Charles M. Beasley, Jr.'s Reply to Malcolm Lader’s Comment

Barry Blackwell: Corporate corruption in the psychopharmaceutical industry
Charles M. Beasley, Jr’s Comment

             I thank Dr. Lader for pointing out explicit examples of a matter to which I briefly referred in my Comment as follows:

“We are all aware of the most egregious examples of old generic drugs with little total use in the marketplace and therefore virtually no competition between generic manufacturers being exorbitantly priced, sometimes at prices exceeding the branded product when released.  This exorbitant price practice, from my perspective, is clear price gouging and profiteering.”

             When I wrote the text above, I had in mind one specific company that has purchased some old, little-used but very important drugs and raised prices by orders of magnitude.  This company’s business model is based exclusively on this practice.  To be very clear and unequivocal, I consider this business model to be obscene.

             In my comment, I devoted more text to describing a related practice with drugs that become generic, describing a personal experience with a medication that I take on a chronic basis.  Again, I have significant reservations regarding the ethics of what I described.

             As some might be aware from reading the recent “Perspective” in the New England Journal of Medicine by Green and Padula (2017), a law has recently been passed in the state of Maryland criminalizing price gouging of this nature by generic pharmaceutical manufacturers.  I fully support such legislation as it is not directed at expensive and risky, innovative development. Furthermore, the standard of proof for what is criminal, as defined in the law, is reasonably high.

             I have avoided naming specific companies and specific drugs as I intend to address practices and not single out individual companies to demonize.  That said, I suspect that most readers will quickly know the company to which I am referring in the second paragraph above, one of the companies specifically named in the NEJM article.  There are certainly other examples of practices related to generic drug pricing that raise important questions of ethics.

             Besides the ethics of this matter, there is another reason to be concerned about such generic drug pricing.  With continued escalation of such pricing, we might well see price controls imposed on all drugs in the United States that would not distinguish between new chemical entities entering the marketplace (patented drugs) and generic drugs.  As might be expected from a review of my initial Comment, I believe that such controls would be a major blow to innovate development of much needed new medications.  That such controls would impair innovation is a belief; obviously, I have no empirical proof of the correctness of the belief.  Fortunately, the Maryland law recognizes the distinction between generic drugs with no to minimal competition between generic suppliers and innovative pharmaceuticals and the companies producing them. 

             As I have neither been connected with the companies nor the drugs discussed by Dr. Lader, I cannot enlighten the readers regarding the rationale for the specific price hikes described by Dr. Lader.  Also, I will not try to justify these specific price increases.  As stated in my initial Comment and reiterated above, I have concerns about this business model.

             All the above said, we should recognize that there is a cost for both production and regulatory activities required to maintain a drug on the market.  For drugs with little use, it might well be that keeping a drug on the market results in such sufficient loss that the company might decide to cease production. The NEJM article mentioned above contains an interesting and short reference to this matter without sufficient explanation: 

“When the digoxin market contracted from eight manufacturers to three after a change in Food and Drug Administration inspections (emphasis added), for example, the price of this drug that’s been available since 1930 increased by 637% within a decade.” 

             Increasing regulatory standards that might only involve documentation of manufacturing practices and assays, when no concern over product quality exists and no product complaint has been filed, can have unintended consequences. Such retrospective requirements can result in a decision to cease manufacture of an old product as profits from the product have declined to perhaps an amount approaching $0.00 and development and implementation of new regulatory standards are deemed prohibitive with regard to continued support for such a product.    

             If there is an insufficient need for a generic drug to generate competition among generic manufacturing companies (that should drive down prices if there is no price fixing) perhaps governments could design a system to manufacture such drugs or provide inducements to private companies to manufacture and sell at what would be deemed a reasonable price. Additionally, great care should be exercised in requiring new regulatory standards be applied to very old drugs without actual cause for concern for the quality and purity of those drugs.

References:

Green JA, Padula WV.  Targeting unconscionable prescription-drug prices – Maryland’s anti-price-gouging law.  NEJM  June 7, 2017 (on line) ; DOI: 10.1056/NEJMp1704907.  Accessed June 8, 2017. 

October 5, 2017