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The Problems With Generic Medications Go Deeper Than One Company

I.

Like many people, I recently read about Turing Pharmaceuticals’ purchase of anti-toxoplasma drug Daraprim and subsequent price increase of 5000%. Vox and Marginal Revolution have already done some good work addressing this particular case, but have only touched upon the broader issue: that everything about generic medications is approximately this terrible.

As far as I’m concerned, the interesting aspect of this case isn’t just that the CEO of Turing is an asshole who is lining his own pockets with zillions of dollars by gouging AIDS patients. I assume most pharmaceutical company CEOs are assholes who would line their own pockets with zillions of dollars by gouging AIDS patients if the opportunity presented itself. The interesting aspect of this case is that the CEO of Turing got the opportunity. How?

In the United States, pharmaceutical companies that discover a new drug are granted a 20-year term of exclusivity to reward them for the public service of drug research. During this time, they can and do price-gouge as much as they want. After twenty years, the drug becomes public domain and anybody who wants can compete to produce it, usually leading to a precipitous fall in costs. But Daraprim is fifty years old; its patent is long-since expired. So Sarah Kliff from Vox asks the obvious question: why doesn’t someone just produce a competitor?:

Daraprim isn’t a frequently used drug. The New York Times estimates that between 8,000 and 12,000 prescriptions get filled annually. You could only fill about a quarter of a baseball stadium with the number of people who take the drug in a given year.

So think about a generic drug manufacturer looking at the Daraprim situation. There are fixed costs associated with building a new plant (or possible lost revenue on other drugs, if they switch production at an existing plant), getting samples of the drug, and figuring out how to make the generic product…with Daraprim, there simply isn’t a big enough patient population for a competitor to sell a “good amount” to. And this is, more generally, a problem with the markets for drugs that only a small number of patients use. They often aren’t big enough to support two competitors.

Moreover, there’s risk associated with starting a drug price war. Let’s say I decide to launch Sarah’s Generic Drug Company, and I’m pretty sure I can break even by slightly undercutting Turing and charging $700. What happens if Turing responds by dropping its price down to $500, or even back to $13.50? It will keep all its patients — and my nascent drug company is likely going bankrupt.

This is definitely part of the story. On the other hand, what about Longecity group buys? Someone on a drugs forum hears about a cool experimental chemical that sounds fun to try. They get a couple dozen friends in on it and pay a lab in China a few hundred dollars to synthesize a big batch. Then the Chinese ship it over, they distribute it to their friends, and they all get a decent supply of a totally novel drug for a few dollars a pill – compared to the $750 per pill that Turing is charging for Daraprim. I am not a chemist, but the Daraprim molecule does not look very intimidating. I bet if a group from Longecity got a couple of toxoplasma patients together for a group buy, they could all get treatments for maybe a few hundred dollars each instead of the $63,000 Turing is now charging. In fact, I encourage somebody to do exactly that as an act of civil disobedience/political activism and win themselves some free publicity.

So how come Longecity can do this, but real generic pharmaceutical manufacturers can’t? I’m not totally sure, but my best guess is that it involves bioequivalence studies (different from purity studies). Generic drugs don’t need the excruciatingly drawn-out safety and efficacy studies required of new brand-name medications, but they do need to pass a bioequivalency study proving that their drug is absorbed the same way as the original. According to Wikipedia, the most common type of bioequivalence study is to “measure the time it takes the generic drug to reach the bloodstream in 24 to 36 healthy volunteers; this gives them the rate of absorption, or bioavailability, of the generic drug, which they can then compare to that of the innovator drug”.

This might not seem so bad, but it must be harder than it sounds. This site, whose style is overly bombastic but whose information seems mostly correct, says that:

The cost and time involved in the ANDA [generic application] process varies depending on the drug, its safety, how long it has been on the market, etc. To have an ANDA approved, it typically requires an investment of about $2 million, and it takes a total of two to three years to get the drug to market…in addition to these costs, a company should budget 15% for legal fees, because wherever there is a big manufacturer with a sizable market share involved, they will sue, just to try to eliminate more competition from the market.

This adds an important extra dimension to Vox’s theory that it’s just too hard to start making a generic medication. If all you want to do is synthesize an active ingredient in powder form, and you’re not too concerned about staying on the right side of the law, it costs pennies and takes however long you need to FedEx something from China. If you also want FDA approval, it costs $2 million and takes two years.

Remember, Daraprim is used by about 10,000 people per year, and before the recent Turing price markup, it cost $13.50 per pill x eighty pills per treatment. 10,000 * 80 * $13.50 = about $10 million per year, of which maybe $5 million was profit. That means you have to capture a big chunk of the Daraprim market before it’s worth trying to get yourself approved to make Daraprim; the FDA is essentially telling pharma companies to “go big or go home”. Nobody wanted to go big, so they all went home.

In the absence of this barrier, it would be easy for small boutique companies with a couple of chemical engineers on hand to spend a few weeks manufacturing a few thousand doses of the drug whenever it was necessary to meet demand. This is how the supplement and nootropic industries work right now, and nootropics are dirt cheap, even though a lot of “nootropics” are the same chemicals as regular expensive medications except with a “not intended for human consumption” label slapped on the bottle that everyone knows to ignore.

I think this might be what’s going on with generic modafinil. Last week I prescribed some modafinil to one of my patients and got a call back from their insurance company saying it was denied because it cost too much.

I told the insurance company that was silly because modafinil only cost about $60 a month.

The insurance company said no, it cost way more than that.

This surprised me, because half the rationalist community uses modafinil, and even some of the doctors I work with use modafinil on long night shifts, and they all get it for $60 a month from places like ModafinilCat.

But according to Nootriment, a month’s supply of modafinil at real bricks-and-mortar pharmacies costs anywhere from $469.23 (Costco) to $850.84 (RiteAid). I’m not totally sure what’s going on, but my guess is that ModafinilCat (illegally) buys it from people who haven’t gone through the FDA’s bioequivalence testing, and RiteAid buys it from people who have. As far as I can tell, both are made by Indian pharmaceutical companies unrelated to the original American company who discovered the drug, but RiteAid’s Indian pharmaceutical company has put more work into staying on the right side of the US government.

If any of my patients are reading this and are upset because I prescribed them a drug which they couldn’t afford, I unreservedly apologize. I was laboring under the misapprehension that the pharmaceutical market made sense.

II.

No tour of terrible generic medications policies would be complete without a stop for Kesselheim and Solomon’s analyis of the Unapproved Drugs Initiative of 2006.

The FDA wanted to encourage people to study drugs that were already in the public domain and get them up to FDA standards. This is potentially a very noble plan. I’ve written before on how it’s basically impossible to get melatonin to interface with the health care system because it got into the public domain without the relevant FDA standards being met. Likewise, there’s no interest in using minocycline to treat schizophrenia because it’s a public-domain drug and nobody profits off of doing the FDA compliance work. So the FDA was definitely responding to a real problem.

Their solution, though, was to say that if anybody did a good enough study on a public domain drug, they could grab it out of the public domain and have it be their exclusive drug for the next while. This was a terrible terrible terrible idea.

Colchicine is a very popular and very effective gout treatment extracted from the Colchicum plant. It’s been used for so long that its first recorded mention in medical literature is on an ancient Egyptian papyrus. The medievals called it “hermodactyl”; Arabic physician Avicenna recommended it; notable gout sufferer Ben Franklin brought the first Colchicum specimens to North America.

But the ancient Egyptians, being a primitive and barbaric people, had no FDA. And although many different groups had done studies proving colchicine effective, none of them had done so on the official FDA forms. In 2007 a company called URL Pharmaceuticals did an official FDA safety study, showed that yup, it was safe all right, and for this service were granted exclusive right to produce colchicine. After suing all other colchicine producers out of business and establishing a monopoly, they raised the price of colchicine by 5000%, costing gout patients thousands of dollars a year.

According to FiercePharma, something similar happened with hydroxyprogesterone caproate, although the FDA later changed its mind. I can’t find any other examples, but the legal framework is still there if someone else wants to try.

III.

Other times generic manufacturing proceeds smoothly. A drug is popular and many different pharmaceutical companies pass the bioequivalency tests, get in on the action, and compete with one another. Nobody snatches it out of the public domain at the last second and receives a new monopoly on it. The companies are able to sell it to the pharmacies for a reasonable cost.

Now you get to have a completely different set of things go wrong.

Michigan Drug Prices is my state’s official drug price register. You can type in any Michigan ZIP code and any drug and find out how much it costs at all your local pharmacies. It’s pretty neat.

Celexa has been generic for more than a decade, it’s got a reputation for being inexpensive, and I prescribe it a lot. Let’s see how much my patients have to pay.

The closest RiteAid to my office charges $4 for a 30-day supply of Celexa 20 mg. The local CVS sells the same amount for $19.79. The local Walgreens sells it for $24.99. And the local KMart will sell it to my patients for the low, low cost of $88.15. That’s an…interesting…range of prices.

If I try to buy it off GoodRx.com, a site that offers pharmacy price comparisons, I can get it for $3.60 from a mail-order pharmacy. But I can also get it for $6.64 from K-Mart, special offer for GoodRx customers only. $10.00 from Walgreens. $11.99 from CVS. All the same stores that were trying to gouge me before. As soon as you take the basic step of saying “by the way, I’m also comparing costs with other pharmacies” their prices drop 90%.

I am far from the only person to notice this. PBS did a segment on one of the reporter’s mothers looking for a breast cancer drug. She originally paid $400 a month for it, which is steep but perhaps worth the cost as a high-tech treatment for a potentially fatal illness. Then she went to Costco and found the same medication cost $10.

Why does this sort of thing happen? I’m not sure. I expect it has something to do with insurance co-pays; if an insurance looks at some kind of average cost of Celexa and decides that the Celexa co-pay will be $5, then it doesn’t much matter to the customer whether they buy it from a pharmacy charging $10 or $10,000. But why doesn’t the insurance company do one the thing everyone in health care agrees insurance companies do best: send whiny faxes complaining that they’re not going to pay you? I don’t know.

But for now you might want to try using something like GoodRx.com if you’re buying expensive medications. And stay away from cats, because there’s never been a worse time to get toxoplasma.

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534 Responses to The Problems With Generic Medications Go Deeper Than One Company

  1. Jacob Schmidt says:

    Could somebody explain where “7000%” comes from? The price increased by a factor of about 55, or by about 5500%. Where does the extra 1500% come from?

    • Scott Alexander says:

      Good question. I’d seen that in various places and copied it without thinking, but you’re right. I’ve edited it for now.

    • SFG says:

      He could have at least gone for 9500 and made the ‘over 9000’ joke.

    • TrivialGravitas says:

      As I understand, this isn’t the first time this drug has been bought followed by being price hiked, the 7000% is probably something somebody came up with based on the original price, then got repeated a lot without that detail.

  2. E. Harding says:

    So the takeaway is that the efficient market hypothesis does not apply to health insurance?

    • Foo Quuxman says:

      A more accurate version would be: The efficient market hypothesis does not fully[1] apply when efficient markets are illegal.

      [1]: there is always a black market…

    • drethelin says:

      I think the efficient market hypothesis can best be seen as a continuum rather than a fact about the world. The more easy and frictionless and liquid transactions are, and the more available information is about the products in question, and the more parties are involved in buying and selling the good in question, the closer it gets to the idealized example of the efficient market.

      As I’m sure you can imagine, in reality all of these and other factors are so deficient that you can pay twice the price for an identical item if you go into a different store a block away. Even on the internet, presumably the place where it’s easiest to find cheaper alternatives, you can take advantage of the fact that people often don’t even bother to comparison shop. You can find the same exact stainless steel multitool on Amazon for 10 dollars or 2.50.

    • HlynkaCG says:

      Or rather that there are incentives in play that we can’t see.

    • Wrong Species says:

      I’m very pro-capitalism but I sometimes wonder if health care is one of those cases where the government may possibly be better than the market. One of the reasons I think that is Cuba. They are poor and have low living standards but their healthcare is apparently top notch.

      • Nebfocus says:

        You may want to do some digging on the wonder of Cuban health care.

        • Wrong Species says:

          That article is setting off alarm bells in my head. Mostly from the fact that it says ” all studies debunk this” and not point to those studies while mostly relying on anecdotes to prove their point. I would love to be wrong on this issue but I wasn’t convinced.

          • Nebfocus says:

            As you shouldn’t be from one column. But you should also be skeptical of a country that doesn’t allow unfettered access to foreigners and blocks internet access to its citizens.

            Sniffnoy (below), can’t change it now, will implement in the future.

          • I don’t know what the truth is about Cuban health care. But my guess is that you don’t either. In a society without a free press, it’s hard to check claims by the government. In the case of the Soviet Union, it became clear after the collapse that the economic statistics were largely bogus.

            In China during the Great Leap Forward, the statistics on grain production were about twice the actual output. That seems to have been not a case of the government fudging the numbers but of incentives for the local officials to vastly overstate them, with Mao at least initially believing the bogus numbers, exporting large quantities of grain while people were starving.

          • Nebfocus says:

            Re: David Freidman above.
            That is exactly my point. The choices are trust what the Cuban govt presents, or the anecdotes that trickle out. History hasn’t been kind to the data given by formerly closed societies.

          • Cerebral Paul Z. says:

            Even taking the official reports at face value, the Cuban triumph consists of forcing a desperately poor nation to spend more than it can afford on health care. This is analogous to the example of the Soviet space program that someone brought up in comments to another recent post: a totalitarian government that decides to make a showcase of one particular area can generally succeed, but only at the cost of making the rest of its economy even more wretched than it already was.

          • Slander says:

            Healthcare ranks above a “shoot monkeys into orbit” program by at least a few hundred notches on the list of critical needs, probably only coming narrowly behind food and shelter.

            If I was living under a totalitarian regime, them making public healthcare a central focus would not factor highly on my list of grievances.

          • Cerebral Paul Z. says:

            Of course if it’s not even possible to spend too much money on health care, then the complaint against Turing disappears (as Mr. Adams said) in a puff of logic, taking this entire comment section with it.

          • Slander says:

            I’m assuming you’re replying to me, but I meant public healthcare as in healthcare available/affordable to the public.

            If you don’t see a world of difference between a state prioritizing that and a state prioritizing orbital monkeys for its PR campaign, I don’t know how to change your mind.

          • Cerebral Paul Z. says:

            I now see that bringing Turing into it (a rhetorical move that was probably too cute by half anyway) only muddied my point. Let’s try a different tack: Slander acknowledges that food and shelter probably outrank health care on the scale of human needs. Suppose Raul Castro reads this and says “My lack of God, he’s right! We should abolish health care and use the resources to provide the people with world-class food and shelter!” What I want to suggest is that this would be a bad idea– and that the overconcentration on health care that they’ve actually been doing in Cuba is a bad idea for exactly the same reason.

        • Sniffnoy says:

          Would you mind changing the link to go directly to the article rather than through a shortener? Thank you!

      • tailcalled says:

        There’s also Robin Hanson’s Buy Health Not Medicine model.

      • naath says:

        Dunno about Cuba but in the UK the NHS does most of the drug-buying (you can go private, but most people don’t) and, yes, they do say “that is too much, we will not buy it” (this is not their most popular function!) and yes, the bulk-negotiation is much more effective than any one person trying to get a discount.

        I am surprised that the big US health insurers haven’t battled pharmacies down to lower cost, or at least the *same* cost everywhere. Perhaps they *have* and it is actually only people who buy things without going through insurers that actually experience this huge variation in price.

        • Alsadius says:

          I read a discussion a while back basically saying that a big part of health-provider(pharma, hospital, etc.) mergers and insurer mergers is the result of a price-negotiation arms race. If you provide half of all drugs, the insurer can’t lowball your prices too much…unless they cover 2/3 of all patients, in which case they might be able to.

        • grendelkhan says:

          yes, they do say “that is too much, we will not buy it” (this is not their most popular function!)

          Don’t they do some kind of utilitarian calculation for how many QALYs they can buy for a given amount? (Looks like.) And of course the decision is never presented as a tradeoff; it’s just “NHS will pay to save my beloved gran, or their bean counters will cackle and dance”, and who the heck would pick the latter?

          It’s damned impressive that the NHS actually manages to do that.

      • Iajawl says:

        Am Australian, can confirm universal healthcare is best. The most you can pay here for a presciption is ~42 AUD(~30USD), with that price only being ~7 AUD for concession card holders. Since the pharmaceutical companies have to make deals with the governments the bargaining power is much better for buyers. We pay less per head of capita on healthcare last time I heard too.

        Also free overnight stays in hospitals is kind of nice.

        • Mary says:

          You seem to have confused “best” with”cheapest.”

          Also, your system is free-riding on American prices, which is where the drug companies get their R&D money back.

          • Gbdub says:

            The Aussie has also confused “free” with “fees are collected elsewhere through taxation and filtered through a Byzantine network of bureaucrats”. But other than that…

          • vV_Vv says:

            @Mary

            You seem to have confused “best” with”cheapest.”

            Australia has generally better health care outcomes and life expectancy than the US.

            Also, your system is free-riding on American prices, which is where the drug companies get their R&D money back.

            Nonsense. If the drug companies were losing money on the Australian market, they would just stay out of it.

            Companies try to make as much money as they can in each market. If they can make more money per patient in the American market than in the Australian market because Australians bargain collectively while Americans don’t you can’t blame it on Australians.

            @Gbdub

            The Aussie has also confused “free” with “fees are collected elsewhere through taxation and filtered through a Byzantine network of bureaucrats”. But other than that…

            Universal health care systems financed with “fees collected elsewhere through taxation and filtered through a Byzantine network of bureaucrats” are still cheaper in terms of per-capita expense than the US private health care system.

          • A Definite Beta Guy says:

            Our biggest PBM is bigger than your entire nation.

          • Nathan says:

            @gdhub

            There’s a 1.5% Medicare Levy. It’s not a perfect system but I doubt it’s anywhere near as Byzantine as the US one.

