because why not? That's what's been going on withThiola, and this new piece at Pharmalot details a number of other recent cases.
Valeant (VRX), for example, seems to have a very predictable strategy: the day that they get the rights to an old drug, its price at least doubles, and can go up fivefold or more, depending on what they think the market will put up with. You sometimes hear companies like Catalyst talking about how now that the old drug under study has been taken under their regulatory and manufacturing wing, that it'll be so much better quality, and be so much better for the patient community. Valeant doesn't bother with any of that crap:
On Feb. 10, Valeant Pharmaceuticals International Inc. bought the rights to a pair of life-saving heart drugs. The same day, their list prices rose by 525% and 212%.
Neither of the drugs, Nitropress or Isuprel, was improved as a result of costly investment in lab work and human testing, Valeant said. Nor was manufacture of the medicines shifted to an expensive new plant. The big change: the drugs’ ownership.
“Our duty is to our shareholders and to maximize the value” of the products that Valeant sells, said Laurie Little, a company spokeswoman. “Sometimes pricing comes into it, sometimes volume comes into it.”
Pricing power should come to those who have earned it, as far as I'm concerned. Do the work, conduct the research, take the risk, and you should be able to reap the rewards. Take over a smaller company that (from your standpoint) is just too dumb to realize that they could have put the squeeze on by cranking the price up by a factor of five? That doesn't deserve so much of a reward. What I'd like to see is an easier path for generic competition in such cases. Let someone come in and compete on price, because there's clearly room for it.
Whenever I write about these cases, there are always a couple of comments to the effect that hey, that's the free market, dude - that's what you like, isn't it? But drugs are not generally sold under a free market system. No market in which a single supplier can raise the price by 525% overnight for no reason other than "Because we can" can be all that free, or all that much of a market, if by "market" we mean "competition between various firms for a share of the customers". The market-exclusivity incentives provided by the FDA (through deliberate action or through regulatory barriers) are strong ones, but they should be handed out with care. As it stands, I think it's too much of a reward, in these cases, for too little work.