Drug Prices and the Free Market

Several pharmaceutical companies have recently been the subject of negative social media for the practice of purchasing older generic medicines and then raising the price by a significant amount.  Most recently, Touring Pharma who purchased Daraprim and raised the price by 5,000% received significant scorn, and attention from both party presidential candidates Hillary Clinton and Marco Rubio on price gouging of drug prices.

Additionally, Valeant was recently subpoenaed over drug price increases when it raised the price of Isuprel by 500% and Nitropress by 200% after purchasing them from Marathon Pharmaceuticals earlier in the year.

UpdatePhRMA on 23 October characterized Valeant’s strategy more like a hedge fund than an innovative biopharmaceutical company.  In the 27 October issue of Aspen Alert, 98% of the respondents of a reader poll agreed with PhRMA’s comment.

However, the free market often corrects these issues and in an interesting turn of events, a San Diego based compounding pharmacy has announced that they will provide Daraprim for 1$ a dose.

The compounding pharmacy is also looking to produce other inexpensive versions of other generic drugs whose prices have skyrocketed.

This could be an very interesting use and niche market opportunity for the new 503B classification of Outsourcing Facilities which may serve to keep prices of these older generic drugs in check.