          • Edward Scizorhands says:

            > > Also, your system is free-riding on American prices, which is where the drug companies get their R&D money back.

            > Nonsense. If the drug companies were losing money on the Australian market, they would just stay out of it.

            This demonstrates a very serious and fundamental misunderstanding of initial costs as compared to marginal costs.

          • Cerebral Paul Z. says:

            True, Edward: in a high-fixed-cost industry like pharmaceuticals, there’s a whole lot of territory in between “losing money” and “get their R&D money back”.

          • RCF says:

            @vV_Vv
            “Companies try to make as much money as they can in each market. If they can make more money per patient in the American market than in the Australian market because Australians bargain collectively while Americans don’t you can’t blame it on Australians.”

            Sure I can. It’s local cooperation but global defection. Besides which, if you are presenting the Australian system as a model for America, it is absolutely relevant that Australians are free-riding, and their low prices would not be possible if America were to try the same thing.

          • vV_Vv says:

            @Edward Scizorhands

            This demonstrates a very serious and fundamental misunderstanding of initial costs as compared to marginal costs.

            It’s not like pharmaceutical companies initially develop a new drug for the American market and then they suddenly realize that they can sell it to other countries. Development costs are distributed over the worldwide market.

            US drug spending ($340 billion) is 36% of the global drug spending ($954 billion). Drugs in the US are overpriced by 20 – 40% compared to European countries of similar per-capita wealth. If Americans paid 30% less for their drugs, global drug spending would be $852.0 billion, 89% of the current one (source).

            Large pharmaceutical companies make profits in the order of 20% (source). I doubt that this profit margin was reduced from ~20% to ~18% it would discourage them from developing new drugs.

            @RCF

            Sure I can. It’s local cooperation but global defection.

            Nothing stops the Americans from bargaining collectively through their government like the Australians do, or even from teaming up with the Australian government and bargain as a single entity.

            You can’t blame American coordination failures on external parties.

            . Besides which, if you are presenting the Australian system as a model for America, it is absolutely relevant that Australians are free-riding, and their low prices would not be possible if America were to try the same thing.

            Almost everybody in the developed world does the same of Australia. It’s not like Americans are single-handedly funding an otherwise unproductive business by paying high prices.

          • Cerebral Paul Z. says:

            I don’t see where Vvvv is getting only a 2% reduction in profit/revenue from. If (per the Beeb’s chart) pharms are making a 19% margin on worldwide revenue of $954b, that works out to a profit of $181b. If we now decrease revenue by $102b on the same volume of product– and if we assume, somewhat optimistically, that all the revenue loss comes out of profit– the latter is knocked down to $79b, less than half of what it was.

          • @Gbdub

            “The Aussie has also confused “free” with “fees are collected elsewhere through taxation and filtered through a Byzantine network of bureaucrats”. But other than that…”

            And private systems don’t have private bureaucrats? On the face of it, you at least don’t need bureacrats whose job it is to figure out who’s paying in single payer systems.

          • DensityDuck says:

            @vV_Vv:

            “Australia has generally better health care outcomes and life expectancy than the US.”

            Australia has fewer inconvenient poor immigrants, mostly due to its policy of sinking their boats before they land (as opposed to the US policy of ignoring them until they shoot someone and then reluctantly putting them on a bus to Tinjuana). And poor immigrants who don’t speak the native language have horrible healthcare outcomes.

            Oh, infant mortality? Yeah, about that. Every baby that’s born with a heartbeat in a US hospital is considered a live birth, and if that baby dies it goes into the infant mortality statistics. Australia follows the EU model, where they will declare infants “non-viable”, and non-viable infants who die don’t count as infant mortality.

            Oh hey, it’s our old friend “life expectancy”. The US has a far higher rate of death by murder and violence than Australia. This is a smart comments section, so I figure I don’t need to show the math to demonstrate what one guy dying at twenty does to the mathematical average life expectancy.

          • Anonymous says:
            This demonstrates a very serious and fundamental misunderstanding of initial costs as compared to marginal costs.

            It’s not like pharmaceutical companies initially develop a new drug for the American market and then they suddenly realize that they can sell it to other countries. Development costs are distributed over the worldwide market.

            You’re still missing the point. Consider your previous statement:

            If the drug companies were losing money on the Australian market, they would just stay out of it.

            I’m going to explain using trivial numbers just to point out the mechanisms involved.

            Market 1: Potential profits – $2. Initial certification costs – $5.

            On its own, this market is unprofitable. Potential suppliers would do exactly what you said – stay out of the market. Now, suppose there’s a second market available.

            Market 2: Potential profits – $10. Initial certification costs – $8.

            This market is profitable. Suppliers will spend the initial costs and enter the market. Now, there’s a lot of overlap in the certification process, so you can actually take the work you did in Market 2 and obtain a certification in Market 1 for only $1 more. Suddenly, it’s worthwhile to enter Market 1! However, if Market 2 gets together and forces a reduction of prices by 30%, then it’s no longer profitable to enter Market 2. Even on a worldwide analysis, $9 is required for certification in both markets, but since the potential profit is only $9, they will only break even and not enter either market.

            So, while it’s easy to say, “Development costs are distributed over the worldwide market,” it hides the ball. Sure, we can say that the $9 is distributed over the worldwide market, but how precisely do we distribute it in a case like this? Is Market 1’s share of the development costs $1 (the additional cost after certification in market 2)? $2 (the quantity of money Market 1 brings to the table)? $4.5 (an equal split)? $5 (the original market 1 barrier)?

            We could do an ex ante analysis. Market 1 brings 1/5 the profits, so let’s arbitrarily assign them 1/5 of the development costs! It’s $1.80! I hope you see how this hides the fact that entry to Market 1 is dependent upon Market 2 being suitably profitable.

            The more correct equity analysis would require precisely what we don’t have – global coordination. We wouldn’t be able to look just at profits, but we’d look at consumption. Suppose Market 1 is consuming 3 units (with laws keeping the profit at $2) while Market 2 is consuming 6 units (producing the aforementioned $10 profit). If we distribute the $9 initial costs across consumption, then Market 1 needs to bring at least $3 in profits in order to break even. So, while Market 2 can reduce prices, Market 1 would need to allow prices to increase.

            All of this is obviously complicated by the fact that services have price elasticity. Additionally, I want to be clear that I’m not saying that this is actually the case with Australia/USA. That argument must be justified with data (that may not exist). I just want to make it clear that this is the type of claim we’re dealing with when people talk about “freeloading” and “global defection”.

        • Edward Scizorhands says:

          Your system has trade-offs. Those trade-offs might be worth it, but pretending they don’t exist either means 1) you honestly don’t know about them, or 2) you know about them but purposefully don’t mention them.

          In many cases those trade-offs are essential functions, so selling the system without tradeoffs is selling a selling a system that doesn’t work.

          • There’s certainly a frontier along which you have to make tradeoffs but any given healthcare system isn’t necessarily close to it. Decades of politicians trying to come up with schemes to make healthcare better or cheaper with no obvious cost have really taken their toll. Many nations have excellent mostly-private healthcare systems like Switzerland. Many have perfectly good public systems, like the UK.

            What makes these systems decent is that they don’t do things like trying to lower cost by preventing “wasteful” competition or compensate doctors using the labor theory of value.

        • thedufer says:

          You seem to be under the impression that the extra money Americans are spending on drugs is going to, like, yachts or something. No, most of what we spend subsidizes drug research for the rest of the world. When Australia is inventing most of the world’s new drugs (not to mention innovation in other industries) you can tell us how great your system is, but not while we’re paying for you.

          I’m not saying our system is better. Maybe it would be better to advance a bit slower and not leave people to die along the way. Just don’t tell me you’ve got it all figured out and pretend there are no downsides to your plan.

          • vV_Vv says:

            You seem to be under the impression that the extra money Americans are spending on drugs is going to, like, yachts or something. No, most of what we spend subsidizes drug research for the rest of the world.

            You are not the first one in this thread to make this claim, I wonder where it comes from. Large pharmaceutical companies have profit margins in the order of 20%. If Americans were paying prices comparable to European countries, that profit margin would be something like 18%.

            Therefore it seems that most of extra money Americans are paying goes indeed to yachts or something.

            When Australia is inventing most of the world’s new drugs (not to mention innovation in other industries) you can tell us how great your system is, but not while we’re paying for you.

            It’s a global market, where a drug is invented bears no relevance to its price in that particular country. In fact, about half of the largest pharmaceutical companies are based in European countries with universal health care and drug price controls.

          • Brn says:

            vV_Vv, the successful drug companies are making large profits. But there is a huge survivorship bias, because you are not looking at all the startups that failed. The possibility of those large profits encourage startups and investors to take risks. Maybe you are right and all that will happen still if we change the profits that the huge successes will get. But you will be literally betting peoples’ lives on that.

          • ” Large pharmaceutical companies have profit margins in the order of 20%.”

            Define the profit rate. Profit as a fraction of what? Capital? Revenue? Defined how—what costs are included?

          • vV_Vv says:

            @Brn

            In my understanding, a pharmaceutical startup has two typical outcomes: either fail or sell to a big pharmaceutical corporation for a gazillion bucks. If the drug market was slightly less profitable, the outcomes would be: either fail or sell to a big pharmaceutical corporation for slightly less than a gazillion bucks. It doesn’t seem to me that the incentives of pharmaceutical startup founders would be different enough in the alternate scenario to change their behavior.

            But you will be literally betting peoples’ lives on that.

            That’s interesting. Right now there are people who die or live with a lower quality of life (e.g. Scott’s patients that can’t get modafinil) because they can’t afford drugs. But you are willing to trade them off for the speculative lives saved or improved by some possible future drug that will be likely developed anyway.

            @David Friedman

            I was referring to this article. I’m not sure if they are amortizing capital in their estimation of expenses, I’m assuming they are. Anyway, even if you compute profit margin in some other way, I doubt you can plausibly claim that the pharmaceutical industry is teetering on the brink of unprofitably and that a ~30% loss of revenue in the American market would significantly hamper its R&D.

          • Deiseach says:

            So why aren’t the drug companies doing that? Why don’t they stick to the USA and tell the rest of the world “Your prices are too low, it’s not economic for us to pay them, if you want these drugs you pay American prices for them”?

            I mean, according to you, they’ve got us freeloaders and spongers over a barrel – we need the new American drugs or we’ll die because it’s not like we have home-grown pharmaceutical companies making discoveries themselves! (Oh, Bayer, do you know that? Hey, Merck, apparently you are not the parent company of Merck Sharp and Dohme, after all! Nor should we regard you as “the world’s oldest operating chemical and pharmaceutical company” because, you know, you’re not American! Go USA!)

            Hark, do I hear the voice of Ayn Rand drifting in on the wind, complaining about “moochers”? 🙂

            I know where Bayer spends its profits (or some of them); I really would bet on yachts or something for the American companies.

            Please pardon me, dear Americans, for laughing at your outrage over the rest of the world leeching off your pharmaceutical research (instead of getting outraged that apparently you are all regarded as geese to pluck by said companies).

            “Oh, yeah? And what would you do without American-discovered drugs?”

            Why, carry on with aspirin (German – Bayer), ibuprofen (British – Boots), furosemide (French – Sanofi SA), metformin (French – Laboratoires Aron), and fenofibrate (French – Groupe Fournier SA) for my current medicinal needs, I suppose?

          • Edward Scizorhands says:

            So why aren’t the drug companies doing that? Why don’t they stick to the USA and tell the rest of the world “Your prices are too low, it’s not economic for us to pay them, if you want these drugs you pay American prices for them”?

            I can get a DVD of a 1 year old movie at CVS for $8. How come a ticket costs more than that? Clearly they can make money at $8.

            I can get a last-minute flight on an airline for $29. How come they don’t sell all their flights at that price?

          • vV_Vv says:

            @Edward Scizorhands

            You seem to operate under the assumption that non-American health care feeds on the scraps that fall off the American table, while in reality some of the largest pharmaceutical companies are not American and most of health care spending occurs outside America.

            America is clearly dominant in things like military and computer stuff, but when it comes to health care, it has a system that performs sub-optimally for most people, compared to other first-world countries. Blaming it on an evil plot by commie foreign moochers isn’t really a rational response.

          • John Schilling says:

            in reality some of the largest pharmaceutical companies are not American

            And these large not-American pharmaceutical companies only ever sell their drugs to other not-Americans?

            Pull the other one; I own stock one of those huge not-American pharmas, I read their annual reports, and I know where their profits come from. And more importantly, where their R&D funding comes from.

            and most of health care spending occurs outside America

            Because there are three hundred million Americans and seven billion not-Americans. Time for some math, if you’re up for it:

            It costs a billion dollars to develop Compound X and secure FDA approval, including all the money wasted on failed candidates before you perfected X.

            It costs $100 to produce enough Compound X to treat one person for whatever ails them.

            1% of the population will come down with whatever it is Compound X is needed for, during the patent period.

            All the not-American governments pass laws saying, “ten percent profit is enough; you cannot sell Compound X for more than $110/course in our country”

            First math question: Will a profit-minded company sell Compound X in non-American countries for $110?

            Second math question: Can a company also sell compound X in America for $110 and stay in business?

            Third math question: What price must a company sell compound X for in America to break even?

            Fourth math question: What price will a fair but profit-minded company sell Compound X for in America to maintain 10% overall net profit over production and R&D costs?

            Fifth math question: What fraction of the global spending on Compound X will occur outside of America?

            Sixth math question: What fraction of the gross profits from Compound X, potentially available for developing Compound Y, will come from sales to Americans?

            Seventh math question: Do the answers to any of these questions depend on whether the headquarters of the pharmaceutical company are in Boston, Geneva, or Mumbai?

            Answers: Yes, No, $200, $477, 84%, 62%, No.

            Because of the population disparity and the price-fixing, the United States with 4% of the world’s population and 22% of the world’s wealth, is in this case stuck with 62% of the world’s bill for medical research and development – yes, even though 84% of the gross medical spending is outside of the United States, even though much of the actual R&D is done outside the US.

            America is clearly dominant in things like military and computer stuff,

            Interesting that you should make the comparison with military dominance, because there are similarities and implications there that bear some serious consideration.

          • brad says:

            @John Schilling
            One part that isn’t clear to me is how much of that “R&D spending” is compliance with FDA rules, and just how much benefit the RoW gets from that portion of the spending.

            It seems like the nationalist and libertarian arguments point in different directions on this one.

          • Edward Scizorhands says:

            Blaming it on an evil plot by commie foreign moochers isn’t really a rational response.

            I’ve got a better idea: you stop making up stuff in your head that I said.

          • John Schilling says:

            Compliance with FDA rules gets you most of the way to drug approval in the rest of the world. I don’t know of any country that just rubber-stamps FDA approval for their domestic market, but quite a few weight it heavily in favor of a new drug and the ones that want to do their own review and approval process are mostly asking for the same tests and reports the FDA does.

            And, for new drugs, you do need to do something like the testing the FDA requires. There may be ways to do it smarter, if the FDA were to change its rules (or disappear in the Libertarian Revolution), but almost certainly not orders of magnitude cheaper and not without some reduction in safety. As always, Derek Lowe is the blogger to follow for this.

            But the rest of the world is unlikely to just sign on to the Brave New World of Drug Non-Approval just because American libertarians manage to arrange such a thing here. In that hypothetical, drug development probably gets cheaper but Americans still wind up paying for most of it because the rational pharma strategy is then to not even try to navigate the expensive drug-approval process in other countries but just sell the weakly-tested version to Americans at a suitable price. Meaning, expensive but less so than now. The rest of the world uses generic versions of existing drugs at prices their national health services will be quite pleased with. This would have the advantage of “fairness” in that there are no freeloaders getting the benefit of medical R&D they didn’t pay for, but the disadvantage that millions of people die from treatable diseases because they live in the wrong country.

          • grendelkhan says:

            John Schilling: All the not-American governments pass laws saying, “ten percent profit is enough; you cannot sell Compound X for more than $110/course in our country”

            How likely is this? A course of Sovaldi costs $84k and up in the US, and £35k in the UK, which is about a one-third discount. Actual manufacturing costs are estimated to be a few hundred dollars.

            I can see this happening for generic drugs, but there’s plenty of fear-of-killing-the-golden-goose out there. The situation you describe would indeed be dire (“what if drug companies couldn’t recoup their development costs?”), but it seems to bear little relevance to reality.

        • Kyle says:

          This is why I think the US gov and companies should set a minimum sale price to foreign countries, maybe indexed to per capita GDP. It could apply to the US, too, so it seems less targeted against international countries. That way it can help force the rest of the world to pay something like what people in the US pay and limit the amount of freeloading currently done.

          • vV_Vv says:

            So instead of defending the interests of the American people through collective bargaining and price ceilings, you are actually proposing that the US government sets a price floor for the benefit of corporations. Nice…

          • Kyle says:

            Well, it would allow you to bargain down the price of US drugs while maintaining the same profit incentive to develop new drugs. Or, increase profits and encourage more development of new drugs. I would consider both in the interests of the American people.

      • Matt says:

        > I’m very pro-capitalism but I sometimes wonder if health care is one of those cases where the government may possibly be better than the market.

        Did we just read the same article? The one extensively documenting the incentives (artificial monopolies) created by the FDA (aka the government) causing all sorts of weird market distortions (price gouging life saving drugs). The most heavily regulated industries are always the most profitable. Naively, we would expect further regulation to cause further distortions from a well functioning market. Throwing more government (FDA regulations) at the problem is not the solution.

        • mulp says:

          Cars are regulated and must pass lots of tests defined by the government and insurers insist on even more tests, yet cars do not varying in price by factors of ten times nor suddenly go up in price by ten or fifty times when a new CEO takes over the factory or new shareholders buy big stakes in the company. All the GM factories have a new owner from the owner in 2008, yet they did not increase in price by even twice. Yet only GM is allowed to Chevys – Ford and Honda can’t sell Chevys.

          • A Definite Beta Guy says:

            The regulations impose fixed costs so high that they create a natural monopoly. They are qualitatively different.

          • grendelkhan says:

            I think you mean oligopoly or cartel or something–there are a bunch of companies, but the barrier to entry is very high indeed. And indeed, it’s really, really hard to start a car company.

            I think the difference here is that you can buy a car from any car company; drugs are way less substitutable than cars. If the price of, say, a Honda Civic went up by an order of magnitude, you might be cranky about it, but you could very easily just buy another, different, compact car, it would substitute reasonably well. Or buy a used one on the secondary market. For drugs without generics, there’s no analogy for any of these things.

        • RCF says:

          The problem is that we’re getting the worst of both worlds. There isn’t really any way to have a free health insurance market, because information asymmetry leads to a runaway spiral of people healthier than the median person buying healthcare dropping their health insurance, which then lowers the median again. So the government has mandated companies give health insurance, which creates distortions of its own.

          There is also no way for a free market to produce drugs. The government has to step in and pay companies to develop drugs. But instead of giving money directly, it creates a monopoly, allowing drug companies to recoup their investment at the cost of higher drug costs.

          • Anonymous says:

            >There is also no way for a free market to produce drugs.

            The past two decades have seen an explosion of novel grey-market drugs (recreational and nootropic), which although not a “free market” is still much more free than the realm of the FDA.

          • Kyle says:

            Well, in places where there is no insurance market the market has managed to reduce prices massively and improve quality at the same time – see LASIK and breast implants. It’s why so sometimes I wish we had 10-20k min deductible insurance plans for everyone (and fine, throw in some primary care).

          • Edward Scizorhands says:

            Can we stop bringing up LASIK and cosmetic surgery as if the only difference was no insurance market? They are also entirely optional.

            (For the record, I think the free market can do a lot to contain costs if the consumer had cost in mind, but bringing up those examples just tends to derail the discussion.)

          • DensityDuck says:

            AIDS drugs are optional, too. You could have just used a condom.

          • John Schilling says:

            Can we stop bringing up LASIK and cosmetic surgery as if the only difference was no insurance market? They are also entirely optional

            OK, shall we talk modern dentistry? Root canals are not “optional” by any reasonable standard, yet they are in my experience faster, better, and substantially cheaper than any equivalent surgery in more traditional (and heavily insured) medical fields. In the same ballpark as LASIK and cosmetic surgery, as it turns out.

            “Optional”, isn’t really the right parameter here. If I’m trying to sell you something and you have a choice between paying your hard-earned money to me, or to one of my twenty competitors, or walking away from the deal altogether, I have to either underbid my competitors or offer a better product at a not-terribly-higher price. If we take “walking away from the deal” out of the equation but you still have the choice between me and my twenty competitors, I still have to either underbid my competitors or offer a better product at a not-terribly-higher price.

            For that matter, look outside the medical industry for a bit. There’s nothing less optional than food, yet the free market does a superb job of providing good food at low prices and just about every attempt to tinker with it makes it worse.

            What would allow me as a seller to get away with ridiculously overcharging you are, A: having a monopoly in a critical service, or B: you being able to pay with Other Peoples’ Money for the service I provide to you. The current, heavily-regulated, highly-insured medical/pharmaceutical industry often provides A and almost always provides B. And the resulting prices are almost always obscenely high, usually for poor service. The few parts of the medical industry that don’t work this way, tend to offer low prices and good service regardless of whether the service is critical or optional.

        • Wrong Species says:

          I know it’s hard to believe but sometimes people read the same things you do and come to different conclusions. I’m aware that the government heavily distorts the market in healthcare. But the government heavily distorts a lot of markets but most of them don’t seem as dysfunctional. At the same time, socialized healthcare seems to work decently in other countries, even better than the more market based system of the US. Obviously it’s more complicated than that but this is the impression I get the more I read about it.

          PS, I’ve noticed that you are usually overly hostile when someone disagrees with your political views. Please stop that.

          • John Schilling says:

            But the government heavily distorts a lot of markets but most of them don’t seem as dysfunctional.

            Most markets still end with people spending their own money to buy stuff they will personally use. They will know immediately if they are being ripped off at the order-of-magnitude level, and they won’t pay. Prescription drugs are usually prescribed by doctors, paid for by insurance companies, and consumed by patients, a decoupling that leaves nobody in a position to understand whether the deal is at all fair. Well, except maybe the seller.

            If the rare patient who pays cash for their own meds decides to not pay, say by buying mail order from an Indian pharmacy instead, who cares? There aren’t enough of them to matter.

          • So a monolithic public healthcare system would be better coupled?

      • scav says:

        You don’t need to go full Cuba. Look at Scotland or the nordic countries.

    • Tracy W says:

      EMH is about stock markets. It came from empirical evidence about stock market prices and aimed to explain that evidence. It’s not about retail prices.

      • gwern says:

        Might be thinking instead of the law of one price, which is important for other kinds of efficiency. Although there it’s obvious to see why it might not hold on a global scale: Customs and laws differ tremendously from country to country, which is why a pack of modafinil might cost you $3 in an Indian pharmacy, and $80 in the USA when ordering from the greymarket. The retailer to retailer differences also look like it’s just exploiting boundedly rational customers…

    • mulp says:

      “So the takeaway is that the efficient market hypothesis does not apply to health insurance?”

      As the author notes, the wildly varying drug prices for the same thing occur when you are paying cash out of pocket.

      If it were simply the existence of insurance, the same car should change wildly in costs based on where you buy it or who takes over to run the same company making the same cars because almost all cars get covered by car insurance that pays for fixing or replacing them.

    • TrivialGravitas says:

      While I agree with that statement, Health insurance is a different problem than the regulatory barriers Scott is talking about. The incentives to do price comparisons are either nonexistent, or drastically weakened, I think I pay 5$ less for a generic at Costco for example, not worth the time and money to go to Costco unless I already have plans to do that, even eliminating the copay would . It’s entirely possible that the modofinilcat drugs are the exact same FDA approved pill (I looked up their supplier and they sell a lot of stuff in the US conventionally) but with less price gouging on the part of modfinilcat than the pharmacists because the pharmacists, even Costco, know they can price gouge the insurance companies and the consumer won’t try very hard to price shop or do without.

  3. bartlebyshop says:

    All this and no mention of RiteAid diluting the Concerta generic? Maybe that’s why their citalopram is cheaper.

  4. Douglas Knight says:

    But according to Nootriment, a month’s supply of modafinil at real bricks-and-mortar pharmacies costs anywhere from $1223.99 (RiteAid) to $1490.84 (WalMart).

    That is not what it says. It says that brand-name Provigil costs that much. But scroll down farther and it puts the price of generic modafinil at $374-590 ($469-880 for 200mg). That still might be too expensive for the insurance company you talked to, but they were wrong to claim that it cost $1200. The gap between $60 and $400 is probably US vs India. That’s partly the bioequivalence testing that gives the right to sell in America, but it’s probably also partly price discrimination, that the company with the right to sell in America is selling at different prices. But here are claims from 4/2013 and 4/2014 that generic modafinil was much cheaper at that time. Maybe the manufacturers discovered that they were alone and raised prices. Or maybe one of the reports is false.

    • Scott Alexander says:

      Thanks, fixed.

      • Phil says:

        do you have any opinion on the ethics of taking modafinil?

        especially in a competitive setting?

        how should one feel if they take modafinil and get a promotion over someone who didn’t take it?

        what if they take modafinil and then win a poker or chess tournament?

        • Mike H says:

          Naturalistic fallacy. Often what these types of competitions measure is innate ability of one type of another, even if that’s innate ability to like doing that thing and thus work harder at getting better at it.

          We compensate people that do better at things because that’s the only way to ensure that the people that are good at things do the best they can, which tends to be good for consumers.

          We look at the consequences for the individual and make moral judgements about what they do and don’t “deserve,” when really what we should be most worried about is “did they produce something for everyone else that wouldn’t otherwise be produced?”

          If that means some people take drugs that other people naturally have equivalents pumping through their veins, I don’t think we should view that as morally different unless that person agreed to not use such drugs.

          • Phil says:

            seems like that scenario has a really bleak consequentialist end game

            where one either takes performance enhancing drug or chooses not to participate in the competitive economy, which is increasingly expansive (especially depending on how seriously you take Tyler Cowen’s theories about the future)

          • RCF says:

            The two moral issues I have is:
            1. It might be that if everyone takes it, then they’re worse of than if no one takes it.
            2. If there’s a norm that people not take it, then someone who does take it has an unfair advantage.

          • Anonymous says:

            http://squid314.livejournal.com/331948.html

            “obligations are a demon that eats up all the free time and happy things in your life. If only a few people have modafinil, they have an extra weapon against the demon. If everyone has modafinil, expectations and competition increase and so the demon becomes stronger. A new equilibrium is established in which there’s more economic growth (so the rich get some more useless positional goods) but everyone gets four hours less sleep per night, plus they have to spend money on modafinil, plus the few people who can’t take modafinil for one reason or another are screwed.”

          • Jiro says:

            Someone pointed out in the replies to that that we already once had 60 hour weeks (where the extra hours came out of giving the workers less leisure time rather than less sleep). The same arguments which say that permitting modafinil would lead employers to expand the size of the week to 60 hours would imply that employers would already expand the size of the week to 60 hours (at least, whenever they are legally permitted to). Yet we don’t see employers expanding the week to 60 hours whenever they are legally permitted to.

          • Daniel Kendrick says:

            Moreover, it’s obvious that if you really think economic growth solely results in more “useless positional goods” being obtained by the “rich”, then we shouldn’t support anything that increases economic growth (if it comes at any cost whatsoever).

            If you reject that (frankly ridiculous) assumption, we could all be in a much better position if everyone took modafinil, working harder and better. The “effective altruists” among you ought to note that we could be producing a lot more bed nets if we had more economic growth!

          • Jiro says:

            Thinking about it a little further, I would think that the reason employers don’t already increase the work week to 60 hours is that people find the marginal value of hours 40-60 to be larger than that of hours 20-40. Since people find the marginal value of such hours higher, employers have to pay them more to buy the hours–enough more that it costs the employer less to hire a second person rather than pay the first person for the extra hours. The employer would only be able to do this if either the employee is so valuable that even the heightened salary is worth it for the employer (which covers cases such as highly-paid actors and CEOs having to work long hours) or if the employee is so cheap that the cost of the employee is dominated by fixed per-employee costs instead of by salary (which covers sweatshop workers).

            Presumably, people who take modafinil to gain extra hours of wakefulness will value the extra hours more than the existing hours, so modafinil will result in the same effect and will not expand the work week to 60 hours.

            Also note that the same reasoning which implies that employer demands will rise to fill the hours available would also imply that pay will decrease to the bare minimum to survive, and that doesn’t happen.

          • Phil says:

            @Anonymous

            thanks, I hadn’t seen that before, that’s pretty much exactly on point with my original query

            the first 2/3rd of that pinged enough of my thoughts that I had trouble not thinking “those are my thoughts, he just explains them more eloquently than I’m able to” (which I’m sure doesn’t give Scott nearly enough credit)

            the last 1/3 kind of reminded me of Louis CK’s bit:

            “The thing that I think it’s important to know if you have kids, especially teenagers, is that the people they meet that are going to offer them drugs are not bad people, they’re really cool people. The fiction that you tell kids that people that offer you drugs are evil is not a good fiction to tell them — because they’re going to be cool people who like them. That’s why drugs are so easy to fall into as a kid. Right away, “Well, my parents are liars because this person is cool. This person understands me better than they do.” That’s part of why people do drugs — it’s because they’re making a connection with people that they really feel strongly about.”

            http://www.npr.org/2015/04/28/402560343/louis-c-k-on-life-and-standup-i-live-in-service-for-my-kids

            —————

            which is ok

          • Daniel Kendrick says:

            @Jiro

            Of course!

            If everyone were on modafinil (or whatever hypothetical “miracle drug”), this might reduce to them the marginal value of leisure, since they would have so much more of it. As a result, they might work somewhat longer. But this is not necessarily so. If modafinil increased productivity while at work, the income effect of the resulting higher wages might encourage them to work less.

            None of this changes your basic analysis, which is spot-on. It is the market reason for overtime pay. The less leisure you have, the more valuable it is. You wouldn’t work 80 hours a week for only twice the salary you could make at 40 hours a week: that extra pay would be worth less because you’d have so much less time to enjoy it!

            The thing is, I think a lot of people, even in an educated audience like this, have in the back of their minds the idea that wages would immediately fall to subsistence if the government weren’t somehow propping them up. That is, obviously, completely false, and George Reisman has a good article, “Wages and the Irrelevance of Worker Need and Employer Greed”, carefully explaining why.

          • TrivialGravitas says:

            @Jiro: We actually pretty much do see that with salaried employees working a massive amount of unpaid overtime in the US (with hourly employees there is a legal barrier, its much cheaper to have 3 people with 40 hour shifts than two people with 40 hour shifts). Though I think that is an even stonger demonstration in favor of the stuff, we have the problem even without the pills.

          • Phil says:

            @Daniel Kendrick fwiw Lance Armstrong raised something on the order of 500 million dollars for cancer research that probably wouldn’t have gotten raised if he hadn’t doped to win his tour de frances

            http://www.forbes.com/sites/melaniehaiken/2012/10/17/lance-armstrong-is-still-a-cancer-hero/

            I’ll let someone smarter than me figure out how much of Lance Armstrong’s doping should be excused on altruism grounds

        • Ever An Anon says:

          Cheating is a problem because it sidesteps the purpose of the incentive structure. Cheating on a test means that you don’t actually have to learn the material, taking a shortcut in a marathon means that you don’t have to be the best distance runner, stuffing the ballot box means that you don’t have to be the most popular.

          But, unless you’re a pro athlete, doping that makes you better at your job is actually a good thing. You have won the raise or promotion because you put in more time and/or did better work. That was the whole point of the raises and promotions existing to begin with. It literally cannot be cheating.

          • Phil says:

            why do we decide classify certain things ‘cheating’ and other things not?

            do we really want to set up an incentive structure where everyone has to take medication to be economically viable?

          • Mary says:

            the problem is that doping may have detrimental side-effects, but if people do it, other people will be forced to do so just to keep up.

            Starve in your twenties or come down with cancer in your fourties — what an economy.

          • Dirdle says:

            @Mary: I think it’s trickier than that – I wouldn’t want to live in Everyone Takes Harmless Nootropics Capitalist Utopia, either. Even if they actually were harmless, not just not-yet-known-to-be-harmful. It seems wrong on a level beyond the possible side-effects.

            If you cut the hypothetical right down to “it really is just a perfect wonder-drug that improves productivity without affecting any other brain function, and the implementation will carefully fence off any slopes into bio-Em nightmare-fuel territory, and …” it still seems just a little too close to admitting that humans exist for the sake of the economy rather than the other way around. But at that impossible level, it would quite probably be the right choice overall.

          • Phil says:

            @dirdle

            yeah, I think that’s interesting
            point
            even if side effects are “safe, but turns you into a workaholic who isn’t as good at smelling the roses and enjoying spending time with your family”

            I think is worth doing the ethical calculus on what that looks like

            =================

          • Slander says:

            Yeah, it already sucks that the 2015 incentive structure forces me to cheat and buy contact lenses to unnaturally enhance my eyesight, coffee to unnaturally wake up before 11 AM, and vaccines to unnaturally resist polio crippling my legs if I want to stay economically viable.

          • youzicha says:

            I don’t think detrimental side effects is “the” problem with doping. Sports often already have detrimental side effects (Muhammad Ali!) which are worse than what you’d get from anabolic steroids or whatever.

            And while I am sympathetic to the concern that economic competition make us waste our lives just to keep up, and that we need some kind of laws to prevent that, nootropics seem like the wrong end to start. I guess the most popular illegal drugs are amphetamine and modafinil, which help you concentrate and feel awake. Work keeps me from many fun things, but being distracted and sleepy are not among them.

            Rather than restricting nootropics, it seems to me that enforcing an 8-hour working day would be vastly more effective in making “the economy exist for people and not people for the economy”.

          • One problem with this discussion is that it implicitly assumes that market competition means the second best producer gets nothing, that if I improve my ability a little you have to match it or lose your job. That fits the metaphor of competition to a race or a football game, but it’s a misleading metaphor.

            If drug use makes me ten percent more productive than someone who doesn’t use the drug, the result isn’t that he loses his job, it’s that I get paid about ten percent more than he does. If that isn’t obvious from the economics, consider that even without drug use people vary a lot in ability and we don’t observe that the bottom 90% can’t get jobs.

            So I get to decide whether the extra 10% of income is or is not worth my estimate of any negative side effects from the drugs.

          • Phil says:

            @David Friedman

            I don’t think 10% just means 10% more compensation is the right way to look at that

            first lots of industries are fairly winner take all where 10% better is the difference between highly compensated professional and not professionally viable

            even in industries that aren’t winner take all, 10 people taking modifinal who are 10% more productive means there 1 less person that needs to be employed for fulfill the total market demand for whatever that output is

          • RCF says:

            If the incentive structure isn’t directly measuring productivity, but is measuring some metric that, in the absence of drugs, is a reasonable approximation of productivity, then using a drug could be cheating.

            @Dirdle
            “It still seems just a little too close to admitting that humans exist for the sake of the economy rather than the other way around.”

            “The economy” is simply the means by which humans provide value to other humans. Humans are the economy, and the economy is humans.

            @David Friedman
            However, if one believes in a Malthusian-type view of the world, then raising productivity by 10% will increase the resources needed to survive by 10%.

            I don’t think 10% just means 10% more compensation is the right way to look at that

            @Phil
            “first lots of industries are fairly winner take all where 10% better is the difference between highly compensated professional and not professionally viable”

            One could respond to that by saying that someone can go into another industry.

            “10 people taking modifinal who are 10% more productive means there 1 less person that needs to be employed for fulfill the total market demand for whatever that output is”

            Apparently, you are one of those people who consider employment to be a terminal value, rather than instrumental to the goal of acquiring resources.

          • Jiro says:

            If you cut the hypothetical right down to “it really is just a perfect wonder-drug that improves productivity … it still seems just a little too close to admitting that humans exist for the sake of the economy rather than the other way around.

            Can’t the same thing be said for utilitarianism? You have to give as much as you’re financially and psychologically able to give. If there was a drug you could take which would remove your psychological need for leisure, you would be obliged under utilitarianism to take it so you could donate more money while still being psychologically healthy. For that matter, the same should go for modafinil itself: if you can take it safely (including safely on a psychological level), gain four hours, and use those hours to make money to donate, aren’t you then morally obliged to do so?

          • jaimeastorga2000 says:

            Apparently, you are one of those people who consider employment to be a terminal value, rather than instrumental to the goal of acquiring resources.

            Unless and until a country implements a universal basic income guarantee (and perhaps not even then) it is ridiculous to pretend that “number of jobs” is not an extremely important metric to optimize for.

          • RCF says:

            Number of jobs can be an indicator, but optimizing specifically for it is a stupid thing to do. Optimizing for number of jobs means hiring people regardless of whether what they’re doing is worth the money. And the “Unless and until a country implements a universal basic income guarantee” qualifier doesn’t make sense. If we’re optimizing the number of jobs, then we’re working towards a basic income guarantee. Albeit a rather inefficient version. If you want to give people money, give them people money.

          • Dirdle says:

            “The economy” is simply the means by which humans provide value to other humans. Humans are the economy, and the economy is humans.

            Entirely correct, thank-you, but I have to ask – what then? When a physicist says “the order parameter field controls the behaviour of the electrons below the critical temperature” saying “but there isn’t any field! It’s just electrons interacting with each other!” would get you a funny look at best. If being part of a superfluid had a moral impact on electrons and I cared about electron welfare, I would talk about how the order parameter should exist for the electrons rather than the other way around. You can’t make the superconductivity go away by only looking at the electron-level interactions, you can only make it harder to see.

          • emblem14 says:

            Maybe not “cheating” per se, but certainly dishonest. How many people go around bragging about being artificially enhanced? #1, broadcasting the secret to your competitive edge undermines your advantage and #2, it’s an admission that your current level of performance is unattainable without special assistance.

            We already have a society-wide experiment running for decades concerning how cognitive enhancers change the dynamic of work expectations and labor market competition – called caffeine.

            There are millions of people dependent on high levels of caffeine to perform at what they (and their employers) consider to be their “normal” capacity. So many in fact, that caffeine users generally set the baseline standards for aggregate performance in any field of employment.

            What if you’re someone who has a caffeine intolerance for some reason? Well, you better hope you find an alternative or have some other compensatory factor (genetics, more sleep than average) to keep from operating at a handicap.

            Since workaholics are more likely to be successful and rise to the top of their professional hierarchies, they, having earned the moral badge of success, set the behavioral norms and ideals for everyone else. In an economy where the path to life-altering success feels more and more like an top-tier college admissions funnel, the pressure to adopt the behaviors of the most productive members of the workforce become prerequisite for effective competition.

            It’s one thing when all this involved was getting educated and being industrious, diligent and persistent – yknow, good ol’ character cultivation.

            But doping, and at some point down the line, other forms of permanent augmentation, imbue benefits that significantly widen the capacity gap between those with and those without. Disparities in access and affordability create new channels of widening social inequality. I think a lot of posters here have heard of/played a game called “Deus ex”?

            Point being, just as the larger question is raised in those games, human capacity enhancement, depending wholly on how it’s distributed among the population, will either help humankind as a whole accelerate a better future for ourselves or will be yet another weaselly move on the part of the elite to further separate themselves from the pack.

  5. Professor Frink says:

    I should note that the generics market works very well for relatively common conditions.

    The biggest problem is orphan drugs (going back to the orphan drug act of 83), treatments that work very well for very rare conditions. It’s hard to make a profit from these, and so regulations are created to encourage companies to actually make the damn things. Then someone games the regulation, so the regulation changes. But it’s a moving target,etc.

    The obvious solution is to use some of the many, many unemployed biochem phds to produce them in a tax-payer funded non-profit lab instead of letting grifters skim rent off the regulations. But that is communism apparently so we’ll keep chasing market solutions that no one really think can work.

    • Mike in Boston says:

      the generics market works very well for relatively common conditions

      If that’s really the case, I would love for someone to explain the story with acyclovir cream, the best treatment for oral herpes aka cold sores, which an estimated 50 to 80 percent of the U.S. population get.
      I got a prescription for it and went to the local CVS to have it filled. It would have cost me US$380 for a small tube. The next month I was in Taiwan and bought a larger tube over the counter for about six bucks.

      • Professor Frink says:

        Generic acyclovir costs $25 at CVS. Were you prescribed the brand name?

        • Deiseach says:

          What the hell? What size of tube was that? That price converts to €340! Yesterday I bought a 2g tube of Zovirax (manufactured by GSK so not the generic) in Tesco which cost me something under €8 and I thought that was iniquitous to pay, but apparently if I were American I’d be even worse off.

          Unless this was for a bucket full of the stuff, I have to say they saw you coming!

        • Mike in Boston says:

          No, the brand name Zovirax cream was an even more obscene figure, something over $500. The $380 was for the generic.

          Where did you get the $25 figure? Did my CVS just screw up? Is there some price list I can quote to tell them that generic acyclovir cream is supposed to cost $25? (Tablets, by contrast, are indeed cheap.) I admit I didn’t pursue this further because I knew I would soon be in Taiwan where I could get the stuff through a pleasant interaction with the pharmacy rather than a confrontational one.

        • Fnord says:

          GoodRx appears to find prices in about the same range (the best deals are cheaper, but still in the hundreds). But only for the ointment. All the other formulations are indeed ~$25 for the generic. What’s going on there?

      • Deiseach says:

        Okay, perhaps I am wildly mistaken here, but the brand-name Zovirax – if I’m correctly reading this – costs something like $287 for 2g tube (I’m calculating that from the price for 5g quoted which is $719.54 which cannot be correct).

        They do say the generic creams are much cheaper and they appear to be, but still – the brand-name is prescription-only and if that price is right, which I can’t believe, then a tube that cost me something like €8/$9, brand-name, same strength, made by GSK, no prescription, in a supermarket costs €257/$287 from a pharmacy because it’s brand-name and needs a prescription????

        Somebody tell me I’m wrong. That is nuts and I must be making a stupid mistake here.

    • LHN says:

      If making drugs cheaply in a taxpayer-funded nonprofit lab is a straightforward solution, why can’t we buy them from a one in a country less averse to such measures?

      That I don’t know of any suggests that US focus on market solutions isn’t the primary problem. But it may be that there are big state-funded not-for-profit drug factories in e.g., Europe, or Canada that I’m unaware of. If so, maybe we should try making them an offer to up production.

      • Shieldfoss says:

        “Why can’t we buy them from a one in a country less averse to such measures?”

        You can if you go there. If you want it here, you need to smuggle it over the border.

        • LHN says:

          Which countries have those state-supported nonprofits to buy from?

          • Shieldfoss says:

            Sorry, didn’t catch that it was important to you that they be state-sponsored non-profit, I thought you just wanted cheap non-FDA meds to solve the problem of expensive FDA meds. In which case, “India.” Also other places.

          • LHN says:

            That state-funded nonprofit was what Professor Frink was proposing, and suggesting we weren’t doing because “that is communism”. If it’s a good idea independent of our biases, then presumably countries with different ideological inclinations than ours should be able to take advantage of it.

            Buying price-controlled drugs from other markets is basically equivalent to imposing price controls ourselves. If it’s a good idea then we might as well cut out the middleman. But I’m inclined to agree with those who think that would tend to badly tank drug development incentives. Everyone else in the world may be able to free ride on us, but we can’t by definition.

          • brad says:

            You think price controlling generics (i.e. those drugs that have been approved for sale for more than 20 years) would badly tank drug development incentives? Or only price controlling new drugs?

          • LHN says:

            Price controlling generics would just impact supply of those generics and their potential competitors. Which evidently is already sufficiently a problem in some cases that the government feels the need to subsidize orphan drugs by offering to restore monopoly pricing.

      • naath says:

        Because “free trade” is a lie.

      • TrivialGravitas says:

        In countries that aren’t averse to such solutions, the prices are lower. The problem isn’t so much that market solutions are bad so much that they are ‘good enough’. If a government funded lab is a politically viable option for undercutting private industry private industry will figure out a way to drop prices far enough the lab never gets set up.

    • Tracy W says:

      The obvious solution is to use some of the many, many unemployed biochem phds to produce them in a tax-payer funded non-profit lab instead of letting grifters skim rent off the regulations.

      Yes, because the moment you call something a non-profit human selfishness promptly disappears and no grifter would ever dream of trying to defraud The Government.

      • Gbdub says:

        Exactly. The “taxpayer funded nonprofit” lab will inevitably be awarded on a “cost-plus” basis to contractors in the home district of the most influential senator on the relevant committee, staffed exclusively by wildly overpaid members of the trade union that donated the most to that senator’s last campaign.

        Honestly one of my biggest pet peeves with the economic understanding of the average blue-tribers is that they tend to significantly overestimate the cost of profit while wildly underestimating the cost of logrolling, graft, regulatory capture, and bureaucratic waste.

        • nil says:

          I work in a nonprofit. As compared to a private equivelant, there’s a ton of really unnecessary waste. The vast majority of that waste is in producing and maintaining reams of paperwork to demonstrate the fact that we aren’t wasting money to our funding sources.

          I’m still figuring out what to do with that fact.

          • gbdub says:

            The worst part is all that paperwork doesn’t even seem to curb the people who actually do abuse the non-profit setup, like the NFL, the Clinton Foundation, or the Waltons. Fraud prevented – enforcement costs probably doesn’t even break even.

    • Shieldfoss says:

      “The obvious solution is to use some of the many, many unemployed biochem phds to produce them in a tax-payer funded non-profit lab instead of letting grifters skim rent off the regulations. But that is communism apparently so we’ll keep chasing market solutions that no one really think can work.”

      Step 1: Break the free market by introducing regulation that make it difficult to profit on regulated orphan drugs while banning unregulated labs

      Step 2: Blame the free market for the few regulated labs skimming rent off their de-facto state-enforced monopoly

      Step 3: …solve this by allowing the government to run unregulated labs

      Could we maybe just cut steps 1, 2 and 3 and just not have the regulation in the first place? Or are you under the impression that a government-run unregulated lab (cannot go bankrupt, impossible to succesfully sue for bad products) will be better run than private unregulated labs?

      • Alphaceph says:

        Yeah but REMEMBER THALIDOMIDE

        Seriously I think regulations need to be subjected to cost-benefit analysis, with other options on the table such as a regulatory agency having the power to force labels to be red and say “warning: not officially certified safe”

        • Thaliomide is the 9/11 of drug regulation.

        • RCF says:

          Oh, goodie. Now we have an entire department dedicated to producing paperwork evaluating the costs and benefits of each regulation.

          • Alphaceph says:

            We already have one, it’s called politics. The problem is that politics doesn’t have institutions or traditions of asking about the costs of regulations, systematically. Libertarians and left-wingers sometimes get into arguments about “cutting red tape”, but these arguments don’t look like actual cost/benefit analysis, they look like a big political tug-of-war.

            David Nutt tried to be rational about this, but it got him fired.

      • Professor Frink says:

        You have no idea what you are talking about, and I seriously doubt you’ve spent any time actually studying the actual market involved. But hey, free markets always work, right? It’s just those idiots in the government are always trying to regulate.

        Orphan drugs aren’t profitable. Too few people have the disease to make it worth the cost of production. Even unregulated labs aren’t going to chase that segment of the market, there aren’t enough customers!

        The point of the orphan drug and rare disease laws and regulations is to encourage drug manufacturers by increasing patent exclusivity time and providing tax incentives. You make it more profitable so people actually produce these drugs (which basically offloads the inflated costs on insurance companies). The problem, as I said above, is that there are obvious ways for companies to game such a system.

        Consider the case of scorpion anti-venom. The entire supply for Arizona was made for free by Marilyn Bloom, an Arizona State professor who retired in the late 90s. As a result, a few years later the entire state of Arizona had no scorpion antivenom. There are worldwide shortages of antivenom of all kinds, because it’s expensive as hell to make, it’s rarely used, and even stored properly the shelf-life is only a few years.

        We can go the simple route, and directly manufacture the unprofitable drugs, or we can hammer on the market trying to make these drugs profitable. And then hammer on the market again when someone starts gaming the regulations, and then keep moving them around,etc.

        • Alphaceph says:

          > Orphan drugs aren’t profitable. Too few people have the disease

          This seems like a somewhat self-contradictory statement when the argument is about a company charging loads of money for a drug.

          Profitable at what price? Presumably at 7000 a pill or whatever it’s profitable, otherwise why is mr asshole-face bothering to do this?

          > We can go the simple route, and directly manufacture the unprofitable drugs

          It’s not the manufacture that’s the problem. If a drug is useful to a small group of people, and they’re willing to pay a price that’s above the minimum cost of manufacture, then it’s no different to any other specialist product, of which there are millions. The only way the government should intervene is if a producer gets total monopoly power over a drug, in which case price controls pending a competitor appearing seem OK.

          • gbdub says:

            I think the point is that, for orphan drugs, monopolies are pretty much guaranteed because there’s not enough market to support multiple competitors.

            Of course, the real question is how much of the cost of entry is really necessary, since most of it is imposed by the government regulators in the first place. If it didn’t cost millions to startup production of a drug, a “boutique” producer that does nothing but produce limited runs of generic meds for uncommon diseases could likely be quite profitable even at reasonable drug costs.

        • Shieldfoss says:

          I have no idea? What bloody industry do you think I work in?

          Orphan drugs aren’t profitable under the current regulatory system because it increases production costs by two orders of magnitude. You could churn them out in an unregulated factory for nothing.

          • Aaron says:

            The unregulated lab could then seek some kind of independent certification from a private lab that specializes in testing drug quality. The unregulated lab could also purchase some form of liability insurance (made cheaper by the independent certification). This could solve quality/safety issue.

      • vV_Vv says:

        Step 3: …solve this by allowing the government to run unregulated labs

        I doubt “Professor Frink” was proposing that the government factories should be unregulated.

        Could we maybe just cut steps 1, 2 and 3 and just not have the regulation in the first place?

        I see that is tempting to put on your libertarian hat and cry “REGULATION BAD! GOVERNMENT BAD!”, but what would an unregulated market entail?

        If everybody is allowed to sell sugar pills calling them daraprim or modafinil, then the information asymmetry will kill the generics business by turning it into a “lemon market”.

        If customers are unsure that a generic medication was a properly manufactured drug or a sugar pill (or worse, a dangerous badly manufactured drug), then only the poorest and most desperate ones will buy it if the price is sufficiently low. This reduces the profits for the sellers, putting out of business the honest and high quality manufacturers while still allowing a margin for the dishonest and shoddy ones that incur in lower costs. This in turn makes customers even less likely to buy generic medications, and thus puts even more proper manufacturer out of business, creating a feedback loop that eventually results in generic drugs being very cheap and very ineffective and unsafe crap.

        • Shieldfoss says:

          They may not have wanted the government lab unregulated, but in that case the cost will still be high.

          RE: Lemon Market – I am not actually in favor of a completely deregulated pharmaceutical industry – I have seen the sub-standard work people will do in unregulated factories. I’m just annoyed that people suggest regulations and then don’t like the obvious results of those regulations.

        • DensityDuck says:

          @vV_Vv:

          “I doubt “Professor Frink” was proposing that the government factories should be unregulated.”

          The reason we’re bringing it up is that what the FDA wants is a regulated process. Frink seems to have this idea that it’s something you get for free; in fact, the cost of getting that process developed (and reviewed and approved) is why the orphan drug problem is a problem at all.

          “Oh, but it’s the FDA, they can get all that process for free” dude, you still have to pay people for the time it takes. And if you’re thinking that you’ll get a good process by putting a bunch of fresh-out-of-college chemists on the problem, then, um, dude, well, um.

    • Kenny says:

      Why not just setup regular non-profit labs? What’s the advantage of funding them with taxes or having the government run them?

      It seems like most of these small-market drugs could be setup for manufacturing or distribution by a single non-profit for a relatively small and mostly one-time expense.

      I’d be worried that government-run labs would be harder to fix in the even of institutional or organizational failure.

    • RCF says:

      The interesting thing is that patents are so taken for granted that they aren’t even thought of as government hand-outs. Drugs being developed by government-run labs is communism, but a government-enforced monopoly is a market solution.

      • That was part of the 19th c. argument over IP, with one side saying it was a violation of the free market, the other an implementation of the market. It’s still the case, in my experience, that some libertarians regard IP as the most justifiable form of property, some as the least.

  6. Douglas Knight says:

    When a 32 year old hedge-fundie with an annoying smirk and a tendency to justify himself using rap lyrics jacks up the price of a drug a few orders of magnitude, everybody loses their mind; when the FDA and some of the largest pharmaceutical companies in the world collaborate to do the same, it passes with barely a peep.

    Yes, there is something different in the coverage. But while Turing is small, but your two examples are not very big (URL sold for $800 million). I suspect that there is an important phenomenon pointing in exactly the opposite direction. I suspect that a lot of what is going on with Turing is that both it and the very big ($100 billion) pharma company it bought the drug from agree that only a small company should risk the backlash from this strategy. Selling off the drug isolates the backlash from all the other drugs owned by the big company.

  7. Pku says:

    Has anyone here tried both wellbutrin and modafinil? I’m thinking about trying modafinil, but it lists anxiety as a potential side-effect, and I had to get off wellbutrin because of the anxiety issues.
    (Also, has anyone here tried modafinilcat and can say if it worked out?)

    • nydwracu says:

      I’ve taken modafinil only twice in my life, but I had a major reduction in anxiety.

      (But I think the anxiety was driven by my general fatigue/low energy, which modafinil obviously completely removes but which I don’t know what else to do about. I’d get more modafinil but I’d first have to remove my aversion to ordering things online.)

    • Kavec says:

      I can’t reliably comment on the anxiety (mine goes from rarer than a Stalin impersonator at an Elvis memorial event to… about the same), but I use modafinilcat for a big order every few months and they are fantastic. Worst experience is having to confirm with a friendly banking robot that I am not being defrauded.

      They offer a sampler pack; I personally found that armodafinil has a lot fewer unwanted side effects (i.e. light jitters on normal modafinil) and for that reason is harder/more subtle to detect that it’s working. Shipping seems to take about or less than a week, modacat provides excellent package tracking, and the entire ordering process is a breeze. Plus, if you keep your old order number around, it’s 10% off if you like the stuff and wish to reorder.

      (Edit from a post-nydwracu reference frame: And, another notable effect is that both forms completely eliminate that ol’ effervescent miasma of “oh god I’m terrible, everything is terrible, it’s all too big and never going to work, and why do I even bother not eating ice cream and crying myself to sleep 23/7” )

    • Protagoras says:

      I’ve tried both, and I had a bad reaction to wellbutrin myself. I didn’t find the modafinil especially helpful, but I didn’t have any significant adverse reactions either. Which doesn’t guarantee you won’t, of course, but I can say that a bad reaction to wellbutrin doesn’t guarantee a bad reaction to modafinil.

    • PDV says:

      Relatedly: Mentioned I’d probably be trying modafinil sometime soon to my therapist, and she hadn’t heard of it but had a big list of extreme side effects (serious skin conditions were mentioned). My guess is that these are the weird anything-that-happens-while-the-trial-runs counts, but I don’t actually know. Is this a real thing, and has Scott (or possibly Gwern) gone over it at some point?

    • Eric H. says:

      I can answer this one, admittedly with a sample size of 1, so remember “Your mileage may vary.” as they say.

      I have been on Wellbutrin since 2011. I have long-term depression, and have been on and off a number of medications for it over the last 25 years. I have stayed on the Wellbutrin because it manages my depression well, doesn’t have any notable side effects for me, and hasn’t suddenly stopped working. The latter seems to be a common problem with some of the SSRI’s (which Wellbutrin is not).

      I have been taking Nuvigil (armodafinil) for a couple years, not for its nootropic effects, but because, thanks to a sleep disorder and a completely bizarre work schedule, I had become narcoleptic. If I am not actively working on something, I can literally fall asleep, standing up, in a noisy room with 1,000 people in it. This is the main reason modafinil/armodafinil is officially prescribed, and it works quite well for that. Once again, I haven’t had any significant side-effects from it, or from the combination with Wellbutrin, but I should also note that I haven’t noticed any cognitive benefits from either drug, or the combination. They give me what I think is a normal level of energy and thought clarity, which I wouldn’t have otherwise. If you’re starting from a different baseline, the results may be very different (in a good or bad way).

      Since this is a side-issue in an article about generic drugs, it’s worth mentioning that Nuvigil is a classic drug company boondoggle. Modafinil is racemic; that is, it is a mixture of left and right-handed molecules with slightly different pharmacology. When the patent on Provigil was about to expire, Cephalon determined (to the satisfaction of the FDA) that the right-handed molecule was more effective, and separated it out as a new product, Nuvigil. (Armodafinil = r-modafinil, get it?) Nuvigil is now the recommended treatment for narcolepsy and shift-work disorder, in place of Provigil (modafinil). A Nuvigil prescription retails for $703 for 30 tablets; I am lucky that my insurance covers it (and Cephalon is kind enough to give me a coupon that knocks $25 off the co-pay, so I get it for $5).

      This is, I imagine, the reason that the drug companies can charge these ridiculous prices for their products — most of the consumers are not paying for them directly. I’m pretty sure almost no one takes “real” Nuvigil unless their insurance covers it, and the same is true for many other expensive drugs. Who is paying for my $5 Nuvigil? Probably you are, via higher insurance premiums.

  8. stargirl says:

    A warning:

    Modafinil in moderately high doses gave me rather noticeable muscle spasms. The spasms went away once I stopped taking modafinil.

  9. 27chaos says:

    After a bit of research, other countries seem to use price controls to deal with the price of prescription drugs. That makes me uneasy, but maybe in a case as extreme as this it is warranted?

    • John Schilling says:

      You can’t realistically set up price controls in just one case, and price controls broadly applied in the United States would essentially end new drug development. Everywhere, not just in the United States.

      Cheaper to pay off Turing than to let that camel’s nose into the tent.

      • Saul Degraw says:

        Would it really? How much drug development money already comes from the U.S. government in terms of N.I.H and other grants to universities and other places? How about Roche and Bayer? They survive European regulation while still being pharmaceutical giants. IIRC Merina and Skylar were developed in Europe.

        • LHN says:

          The company’s location isn’t really relevant. European drug companies still sell into the US market.

        • Tracy W says:

          As I understand it the big costs in drug development are not the actual lab work but the big clinical trials which check for rare side effects.

        • Imagine God came down and said “here, take this molecule. It’ll cure all cancers”. It’d still cost you about 300 million USD to get an FDA approval.

          The NIH does a bit worse than God and says “here, take these 100 molecules. One of them will work” so it costs you 2 billion to sift through the 99 that don’t work and get FDA approval on the 100th.

          • Adam Casey says:

            >it costs you 2 billion to sift through the 99 that don’t work and get FDA approval on the 100th.

            Or more realistically to get FDA approval on 20 of them, and if you’re lucky the right one is one of those 20 =p

          • CatCube says:

            Actually, I don’t think it even gives you 100 molecules. It gives you 100 targets that a potential molecule might be able to cure the disease by interfacing with. It’s on the drug company to find the molecules that will fit (without hitting anything else) and then go forward as you’ve said.

          • Edward Scizorhands says:

            And then when you find the 1 molecule out of 100 that works, people complain that it was the NIH that *really* found it, so you didn’t do any *real* work.

          • Murphy says:

            @Scott

            Re: biodjinnetics, I’m pretty sure that I could walk down the hallway and find a couple of junior-ish people willing to try a few tests based on a hunch and guesses and some senior people who could then be persuaded to salivate and push things upwards based on some basic tests if it was the real deal.

            Presuming it doesn’t also kill the patients it would also likely be fast-tracked if so dramatically effective. Not perfect but not everything is hopeless.

          • RCF says:

            Re: biodjinnetics

            Isn’t “Not three?” a question?

            Also, if people can get funding for drugs with small effect sizes, it should be possible to get funding for something that works on 100% of cancers. Though it might take a while to move through the chain of gatekeepers.

            Another tactic would be selling life insurance policies to cancer patients, then giving them the drug. You’re not selling the drug to them for $100,000, you’re selling a life insurance policy to them for $100,000, and giving the drug for free.

        • John Schilling says:

          How much drug development money already comes from the U.S. government in terms of N.I.H and other grants to universities and other places?

          To the first order, none. Government and academic labs develop drug targets; interesting bits of biochemistry where if a molecule were found to bind to X, it would theoretically have effect Y and interrupt the progress of disease Z.

          Then someone has to find the molecule that binds to X. Not the one that also turns the patient plaid, the other one. No the other other one. And then reformulate it so that it doesn’t have to be given intravenously every two hours. Then, and only then, actually verify the theory that says that binding to X cures Z. Nine times out of ten, one of these steps turns out to be absolutely impossible. The tenth time, you have to prove you did everything right, with hundred-megabuck clinical trials.

          And as Scizorhands notes, when you do get everything right, the usual suspects say that the NIH cured Z and you’re just raking in obscene unearned profits.

          Academic labs don’t have the resources to do this sort of thing. Government labs could in principle do it, and have in the past – Penicillin, as a drug you could give humans rather than just a laboratory germicide, came out of a crash government program to give the U.S. Army a decent antibiotic going into World War II. But I am skeptical that scientific megaprojects run by the government are going to turn out cheaper than free-market solutions or even crony-capitalist solutions.

      • Deiseach says:

        But Turing did nothing to research and develop the drug; if I’m following the story correctly, they are the third link in the chain of buying the US rights from GSK, every company in between jacking up the price before selling it on.

        Turing is only the most outrageous increase. It costs them nothing like the price charged to manufacture the drug; they’re not paying off research costs or funding other drug development; it’s the guy scenting an opportunity for pure profit by taking a small market drug that’s been around for ages, is safer (allegedly) than alternative treatments, won’t make enough to repay the big company that created it, and shooting the price as high as he can get away with (and apparently he can get away with a lot).

        This is pure profiteering and nothing to do with pharmaceutical research and development, and he should be smacked on the nose for it.

        • A Definite Beta Guy says:

          This is pure profiteering and nothing to do with pharmaceutical research and development, and he should be smacked on the nose for it.

          No disagreement, but that’s a policy God can make, not elected law-makers. We need something more specific.

        • John Schilling says:

          Effective capitalism requires mechanisms by which investors can cash out at any stage, because most of them don’t have the patience to wait twenty years. The kids start college in ten, and Harvard doesn’t take IOUs. So any mechanism that says, “If you do the hard expensive research to develop a new drug, you can collect monopolistic profits for the next decade or so”, has to include “…or sell to someone else the rights to collect the profits”.

          Which implicitly means, “If you find someone willing to sell, you can buy the rights to collect monopoly profits from a drug without having to do any research”. Turing just found a real bargain in that respect, probably because the original owners didn’t see in the convoluted regulations the path that allowed them to still collect quasi-monopolistic profits. The story wouldn’t fundamentally change if the original owners of the license, the ones who did do the original research back in the day, were the ones to see the opportunity for a 5500% price increase.

          And adding a law that says “you can’t do this or we’ll smack you on the nose”, just makes the regulatory environment more complex. The pharmaceutical industry can afford more and better lawyers looking for convoluted paths to obscene unearned profits in that environment, than the government can afford to pre-emptively block all those paths. Particularly because, Regulatory Capture 101, lots of the government’s lawyers will be de facto working for the pharmaceutical industry.

          • brad says:

            The decade or so ended before most of us were born. I doubt the projections in the go/no go meeting 60 years ago at Burroughs Wellcome included the net present value of the sale to Turing Pharmaceutical.

            This reminds me of the argument for perpetual copyright, as if anyone is going to make a movie if they can have exclusivity for 100 years but not if it is only 75 years.

          • Corwin says:

            A movie that doesn’t make back its cost at least twice over the opening weekend is considered a failure.

          • RCF says:

            What even worse is that every time they extend the copyright, it applies to works that were made before the extension was passed, so it’s not like the people who made those works are incentivized by the extension; their heirs are simply getting free money. Plus, since every few decades there’s an extension of a few decades, we may never have anything go into the public domain again.

        • Doctor Mist says:

          We’re all agreed that Shkreli is acting like an ass, but I wonder if we are edging into “proving too much”.

          Was CorePharm (the company he bought the rights from) about to discontinue the drug? Circumstances suggest so, but I don’t know. If so, imagine somebody more attractive buying the rights. He looks at the supply/demand curve and says, just as one would for a car or a vacuum cleaner, something like:

          “Hmm…
          At $850 I can sell 800, = $680,000.
          At $750 I can sell 1000, = $750,000.
          At $650 I can sell 1100, = $715,000.
          At $550 I can sell 1200, = $660,000.
          Seems pretty clear.”

          If you like, suppose the buyer is an effective altruist who will use all his profits on bed nets. Is he profiteering? The folks who want the drug don’t care what he’s using the profits for.

          Maybe another way to ask my question is: Why was this opportunity even available? If Shkreli can make money selling the drug for $750, why on earth was CorePharma letting it go for $13, rather than, say, $14 or $20 or $100 or $200? If the answer is that they were true humanitarians and didn’t want to be profiteers, was it really better to give up on it entirely? Why are we mad at Shkreli rather than at CorePharma (aside from the fact that Shkreli acts like an ass)?

          Well, okay, Derek Lowe does sort of seem mad at CorePharma and GlaxoSmithKline (the original producer), too. Suppose CorePharma or GlaxoSmithKline had said, “Sorry, the bookkeeping for this little-used drug is killing us, we’re not making it any more.” People do without it, maybe dying, for twenty years. Some guy comes along and notices that there is some money to be made resurrecting it, so he tracks down who owns the rights and buys them, selling this previously unavailable drug at Market Price (i.e. the price that maximizes return). We are, by any rational measure, better off than if he hadn’t done so. Is he bad? If not, what exactly distinguishes him from Shkreli?

          It is really sad that somebody else didn’t decide to outbid Shkreli and then sell the drug for less than the market would bear. For that matter, they might still be able to do that — Shkreli might be delighted to make a quick 10% profit by flipping the rights; all we need is somebody who has a lot of money to invest and doesn’t care what rate of return they get from it. I wonder if there is anybody like that?

          • Jiro says:

            Selling the drug at hundreds of dollars only makes money because of government interference, namely, the requirement that competing versions are tested against your version (which you refuse to sell to them). Someone who does not do this government-mandated (and impossible) testing cannot make money by competing. If it wasn’t for this government requirement, competitors would force the price down so it was no longer hundreds of dollars.

  10. frank black says:

    “When a 32 year old hedge-fundie with an annoying smirk and a tendency to justify himself using rap lyrics jacks up the price of a drug a few orders of magnitude, everybody loses their mind; when the FDA and some of the largest pharmaceutical companies in the world collaborate to do the same, it passes with barely a peep.”

    This reminded me of the Joker in Batman

    • Anonymous says:

      It was almost certainly an intentional reference, based on the phrase “everybody loses their minds”.

  11. brad says:

    The ANDA is even worse than it sounds. It requires the second company to procure drugs from the first company to conduct the bioequivlence study. But under the pretext of complying with recent FDA regulations to encourage drug companies to prevent diversion, the first company can tightly control distribution to try to prevent the second company from getting any to test with. That’s exactly what Mr. Hedgie is try to do. The FTC considers that a violation of the anti-trust laws, and has filed an amicus brief to that effect, but doesn’t seem to think the tactic requires any particular pro-active effort to combat.

    Also, no reason to send away to bespoke chemical manufactures in China, you can order the drug from Canada for $6 a tablet. Not technically legal but in small numbers unlikely to be seized by customs. Which in turn points out one good solution to this mess — reciprocity with other developed world regulators, at least for generics.

    A more comprehensive solution is to publicly fund a generic manufacturer of last resort. Given that so much of the cost of these stunts (including related stunts with so-called orphan drugs) falls on medicare and medicaid, it would probably save money. And no one could accuse the government of stiffing the production of new drugs since it would only manufacturer drugs in the public domain.

  12. The Anonymouse says:

    So what you’re saying is that Shkreli’s actions have created… a toxoplasma of rage?

  13. zz says:

    This reminds me of a Breaking Bad fanfiction idea I once had, inspired by a friend who compared the war on drugs to anti-piracy efforts, which actively drive people to piracy. (Relevant xkcd)

    The basic idea is that Walter White branches out from being a meth kingpin and eventually delivers higher-quality prescription drugs than you would get at a pharmacy at a lower price, such that, regular, otherwise law-abiding citizens whose primary goal was to get their medication would buy from him instead of from whatever had FDA approval. In my head, he goes so far as to test prospective drugs, but requires preregristration and good statistics and stuff (this is an area I know less about) so that he is able to confidently sell working medicinal drugs that don’t yet have FDA approval, and might even be able to make the numbers make sense for drugs where there isn’t enough return to make sense to law-abiding pharmaceuticals. This testing for medicinal (and, I suppose, nootropic) drugs is heavily subsidized by profits from recreational drugs, which are sold in high quality with fact sheets containing information about side-effects and risk of dependency and stuff.

    If anyone wants to write this, please do; it’s not like I’m ever going to have the time or ability to write dialogue.

  14. Saul Degraw says:

    What is interesting to me is how this whole story ends up being an ideological Rorschach test.

    Almost everyone except the dude-bro CEO thinks or at least says/writes that they think that it is morally and ethically wrong to jack up the prices of cheap drugs on the most vulnerable and physically ill people in society.

    The issue becomes who gets the blame for the situation.

    Libertarian-leaning people seem to blame the entire situation on evil FDA regulations. James Person from the Moorfield Storey Institute wrote this on Huff Post:

    “It would appear the villain, at least in this case, is not the non-existent free market, but the controls imposed by the FDA granting a regional monopoly.”

    Meanwhile people on the left like me can equally say that the problem is continued Republican blocking of letting government agencies set and monitor the price of drugs and also note that most if not all other Western nations treat drugs like a regulated utility with strict price controls. In the U.S. we let drug companies themselves set the prices and this makes them high.

    The drug companies say that high prices are because of how expensive it is to market and research new drugs but a lot of this is already done with government money in one way or another. There is an implied threat that there will be no more new drugs if the U.S. institute utility pricing on the pharma industry. But the only way to test this is for the U.S. to institute price controls on pharma and see if there are new drugs or not. My guess is that there would still be new drugs coming to market.

    Semi-randomly and semi-OT, Martin Shkrelli is another example of why I don’t get twitter, instagram, etc. The guy is only three years my junior and he mainly tweets about spending 5 figures on rare bottles of wines, helicopter rides, and other conspicuous consumption choices. The dude might be operating in the world of the perfectly legal (if not morally defensible) but his brazen consumption bragging could not have helped his case. And I am not opposed to spending money on quality product or the profit motive.

    • Cliff says:

      Well should we institute the price controls based on your hunch and then 15 years later try to figure out how many life-saving blockbuster drugs were NOT developed because of artificial price controls imposed by the government?

      • Saul Degraw says:

        There seems to be an argument that the rest of the world can have a welfare state at the expense of the United States not having one. I am not sure that this is true.

        Capitalists being capitalists will find ways to develop products even in countries with strong price controls. Thalidomide and Acutane were both developed in Europe and both have horrible side-effects. FDA regulations stopped Tahlidomide from being approved for use in the United States and it seems to be credited to one pesky regulator who died recently. Accutane is available in generic form in the United States.

        I see no evidence to suggest that drug development would stop if the U.S. acted the same way as most, if not all other, Western Countries.

        What I see is the pharma industry and their spokespeople saying “Nice designer drugs we have here. Wouldn’t want anything bad to happen to them, would you?”

        • Douglas Knight says:

          FDA regulations stopped Tahlidomide from being approved for use in the United States and it seems to be credited to one pesky regulator who died recently.

          Regulator or regulations? They aren’t the same thing. The truth is that it was the person, not the rules that blocked it. 100% whim, with no explanation ever given.

        • Tom Scharf says:

          “I see no evidence to suggest that drug development would stop if the U.S. acted the same way as most, if not all other, Western Countries”

          Really?

          So if your engineers and scientists tell you they expect a drug development to have a 20% chance of success, and you estimate price controls will only allow you to make 200% return over the R&D, what would you decide to do?

          It is these lost opportunities, decisions to not investigate a drug where society loses. You would never find evidence of this after the fact either from your point of view.

          Artificial restraints on the market are rarely a good idea, but sometimes necessary.

          • There is some evidence.

            There’s an old Peltzman article on the effects of the Kefauver amendments to the Pure Food and Drug Act, which required a new drug to show not only that it was safe (already required) but that it was useful, which I think meant “better than what is already out there.” He concluded that that single change in the law cut the rate at which new chemical entities were introduced roughly in half while having no effect on the average quality, judged by several different measures.

          • grendelkhan says:

            That’s especially odd, considering that there are ways around the “better than what is already out there” thing. (There are more examples in Bad Pharma.)

    • Murphy says:

      It’s a pretty standard freedom vs assholery and exploitation situation.

      Legally you have the freedom to stand on a soapbox outside an orphanage singing “Where’s Your Mama Gone” all day but that would be an asshole thing to do and few people exercise their right to free speech in that manner.

      Legally drug companies in the US have the freedom to pull this kind of stunt but we can see from the fact that the company which previously owned the rights not doing so, not every executive acts like a sociopath and charging as much or more than the market will bear.

      Many countries deal with these problems by making the action illegal in both cases above due to the impact on others.

      The weird thing is that in the US there seems to be this belief that things are by default morally OK if someone is doing it to make money or that we should expect no better of corporations than to be exactly as evil as the absolute legal limits imposed upon them.

      One possibility for people who aren’t totally against the FDA’s existence might be for the FDA and some of the other large health systems around the world to have some kind of mutual accreditation for generic drugs. It both improves scale and makes it more likely that one of the more socialist systems will fund things if the total cost is too high.

      Simply having to prove bioequivalence isn’t a bad thing: historically there have been a lot of people killed by companies failing to check that what they were selling is bioequivilent or even simply not poison. Look at the Sulfanilamide Disaster for an example, 100 people, mostly children died because a company couldn’t be bothered checking if their ingredients were deadly to humans.

      http://www.fda.gov/aboutfda/whatwedo/history/productregulation/sulfanilamidedisaster/default.htm

      I can’t find figures for the cost of getting approval in the UK for generics but since the NHS eats the cost you can be damned sure that the moment it looks like it would be cheaper for them to run the tests themselves with some small manufacturer they can.

      • Nita says:

        there seems to be this belief that things are by default morally OK if someone is doing it to make money or that we should expect no better of corporations than to be exactly as evil as the absolute legal limits imposed upon them

        Exactly. People like Shkreli are the reason why so much regulation exists in the first place. Their determination to screw other people over to the maximum possible extent imposes both short-term costs on whoever ends up paying, and long-term costs on the whole society. “Haha, all pharma CEOs are assholes” is not the correct reaction.

    • Sastan says:

      Well, it depends on whether your fantasy system relies on all human beings to be perfect, compassionate and altruistic at all times, forever, or whether you deal with the real world in any form.

    • JBeshir says:

      It seems likely that they’re both valid observations of how the system works; competition of suppliers is made much less effective by the regulatory regime, and also the lack of monopsony means that the individual impracticality of negotiation under many circumstances and difficulty shopping around or simple failure to do so when they could, as well as insurers insulating most consumers from pricing differences, making the buyers very poor at negotiating. The former explains high prices well, but only the latter explains massive price variations within the US.

      What solution can deal with these things is tricky.

      European-style government-run healthcare seems to do better on both at the moment. The way it helps the latter problem is obvious, but on the libertarian’s problem, in government-run healthcare, a single entity both pays for drugs, sets drug regulations, and is screamed at by the public whenever anyone dies of a drug side effect, which creates a motivation to balance the amount of screaming they get with the extent to which they push up the prices they have to pay. In such a system, the government internalises the costs that result from its standards. With the current American system, since the people setting the standards for drugs aren’t the one’s buying them, the effect they have on cost when setting the standards is an externality they have no reason to care about.

      Internal politics and inappropriate levels of screaming make the tradeoffs European health systems strike still excessively cautious (possibly less excessively cautious?), but since they also pay the costs of that, it is left as just another thing like wild overinvestment in counterterrorism where the government overspends money from general taxation on a problem because the taxpayers want them to, rather than something which causes huge costs to people who get sick, especially uninsured ones, as a consequence of how people at large vote when it comes to healthcare.

      It seems like you should be able to do better than that, though, in particular retain the ability to have the market decide how much reward and how to distribute it to motivate drug research rather than a government agency, but it isn’t obvious how you’d bring it about. Price controls would probably do a little worse there than the fully government run system, because in the latter the government is at least on the hook for additional healthcare expenses incurred as a result of poorly treated diseases.

    • Saal says:

      So, this makes me think about the underlying roots of which direction I run on this and similar issues. I’m kind of curious if it’s similar to other people’s reasoning.

      To take this particular issues as an example, I tend to lean toward solving massively high drug prices via the ‘libertarian’ method of removing certain FDA regulations that cause the issue in the first place. Giving this five minutes of thought, I don’t really know that much about FDA regulations, the reasoning of the people who wrote them, the context they were conceived in, etc., so I really shouldn’t have much of an opinion on this.

      It occurs to me that I’ve taken stock of a few cases where I am fairly knowledgeable and support ‘libertarianizing’ and generalized to most government functions because of an intuition that really doesn’t have much to back it up. I get this idea that regulation X causes problem A; one side wants to remove X, they other side wants to patch X with regulation Y. My intuitive response here is that patching regulations runs into…I don’t know, a sort of Zeno’s Paradox? Like, no matter how many patches/bandaids we apply, we’re never going to get quite as far as we would by simply removing the regulation/not making the wound/ refusing to race the tortoise in the first place. But then, policy debates aren’t one-sided, so this is pretty clearly a failure to see the benefits of a given regulation and balance that against a neverending regulatory stack.

      IDK, nothing really new here, but I just thought I’d put this up in case anyone has similar intuitions regarding regulatory ‘chasing the tortoise’. Definitely a bias I need to make myself aware of any time a discussion on this sort of topic is taking place.

      • gbdub says:

        A bigger issue is that the “patches” are often not even intended to be beneficial. That’s how you get regulatory capture. Big corporations tend to LOVE complex regulations, because only they have the army of lawyers necessary to game the regulations to maximum benefit.

        And, since the average voter can’t be bothered to understand the minutiae of every regulation, the only people pushing for the patches are the companies that operate under the regulations (and only the ones big enough to afford a full time guy in Washington to bug regulators and congress-critters about it). Which has obvious conflict of interest issues.

        There’s a reason government regulators usually end up making more money after they “retire” and end up as executives for the companies they used to regulate. It’s not a pretty one.

        My admittedly cynical-libertarian slant is that the more power you give the government, the more detailed and complex you make their purview, the more opportunity for abuse you have. Rather than try to patch up all the loopholes, inevitably making new ones, it’s better to start with a dead simple regulation in the first place, and accept the non-optimalities as the cost of avoiding graft.

  15. John Schilling says:

    And stay away from cats, because there’s never been a worse time to get toxoplasma.

    But maybe never a better time to get a hefty dose of rage?

    Meh, I’m not actually outraged. This is standard Regulatory Capture 101. The time to be outraged was seventy or eighty years ago when people foolishly decided to set up a government agency that could prevent people from selling drugs if they weren’t proven to be safe and effective. That ended the way it always does, with drugs proven to be safe and effective IFF their marketing would further the interests of the people presently making lots of money selling drugs and everyone else shutting up and liking it if they don’t want to be on the receiving end of an FDA SWAT team.

    Too late, not going to change, anything that looks like a change will just be cleverly arranged to produce the same end result. Because Thalidomide!

    The Longecity-type hack is a neat idea, and might be a way for clever and exceptionally well-informed people to deal with the problem. If it ever comes close to being a real solution for everyone, the FDA actually does have SWAT teams and they can get the records of your payment to the Chinese lab.

    • Saul Degraw says:

      I think you are underestimating how much shit people used to put into drugs back in the 19th century that was either useless and/or harmful.

      The FDA wasn’t created out of thin air for no reason.

      • Erebus says:

        Take a look at the supplement and cosmetics industry. There’s a lot of stuff out there that’s useless and possibly harmful, but it’s still, a few bad actors notwithstanding, an industry that works reasonably well & does very little harm, given its size.

        As I’ve argued elsewhere, I’m starting to think that generics should be handled in the same way the dietary supplement industry is handled. If you want to buy resveratrol, for example, there are 500 different vendors to choose from, and many of them are highly trustworthy. Competition has led to a race to the bottom on price; it’s something like $40 for a month’s supply of the most expensive and highest-dosed resveratrol products. (And resveratrol, as a raw material in powder form, costs twice as much as pyrimethamine. Pyrimethamine is something like $100/kg; it’s a four-step synthesis that any first-year college chemist can pull off.) Quality control can be handled by consumer organizations — a couple of LC/MS and NMR tests shouldn’t cost more than a couple hundred bucks, anyhow, which is something that even the average consumer should be able to afford.
        …Pyrimethamine would quickly cost $8/month, if it were regulated (or non-regulated) in this way. It beats buying bulk powders from China, and it beats a drug black market.

        The major loophole that needs closing, in any case, is the “closed distribution” loophole. That’s the one that Shkreli is really taking advantage of here.

        • Saul Degraw says:

          Though the microbeads found in exfoliating products get in the water supply and are apparently small enough to avoid filters/cleaning and causing environmental hazards and potentially toxic hazards.

          • Erebus says:

            That’s a non sequitur. Surely you’re not suggesting that there ought to be more intense regulation of the shower-care industry, nor are you suggesting that there wouldn’t be any toxic/environmental hazards if it were thus regulated?

            I’d merely note that there are side effects and unanticipated consequences even with drugs that the FDA approves — see, for example, troglitazone, rosiglitazone, and many others. Onerous regulations may make things marginally safer — at huge, one might say disproportionate, social cost — but it certainly does not eliminate risk.

          • Douglas Knight says:

            Did troglitazone and rosiglitazone have any unexpected side effects? Or did they just have bad luck to get a few adverse events and were pulled from the market due to pure noise?

        • Emlin says:

          The supplement industry is actually kind of terrifying:

          http://well.blogs.nytimes.com/2015/02/03/new-york-attorney-general-targets-supplements-at-major-retailers/

          Also, Consumer Labs and some of the other big testing places charge to read their reports – I think the current burden in research, knowledge and money in order to try to make a good vitamin purchase is fairly non-ideal.

          • Erebus says:

            -As terrifying as charging thousands of dollars for a chemical that costs pennies to make? Surely not as terrifying as ordering chemicals from underground chemists in China and taking them on faith?

            -It’s an enormous industry. Not every product/brand is trustworthy — but there are enough that are, and as competition is fierce and the barriers to entry are low, prices are kept very low.

            As far as that particular article is concerned, the testing methods that the NY attorney general used were wholly inappropriate. DNA doesn’t typically survive the herbal extraction process intact, and rice flour is a very common lubricant/excipient, which would explain why rice DNA was found in products.

          • Emlin says:

            @Erebus

            Well, I have some health conditions that make certain vitamins and supplements desirable for me to take. I try hard to buy reputable products that hopefully contain what they say they do and don’t contain poison but I don’t feel confident in my ability to do that with any real certainty and that’s why I think that the status quo sucks.

            Your criticism of the test is addressed in the article, but I’m not an expert on the subject to evaluate your claim vs. theirs – it does not, however, address the issue of undisclosed allergens found in the supplements. Also, it is certainly not an isolated incident:

            http://www.accessdata.fda.gov/scripts/sda/sdNavigation.cfm?filter=&sortColumn=1d&sd=tainted_supplements_cder&page=1
            http://www.fda.gov/Safety/Recalls/ucm463048.htm
            http://www.foodsafetynews.com/2015/09/dietary-supplements-maker-sent-to-federal-prison-for-fraud-scheme/

          • Erebus says:

            If the AG’s test had a very low limit of detection, it may have picked up allergens at concentrations that are not hazardous. I don’t believe that any undeclared-allergen-related side effects have ever been reported. Am I mistaken? If not, I’d be inclined to believe that this is not as much of a concern as the article made it out to be.

            Anyway, I’m not here to white knight for the supplement industry. It’s far from perfect. It’s not even good. But it’s actually better than the over-regulated and overpriced pharmaceutical model for generics. And it beats the Longecity model by a country mile, as well — both in terms of scope and in terms of risk.

          • Scott Alexander says:

            There’s now quite a bit of concern that the New York attorney general totally botched his tests and that the supplements were fine all along. See here.

        • Professor Frink says:

          The supplement industry is horribly broken. Very few contain what is on their labels.

          • Earthly Knight says:

            Yeah, this is a poor example. The vitamin and supplement industry rakes in something like $30 billion domestically each year hawking products which are not only largely useless but often impure, defrauding consumers with misleading claims about health benefits while remaining just vague enough to tapdance around FDA scrutiny. If the choice is between the drug market and the vitamin and supplement market, you’d be a lunatic not to pick the drugs.

          • Erebus says:

            -There are good companies and bad companies. There are useful ingredients and useless ingredients. Educated consumers are healthy and safe consumers. If you buy a product from NOW Foods or Solgar, I’d bet that you’re getting what’s on the label. If you buy a product from “Butala Emporium”, you have only yourself to blame. If you’re worried, send a sample of your product out for private analysis; this is neither hard nor expensive. (Cheaper than paying for a single dose of some generic drugs, which cost pennies to actually manufacture.)
            In any case, I have no sympathy and no regard for people who take drugs, nootropics, or supplements without knowing what they’re doing.

            -See what Scott wrote about online nootropics vendors below. (comment 240659.) The same applies to supplement companies –and to an even greater extent, as when they’re found to be selling fraudulent or mislabeled products, they’re often prosecuted in federal court & are paraded through the media.

            -Low barriers to entry keep costs down, keep consumer choice high, and we all benefit by access to a free market. The cream will rise to the top, and the scum will sink to the bottom; there will be trustworthy and untrustworthy vendors. My argument is basically that if regulations were loosened to near-nothing — to late 19th century levels — things would be a lot better than they are today. The industry would police itself, consumers and consumer associations would actively test product, we have the internet, and so on…

            …What’s certain is that all of your generics would cost no more than $20 for a month’s supply.

          • JBeshir says:

            @Erebus:

            People with <115 IQ and who are not educated have moral value, too, and should get to be healthy and safe as well unless the costs of all available mechanisms of enabling them to be so are so extremely high that they're all net negative actions, which seems unlikely.

            So far they are not being super well treated by the supplement industry but it doesn't matter much because supplements have small effect. Extending the same lack of regulation of advertising and of quality to medicine in general seems likely to have a very negative impact on them.

            The world does not have an underlying design which would make things great and fair for everyone so long as everyone does What They Are Supposed To, so making things more fair for the educated and intelligent consumer can make things less fair to other people, and there isn't going to be an easy fix for that in the form of someone else who just needs to start doing What They Are Supposed To to sort it out.

            You have to make compromises, not just focus on one group and optimise for them and assume that it should be possible for other groups to deal with the results of that because if they couldn't it wouldn't be fair.

          • Erebus says:

            I live in Hong Kong. Medicines are wholly unregulated here and pharmacists are held in the same regard as shop-keepers. Absolutely nothing requires a prescription, you’re never going to get an unsolicited lecture or lesson from your pharmacist, and nothing costs very much. (Antibiotics and antivirals cost pennies. I recall I paid $3 for a couple weeks of Acyclovir. It’s also only $480 for a 200iu kit of Human Growth Hormone, which would cost thousands in the USA — even on the black market.) What’s more, medicines are trucked in from Mainland China all the time, where there are hundreds of companies competing to manufacture off-patent generic drugs.

            Although quality control ain’t up to the FDA’s standards, low-IQ people aren’t dropping left and right. In fact, they are very well-served by this unregulated market, as they can actually afford to pay out of pocket for the drugs they need, when they need them. There’s no going into debt over medication bills, no need for degrading welfare applications, nothing like that at all. Hong Kong also has an extremely high life expectancy, which would seem to indicate that its laissez faire attitude towards pharmaceuticals leads to positive outcomes.

            …So spare me the talk of “fairness.” Cringing in fear as you cling onto obviously flawed “safety regulations” doesn’t seem to be helping anybody.

          • JBeshir says:

            If it’s genuinely the case that it works out well for the majority, that’s fair enough. My objection was to the case built around solely how a market built on reviews and consumers doing their own testing keeps an educated consumer healthy and safe without addressing what it does for the rest.

            I’m updating based on your description a bit in the direction of thinking that maybe all that’s critical most of the time is that there’s one big country or set of countries requiring well-tested medication, with patent enforcement, and then everyone else can afford to be unregulated because cloning the name brand drugs coming out of that country is easy enough to do cheaply enough that rather than descending into snake oil people will just make and sell and buy the generics. It’s plausible.

            I’m unsure if having some countries with strict regulation of the quality of their generics pushes up quality elsewhere by forcing the development of capability to produce good generics. Maybe, maybe not. Hard to test.

            I still think it’s very likely you need some process somewhere in some country which is motivating people to produce known-working original drugs to clone, though, to avoid ending up with just snake oil everywhere, because testing whether a drug target actually works to solve a problem is obscenely expensive, and if some government isn’t rewarding it with patents it seems unlikely it’d be profitable, knowing that everyone else could immediately clone it so even if consumers only bought tested drugs you’d still make little profit on sales to cover the huge initial costs.

            If there was a cheap way to do almost as well then companies would use it to avoid advancing drugs which were going to fail into FDA trials and avoid ever having expensive failed trials, and while they do some of that they still have a huge failure rate in clinical trials. So I don’t think a cheap way that companies can use to identify working drugs well will pop up post deregulation to resolve this.

          • Earthly Knight says:

            There are useful ingredients

            No, in fact, there are not. Unless you are a pregnant woman, a Zambian child, or afflicted by one of a handful of rare diseases, there is no medical need for you to take vitamins or supplements. The whole industry is a swindle, to the tune of $30 billion annually.

            If you’re worried, send a sample of your product out for private analysis; this is neither hard nor expensive.

            And what happens if the second bottle but not the first is tainted? It’s your own fault for foolishly trusting that the pills would actually contain the listed ingredients, right?

            Hong Kong also has an extremely high life expectancy, which would seem to indicate that its laissez faire attitude towards pharmaceuticals leads to positive outcomes.

            Are you seriously drawing a causal inference from a single data point? All of the developed East Asian countries have high life expectancies regardless of how stringent their drug controls are (Asian-Americans have a higher life expectancy still). But this is all a canard, because no matter how people are sickened or killed each year by tainted vitamins, they’re never going to be competitive with cardiac arrest or traffic fatalities when it comes to overall mortality rates. The point is more that huge sums of money are wasted on vitamins and supplements with a small risk of grave harm and no upshot.

          • Erebus says:

            @Earthly Knight

            I rather like CoQ10 and experimenting with nootropics, and lots of folks obviously feel the same way. But that’s beside the point. I feel as though you’re not even comprehending my argument: Whether or not the supplement industry is a sham is irrelevant. The fact is that supplement products are chemicals which can be sold freely, with near-zero oversight, without “bioequivalency studies” and complicated distribution schemes, without any real barriers to competition between firms, and that prices are therefore kept very low.

            1kg of resveratrol in crystalline powder form will set you back $300.
            1kg of crystalline pyrimethamine will cost you $100 or less. It’s very cheap to synthesize.
            …And genuine resveratrol products sell for pennies per dose, whereas pyrimethamine as “Daraprim” hit the news when it was raised in price from $13.5 to $750 per 100mg pill. But even the former price of $13.5/pill is very high; much more expensive than it would be in an unregulated free market.

            The fact of the matter is that something is very broken about the FDA’s model for off-patent drugs. And I feel that this problem is simply that there is no free market for generics. If there were, there’d be no loopholes to exploit, no such thing as “closed distribution”, and Daraprim would cost pennies per pill.

            I’d add: Testing chemicals is not magic. In fact, it’s downright easy and cheap with modern instrumentation, and even extremely thorough and rigorous testing would cost little more than the $750 Shkreli wanted to ask for a single Daraprim capsule.

          • Earthly Knight says:

            ” Unless you are a pregnant woman, a Zambian child, or afflicted by one of a handful of rare diseases, there is no medical need for you to take vitamins or supplements. The whole industry is a swindle, to the tune of $30 billion annually.”

            How can you possible know that? Controlled experiments on the effect of supplements on humans are hard, given the long human lifetime and other problems—I’ve seen it claimed that we know more about feline nutrition than human, and it seems likely.

            There are lots of things which some well informed people believe might be good for you which nobody can be certain are good for you. I’ve just ordered one such product, endorsed by quite a lot of highly respectable people—who don’t claim they are sure it can extend your life, but offer reasons to think it might.

            http://www.elysiumhealth.com/

            Strikes me as a sensible gamble.

          • Earthly Knight says:

            and that prices are therefore kept very low.

            You are failing to factor in the amount of money which will be squandered on nostrums and patent medicines in an unregulated market. A drug priced down $40 saves the consumer no money if she also blows $40 on supplements recommended by her naturopath. The US spent $374 billion on FDA-approved drugs in 2014– the $30 billion currently spent on urine-enrichers would already be a significant chunk of the total.

            There are lots of things which some well informed people believe might be good for you which nobody can be certain are good for you.

            Certainty is an unreasonably high bar– what we really want is a reasonable degree of confidence that the supplement or vitamin in question will significantly increase your lifespan or improve your quality of life (without also carrying an undue risk of harm). As far as I know, no supplements or vitamins exist at present which can make this claim, and indeed if there were any they could in due course secure FDA approval and sell like gangbusters.

            The product you mention has a batch of endorsements by high-flyers (cf. Linus Pauling), but the evidence to its credit seems to consist, at present, of rodent trials, and the track record of “has shown promise in rodent trials” is scarcely distinguishable from chance. Here’s what one impartial expert has to say:

            “It is not quite clear to me what they want to target with this pill,” said Pere Puigserver, a biology professor at Harvard Medical School. “What does it mean, to improve metabolic health? And what exactly is being repaired in the body? And is the outcome the same for everyone?”

            In other words, we do not have even a glimmer of the mechanism by which the supplement could work. So no, I don’t think it’s worth shelling out $60 for.

          • There’s no humilating welfare claims under NHS style systems either.

        • Deiseach says:

          Given China’s wave of food adulteration scandals over the past decade (in 2008 you had a large dairy not caring about poisoning the children of the nation), I’d be very wary about buying anything online from them as a source.

          Suppose the supplier thinks “Heck with it, why do I care if I poison some foreigner?” and cuts his product with fertiliser, what exactly are you going to do about it? Good luck trying to sue them through a Chinese court from your hospital bed in America!

          • Alex Z says:

            Well, either this supplier is reputable or they are not. If they are currently reputable, they will no longer be and they will lose customers. If they are not currently reputable, then buying their stuff was a bad idea to start with. Now you may point out quite rightly that if the reputable producer poisons their pills, that will cause a lot of suffering before their reputation is updated. That is true. But then again, if a company with FDA approval to sell their drug starts cutting it with fertilizer, that will also cause a lot of suffering before their approval is revoked.

            Also, the problem today is that the very thing that makes a producer able to satisfy your demand for a cheap drug is what makes them able to deliver a bad product with no legal consequences. If medicine was deregulated, it is likely that there would be many US manufacturers to choose from who you could sue if they start delivering fertilizer instead of modafinil.

          • grendelkhan says:

            But then again, if a company with FDA approval to sell their drug starts cutting it with fertilizer, that will also cause a lot of suffering before their approval is revoked.

            Yes, but they didn’t. Shouldn’t that at least count as some form of evidence that the standard just-so story of the market sorting everything out in an ideal fashion is a bit incomplete?

      • bartlebyshop says:

        I was waiting for this thread to give me an excuse to post The Radium Water Worked Fine Until His Jaw Fell Off.

        • DrBeat says:

          I know we’re not supposed to think of people who lived in the past as being stupider than us, since they didn’t have access to the information and the culture of information we have… but “damn, these people are stupid” is the conclusion I keep getting when I look at 19th-century supplement quackery.

          Like, how many damn times can you go “Oh, a substance I haven’t seen before! CLEARLY IT WILL MAKE ME LIVE FOREVER!”?

          • bartlebyshop says:

            It’s not that crazy. Patent medicines often contained heroin or cocaine (no surprise about their appeal there) and ionizing radiation sterilizes things.

            Rich people in our day believe stuff just as stupid. People make fun of the Steve Jobs fruit diet cancer “cure” all the time.

          • Jaskologist says:

            They sure were silly. Now we know that it is computers that will make us live forever.

          • onyomi says:

            Read Longecity’s forums now if you think people are less gullible.

          • Deiseach says:

            But the 19th century was also about The Triumph Of Science. So much industrial and technological progress was being made, people were living richer, easier lives than in the past, new products and labour-saving devices were coming out all the time (sound familiar?) that the trust in NEWLY DISCOVERED MIRACLE CURE CAN TACKLE ALL AILMENTS was there.

            After all, we did the same with antibiotics, didn’t we? Now you can get better from a disease that previously would have been a sure death sentence – why, this same drug will surely knock that cold on the head in no time flat!

            And look at the unexpected side-effects when you start testing drugs – Viagra started off as a candidate for treating angina and hypertension before the other benefits turned up. Cue a whole new market when finally a working aphrodisiac had been discovered!

            We still do the same – look at Scott’s posts about how “hey, if this works for depression, will it work for anxiety and fallen arches as well? Let’s try it!” The expectations that arise when something new comes on the market and is (briefly) out-performing its competitors makes everyone try it for “Well, condition Y is something like condition X that this new wonder drug cures, so would NuWondaDrug work for it as well? Can’t hurt to try!”

          • HeelBearCub says:

            I honestly can’t tell anymore, but it feels like this sub-thread is ironic.

            DrBeat, Jaskologist, onyomi, and Deiseach, my expectation is that you are all willing to happily jump on the “FDA is awful and a perfect example of why government is doomed to lag behind the the awesome power of the free market” bandwagon. Yes, that is an over the top and snarky summation.

            Do you agree or disagree with the following statement:

            The more the truth of claims about benefits and harms of a product are not readily apparent to the consumer, the more important it is that a third party which is hard to coerce or bribe be responsible for validating the product in some manner.

          • “The more the truth of claims about benefits and harms of a product are not readily apparent to the consumer, the more important it is that a third party which is hard to coerce or bribe be responsible for validating the product in some manner.”

            I agree with that. But I don’t think the government is a good candidate for that third party. Hard to coerce but possible to bribe, and, in the regulatory context, it has a monopoly position.

            If I decide that the private source of information I have been relying on isn’t to be trusted I can switch to another. I can’t (legally) do the equivalent if I decide the government regulators can’t be trusted.

          • Deiseach says:

            HeelBearCub, I’m one of the people arguing for the likes of the FDA and indeed more regulation or intervention to stop this kind of thing happening again: third, fourth or fifth party buys rights to drug, does sweet fanny adams about R&D, just churns the stuff out, and jacks up the price to eye-watering levels.

            I don’t know how you got “FDA is awful and a perfect example of why government is doomed to lag behind the the awesome power of the free market” from a comment that people in the past were not spectacularly dumb, they made the same kind of assumptions about The Wonders Of Science that we did and still do in the present day. Do you really not remember back when Prozac first came out, non-depressed people were taking it, and a lot of media columnists wrote articles about My Week On Prozac As A Normal Person concluding “This is the greatest thing ever, it should be put in the water supply, nobody would ever be unhappy again”? 🙂

          • John Schilling says:

            Do you agree or disagree with the following statement:

            The more the truth of claims about benefits and harms of a product are not readily apparent to the consumer, the more important it is that a third party which is hard to coerce or bribe be responsible for validating the product in some manner.

            I agree with this statement. Since basically all government bureaucracies are easy to bribe on an industrial scale, it is particularly important that government bureaucracies be kept out of the product-validation business.

            Nobody has yet found a way to make a government bureaucracy immune or even highly resistant to industrial-scale bribery, aka regulatory capture. In particular, passing a law saying “government regulators must now regulate X in manner Y and must not take bribes, Or Else”, has never worked and isn’t going to work any time soon.

            So, if you have a wonderful plan to fix this problem that with a new regulation, presuming only that the regulators won’t be effectively bribed, you’re not helping. If you’ve got a way to solve this problem via government regulation even assuming the regulators are de facto employees of the pharmaceutical industry, that I’d like to hear.

          • DrBeat says:

            “DrBeat, Jaskologist, onyomi, and Deiseach, my expectation is that you are all willing to happily jump on the “FDA is awful and a perfect example of why government is doomed to lag behind the the awesome power of the free market” bandwagon. Yes, that is an over the top and snarky summation.”

            What the hell did I do to be put on that list?

          • Nornagest says:

            “FDA is awful and a perfect example of why government is doomed to lag behind the the awesome power of the free market”

            The FDA is indeed pretty awful, and I haven’t been impressed with many of the attempted defenses in this thread, but as an exemplar of government it’s only marginally better than the DMV. There are lots of biases and sacred cows and systemic issues unique to health, or to America’s charming brand of health administration, that contribute to how and why it sucks.

          • Jaskologist says:

            I mean, I would jump on that bandwagon, but in this thread all I did was jump on the “make fun of people who think they’re going to upload their minds” bandwagon, with a dash of “make fun of people who think they’re different from their forbears.”

          • Earthly Knight says:

            Nobody has yet found a way to make a government bureaucracy immune or even highly resistant to industrial-scale bribery, aka regulatory capture.

            What about strict campaign finance laws? These seem like they have the potential to thwart regulatory capture, even if they are objectionable for independent reasons.

          • Nornagest says:

            Campaign finance laws would do very little to thwart regulatory capture. At least in the First World, most of it comes out of lobbying and information and staffing asymmetries, not favor-trading.

          • LHN says:

            The fundamental reasons for regulatory capture include a) nobody knows as much about a regulated industry as people with experience in the industry; b) nobody cares as much or as consistently about the regulatory body’s activities as the people in the industry; c) there’s no one who values experience with and contacts in the regulatory agency when hiring more than the industry does. So regulators will tend to wind up seeing things from the industry’s perspective one way or another.

            Keeping industry from making meaningful political contributions, even if it works, doesn’t help with any of those.

          • Earthly Knight says:

            I had thought that the fundamental reason for regulatory capture, and the raison d’etre for lobbying, was the promise that if the appropriate people are appointed and the appropriate legislation drafted, the politician’s campaign office will receive a check for $500,000 come November (or is this the one place where incentives don’t work?). Information asymmetries are not trivial, but there is generally a pool of academics to draw on and consumer or environmental groups happy to suggest candidates.

            There is a second cause of regulatory capture which I’m neglecting here, though, which is politicians who are ideologically corporatocratic or (what’s much the same) libertarian and so appoint foxes to guard the henhouse because they think this is the just and natural order of things. But I can offer an even tidier fix for this problem.

            I think you’ll find that no problems are more insoluble than the ones whose causes you willfully mistake.

          • HeelBearCub says:

            @Dr Beat:
            It’s possible I have you confused with Dr Mist? Sorry, if I was incorrectly ascribing views to your avatar.

            @everyone else:
            Regardless of how you structure the third party, there will be a great deal of pressure in the bribe/coerce department. Also, at the end of the day, either the the third party has authority to ban the drug, or it’s bullshit, so like it or not it’s a government function. You can try and dance around this, but I really don’t think you can get out of it.

            I mean, the completely independent bond rating agencies seem to have had a far worse problem in terms of corruption and capture. And the more arcane the instrument, the worse it was.

            I contend, this is just inherent tension in these types of systems. It can’t be avoided. The best way to minimize it is via cultural mores.

            People like to piss and moan about building codes, but those seem to work pretty well.

          • John Schilling says:

            What about strict campaign finance laws? These seem like they have the potential to thwart regulatory capture, even if they are objectionable for independent reasons.

            Regulatory capture works primarily at the level of unelected bureaucrats, because it is the bureaucrats who write and implement the regulations. Even if an issue rises to the level where a congressman introduces a bill saying that e.g. “Daraprim may not be sold for more than $2.99/pill” and other congressmen all posture in front of the cameras as they vote for it, the bill will have to have several pages of text to close all the obvious loopholes like just renaming the drug. Those pages of text will be written by unelected bureaucrats, and it will be unelected bureaucrats who explain to the congressmen that yes, these pages of legalese do in fact close all the loopholes.

            For reasons that I think have been explained here repeatedly, those bureaucrats will be very nearly de facto employees of the pharmaceutical industry. Even the ones that are specifically hired by individual congressmen to give them sound advice on pharma legislation. Especially those ones. And if you still think strict campaign finance laws will be any use at all, those also will have to be complex tomes of legalese to close all the obvious loopholes, and will be written by, oh, you know the rest.

            And most regulatory issues never rise to that level in the first place. Congress just passes a blanket authorization that says, “You FDA types go off and write whatever regulations it takes for me to never hear the word ‘Thalidomide’ again; we’re setting it up so whatever you write automatically becomes law without our having to bother with it”.

            This is not a simple problem of people writing big checks to congressmen and calling them “campaign contributions”. This is a complicated problem, deeply rooted in the structure of a civil service more than two centuries old, and lots of smart people have spent a lot of time trying to solve it. If you think you have a workable answer, start by asking yourself if it’s really plausible that nobody else has ever tried it before.

          • Earthly Knight says:

            Bureaucrats do not spring full-grown from Jupiter’s head into their positions! They are hired by people who are hired by people who… are elected politicians.

            There are literally hundreds of thousands of doctors, biochemists, and pharmacists who have nothing good to say about the pharmaceutical industry. If you’re willing to pay them a competitive salary, I’m sure at least a few will have the expertise and independence to consult on legislation or serve in regulatory agencies.

            But this is all a bit of a farce– how about we debate whether regulatory capture is inevitable after emptying congress of politicians who’ve made it their mission to capture as many regulatory bodies as possible? There is little need to advert to institutional causes when there are actual flesh-and-blood legislators who will cheerfully tell you what a great idea it is to have Pfizer reps draw up bills for them.

            If you think you have a workable answer, start by asking yourself if it’s really plausible that nobody else has ever tried it before.

            If memory serves, the solution I proposed has been tried before, but it was voided by unelected bureaucrats appointed by presidents beholden to mammoth corporations.

            So… case in point?

          • Earthly Knight says:

            Here is the fountainhead of regulatory capture:

            https://en.wikipedia.org/wiki/List_of_members_of_the_American_Legislative_Exchange_Council

            It publishes model legislation and has enjoyed great success in prompting (chiefly Republican) legislators to introduce bills on its behalf. It’s vision statement is “A nonpartisan membership association for conservative state lawmakers who shared a common belief in limited government, free markets, federalism, and individual liberty.”

            Among its principal sponsors are Exxon Mobil, Pfizer, and the company formerly known as Philip Morris– so apparently its vision of individual liberty includes the liberty to enslave children to carcinogens.

            The Cato Institute is a member. Dollars to doughnuts that the Pauls, pere et fils, have also collaborated in the past.

            I submit that we do not need to do any sleuthing to find the hidden springs and principles at work when the new drug bill bears GlaxoSmithKline’s indelible mark.

          • Doctor Mist says:

            @HeelBearCub:

            Dr Beat: It’s possible I have you confused with Dr Mist?

            Well, I must say that it’s certainly a time-saver to have you reply to my comments before I even write them! 🙂

            I especially like the bit of attributing an over the top and snarky opinion and then hanging a lantern on it by pointing out that it’s over the top and snarky. I’ll have to remember that one.

          • grendelkhan says:

            Deiseach: After all, we did the same with antibiotics, didn’t we?

            (Pardon for not being polite with the threading, but I really like this anecdote.)

            Even more so, the discovery of vitamins! That terrible disease which cursed the mightiest navies in the world? Vitamins! That mysterious skin disease that cursed poor farmers for so long, maybe due to bad air or something insect-carried? Vitamins! Within a period of a few decades, diseases which had plagued us for centuries or longer vanished with the application of tiny quantities of nigh-magical substances, to the point where scurvy, rickets, and pellagra sound like weird, old-timey words to us now.

          • Jiro says:

            People do take vitamins in useless ways just like they try to do for antibiotics. Probably most vitamins taken in the US are taken for such useless reasons.

            It’s just that unlike antibiotics, the fact that they do this is usually harmless, and even in extreme cases where it does cause harm, doesn’t cause the kind of harm to others that similar misuse of antibiotics does.

      • Alphaceph says:

        It was a different time, before education and the Internet.

    • Alphaceph says:

      I think it would be a good idea to take a buch of things that are banned by agencies like the FDA and instead slap a label on them that says “FDA regulators think you should not take this”.

      You could add some currently illegal drugs to this too. (But not all because a lot of them would make very effective weapons to use on people, e.g. forcibly giving someone a heroin addiction)

      • Winter Shaker says:

        Is it even that easy to forcibly get someone hooked on heroin who isn’t actively trying to take more of it? As I understand it, the people who develop opiate problems tend to be those for whom the ‘this makes all the stress in my life melt away for a few hours’ is too strong an incentive to resist; anyone being spiked is likely to know from the first time that they’ve been drugged with something, and not trust you to make their coffee for them again.

        Also, given the massive externalities of drug prohibition (including in the case of heroin, the more-or-less permanent destabilisation of Afghanistan by funneling pretty much all the profits of the opium harvest to militant groups, and the exaggerated risk of overdose death because of heroin’s uncomfortably tight toxic ratio and the fact that criminal retailers often don’t know the purity of what they’re selling because of contamination upstream, and in any case are under no particular obligation to state an accurate dose on the packet), I am not at all convinced that a legally-produced, purity-and-dosage-regulated market in pharmaceutical-grade heroin with a ‘FDA says you shouldn’t’ label’ would be worse than the current situation.

        I mean, it probably wouldn’t be ideal – this is an instance where there is a good case to be made for a closely-controlled prescription-only model for problematic users (which should tamp down on the effect whereby people start to recruit new users to sell to, so as to finance their own supply), but the status quo is pretty terrible.

        • Alphaceph says:

          > I am not at all convinced that a legally-produced, purity-and-dosage-regulated market in pharmaceutical-grade heroin with a ‘FDA says you shouldn’t’ label’ would be worse than the current situation.

          > I mean, it probably wouldn’t be ideal

          It’s probably a good idea to use the ban-power that the state has to encourage people to take less destructive drugs than heroin. If I were the god of all drugs laws, I would try 10 other solutions before providing heroin.

          Solution number 1 would be “hey, you can get weed and ecstasy for free or near free, no need to do crack!” (probably unconvincing to addicts, but new users would probably substitute to some extent)

          Solution number 2 would be to incentivize the development of more pleasurable but less horrifically destructive drugs.

          Solution number 3 would be setting up special areas (very remote) where addicts to the worst drugs could be sent, instead of prisons. People who are F&*^ed up on heroin and lead criminal lives to feed the habit. Ideally these would be OK places to be, sort of gated communities for junkies. It would need to be funded but you would probably save money overall because of fewer prisons. These places would have the drugs freely available. Most people who were there would volunteer to go because of the free and easy availability of the drugs, they would be free to leave if and only if they agreed to have an implant fitted that prevented the drug from working on them. This, along with increased police focus, would kill the business model for the dealers, because the state can undercut them, but the remoteness of these gated communities would mean that it would be hard to just “casually” get into the nasty stuff.

          • youzicha says:

            Having the option to exit society and spend the rest of your life doing heroin in a gated community, with the government footing the bill, seems pretty appealing! Sort of like a monastery, but for sin instead of prayer. 🙂

          • Alphaceph says:

            It could be problematic if too many people wanted it. Social engineering has a bad history.

            But one way to look at it is it’s like a prison we have today, except

            1. you separate out the drug addicts from the murderers (probs a good thing)

            2. Drug addicts volunteer to be sent there because the drugs are free and clean (eliminates incentive to evade the police)

            3. Drug addicts can lead lives there, have sex (with the opposite gender!), browse the internet, etc if they want to.

            4. It would almost certainly be cheaper than prison, taking into account the savings from not needing as much security because they wouldn’t even want to escape (just put a ring of heroin/crack dispensers at the outer fence, I’m sure few people would get past that), not needing to convict the volunteers of anything or pay for their lawyer, etc

            5. You are probably not making it much easier to take these drugs for most people because you would have to make a commitment to go to the drug monastery. It would not be a spontaneous decision you make at a party at 3am. That’s a huge difference.

          • Winter Shaker says:

            It’s probably a good idea to use the ban-power that the state has to encourage people to take less destructive drugs than heroin. If I were the god of all drugs laws, I would try 10 other solutions before providing heroin

            It’s probably a good idea to use the tax powers the state has to steer people towards less risky opiates* – heroin in smokable form vs that which is only good for injecting; morphine vs heroin; opium vs morphine, and indeed whatever synthetic opiates we can devise that have a wide enough toxic ratio and are yet enjoyable enough for people to actually want to use them instead of heroin. (I still wait to see what will eventually come of David Nutt’s proposals to devise a lower-risk alternative to alcohol ).

            But I don’t see what’s so terrible about heroin that it isn’t a good idea to have it available on prescription (I mean, yes, the addictiveness, but at pharmaceutical grade it’s got very low chronic toxicity compared to, say, alcohol, and at measured doses it is much easier to avoid acute toxicity). Cochrane come out in favour, for what it’s worth.

            Your opiate camp proposal sounds like it would have some potential negatives. Given that, so far as we can tell, prescription heroin already reduces criminality in addict populations, having the treatment centre in the place where people actually live, where their friends and family are (thus keeping them in touch with the social connections that I understand is a big help in overcoming addictions), rather than sending them miles away to a place where everyone is already a problematic opiate user, would still seem like a more sensible option. And I’m not sure how easy it would be to make an implant that makes heroin ineffective without also making life more painful generally – heroin works on the bits of the brain that normally receive the endogenous signal to stop hurting; I gather that naloxone blocks heroin at the expense of increasing sensitivity to pain. (I welcome our host’s corrections if I have misunderstood things, though)

            Though for stimulants like crack, I gather the problems are trickier, since you’re not dealing with someone who will be calmed down for a period of time by their drug of choice, but with people who will be hyped up. The book Blueprint for Regulation published By Transform Drug Policy Foundation is an interesting attempt to sketch out what sort of policies would produce the best public health outcomes in a post-Prohibition world, if you’re interested.

            *Edited to add: I think this is probably a good idea in general – incentivising lower-concentration, or otherwise less risky forms of any drug (beer over vodka, powder cocaine over crack, coca tea over cocaine, magic mushrooms over, say, LSD) is worth trying.

            Edited again to add: I’ve now scrolled down the recent comments, and you are bringing up the ‘someone deliberately getting someone else addicted to heroin against their will or without their knowledge’ scenario several times. Does that actually happen often enough to be a serious strike against the benefits of ending the War on Drugs generally? I’ve never heard of any cases, so I’d assume it’s pretty rare.

          • Alphaceph says:

            @Winter Shaker: you make some good points.

            – Regarding weapon style uses of hard drugs, it would be a lot easier to spike someone or fool/persuade them into developing a life-destroying addiction if super-nasty drugs were available like mars bars are, and were legal to boot. Would spiking someone even be illegal? It’s not against the law to lie…

            – Taxing drugs would only work if the untaxed alternative basically had the same effect. Drug addicts have extremely inelastic demand curves!!!

            – Giving out drugs like heroin on prescription might be a good idea. Having them injected under supervision, for free, at a government recreational drug centre would be better. This has the advantage that hard, nasty drugs cannit be used for spiking/feeding to children etc. Both options have the potential downside of increasing demand.

            – having a “drug monastery” to send people to can be seen as a substitute for prison. If you had a “drug centre” in the community, you wouldn’t need it. The advantage of geographically separating it is “normal” people would volunteer to go there, see the people who were there and nope the fuck out of it. With a drug centre in the community, people would go there in their lunch break because they thought they had the willpower to kick the habit… until they actually tried to.

          • Winter Shaker says:

            Alphaceph:

            Would spiking someone even be illegal? It’s not against the law to lie…

            Well, spiking someone with alcohol is already a crime, at least where I come from (the UK), and I’d be very surprised if it wasn’t where you are as well. I’m pretty sure that spiking people with heroin would remain illegal as all hell under any remotely plausible post-Prohibition regulatory framework. I remain skeptical that there is a significant of would-be heroin spikers just waiting for heroin to be legal to possess, who are not already happy to spike with alcohol. Again, do you have any instances of this actually happening, or any good evidence that it would be so much of a problem as to outweigh the enormous social gains that stand to be made by making heroin safer by regulating purity and dosage, and taking almost all the profits of the heroin trade out of the hands of violent criminals? Drug prohibition costs a hell of a lot of lives after all.

            And do you have any good reasons to think it would be easy to spike someone often enough over a short enough time period to get them addicted when they didn’t want to get on the drug? Your premise seems to assume that even one dose is typically enough to create physical and psychological dependency, which seems pretty implausible to me.

            And that’s assuming it even was available ‘like mars bars’. Seriously, you should read chapter 2 setting out the regulatory option (from page 15) and the specific section on opiates and other depressants from that Transform book from my previous link (from page 156) – there are plenty of regulatory options available between the current ‘criminals control the entire market’ paradigm and the extreme free-market ‘no more restrictions on selling heroin than on selling chocolate’, and there is no good reason to think that the extreme free-market scenario would prevail when deciding how to regulate it after Prohibition.

            Taxing drugs would only work if the untaxed alternative basically had the same effect. Drug addicts have extremely inelastic demand curves!!!

            It wouldn’t be perfectly watertight, sure, but different preparations of drugs, or different but not-that-different drugs, can substitute for each other to a degree. If it’s harder / more expensive to buy whisky, you can still get beer (which is more difficult to get life-threateningly drunk on in a short space of time). Indeed, that’s already what the UK tax system tries to do, except that it works in a weird blocky way with different tax bands for different types of drinks that tend on average to have different strengths, rather than a straight-up tax that progressively ramps up according to alcohol percentage. No reason you couldn’t funnel some people from more concentrated / risky drugs or preparations to lower risk ones by pitching the tax gradient cleverly.

            You also need to factor in the ‘iron law of prohibition – the idea that the more you enforce a law against possessing a drug, the more you drive the market towards more concentrated (and thus more dangerous but also more easy to smuggle for any given quantity of active ingredient) versions of the drug – lots of users do not necessarily want the strongest possible version of a drug (see, e.g. tea drinkers who decline to guzzle caffeine pills, beer drinkers who don’t fancy vodka), so there may well be an automatic market correction towards less risky versions of any particular drug even in the absence of specific tax tinkering.

            I don’t think we actually have any disagreement that supervised injecting sites for heroin would be safer than prescription heroin to take away. Again, I recommend chapter 2 and pages 156 to 161 of that book – but will note that a supervised injection model would be expensive and complex to run, and to the extent that someone is a dependent opiate user but not so chaotic that they cannot reasonably manage their own addiction off-site (especially if they have a job that they would only be able to hold down if they don’t have to head out to a supervised injecting centre), then that option should be available.

            having a “drug monastery” to send people to can be seen as a substitute for prison

            Not quite sure if we’re in disagreement here, but I am very skeptical of the idea that sending someone to prison should ever be the default reaction to the fact that they use any drug. Most drug users do not become problematic users (assuming a fairly normal, non-gerrymandered definition of ‘problematic’), after all, and of those who do becomse problematic users, not many of them are going to have their problems adequately addressed in prison. Some, sure, will commit genuinely victim-creating crimes – theft, robbery, violence etc – while under the influence or while trying to get money to buy more, but it’s those crimes that justify the intervention of the criminal justice system, not the mere fact that they have a compulsion to get high.

            We already live in a society where most people do ‘nope the fuck out’ of serious opiate addiction, and, given the observation that there is no noticeable systematic correlation between levels of drug use and harshness of punishment, it’s reasonable to assume that most of them say no to heroin not through fear of getting caught but simply because they don’t want to get on heroin. If the heroin is available on prescription, that would pull the rug out from under the street dealers, and to the extent that the users themselves would otherwise become low-level dealers to fund their own habit, that would further prevent more people from being drawn in. And of course, the prescription system (or supervised consumption rooms) would not just give it out to anyone who asked; there’d need to be some sort of assessment so that your ‘people coming in to try it in their lunch break’ scenario was minimised.

            The word from Switzerland is that their heroin-assisted treatment model has seen a decline in the number of new users, so it seems to be working out for them. No need to send people off to gulags far from their friends, family, employment opportunities and other support network type things that can be vital in helping you overcome addiction unless you can demonstrate that keeping them in situ would be disastrous.

      • onyomi says:

        So-called “right to try” legislation allowing terminal patients to try otherwise unapproved drugs are a step in the right direction, though it is incomprehensible to me why anyone could be against them. But what you are proposing is definitely better. But that would also mean treating adults like… adults.

        • JBeshir says:

          The reason I’ve heard to oppose right to try is that it creates a large incentive to create potential drugs and then be very, very slow about running studies to work out if those drugs actually work or not, because you can keep selling them so long as you don’t know yet (when you do know, even without explicit regulation it’d presumably be fraud to keep trying to sell them).

          When eventually the drug turns out to in fact not work you lose your revenue stream, but can promptly start over with a new drug. If legislation doesn’t require that the drug be on the track to eventual approval, this never happens and you keep having drugs being sold as snake oil with no one running the very expensive studies that would show they don’t actually work. If legislation does require this, as current legislation (at least in the UK) does, then there’s also going to be very few of these experimental drugs available, so you can charge a huge price for your experimental drug while it lasts.

          Drug discovery nowadays is really, really hard, and increasingly difficult over time, with drugs chasing smaller and smaller effect sizes and more and more questionable mechanisms of action, as the low hanging fruit are eaten, so there’s apparently a strong chance that this business model could be more compelling than actually trying to produce working drugs is.

          I thought right to try laws sounded like a great idea at first, but after reading some write-ups of this problem (words like “scam” seem to be thrown around) I’m highly uncertain on the matter. Creating exceptions to rules can go awry as easily as the rules themselves can, after all.

          • onyomi says:

            I would rather just get rid of the requirement for FDA approval altogether, but if that’s impossible, the least we can do is let people who are going to die anyway try what they want. It is an interesting objection I hadn’t thought of, but I’m willing to accept it even if it does produce a perverse incentive, because the alternative is cruel and Orwellian.

          • JBeshir says:

            Yeah, that’s perfectly reasonable as a position. Not only is the amount of perverse incentive one is willing to tolerate to avoid being cruel and Orwellian variable between people, the size of this incentive and extent to which it is a problem is unclear to me.

            I just thought it was worth describing the major reason I know of for opposition since it was mentioned as not being understood.

          • Alphaceph says:

            > with drugs chasing smaller and smaller effect sizes

            If the drugs really are chasing smaller and smaller effect sizes, then who cares what the company charges for it?

            In the limit as the effect size tends to zero, drugs just become different brands of placebo. We don’t regulate magical aura healing or homeopathy so why should we regulate drugs which only make some tiny, almost-undetectable difference?

            I suppose you could argue that they crowd out drugs that actually do work, but would people stick with a fancy placebo if someone came along with a real drug that actually works?

          • Cadie says:

            I’m doubtful that this would turn into a problem except possibly for a few common terminal diseases like Alzheimer’s and some forms of cancer, only possibly even then. For everything else, the revenue stream from right-to-try would be much smaller than getting a drug through the FDA and for regular sale – and the drug company is losing potential patent years since the 20-year patent timer starts ticking while the drug is still going through clinical trials. So if the drug works, they’re shooting themselves in the foot by delaying, losing many millions of dollars each year they wait. If it doesn’t work, are they really making enough money on right-to-try to offset what they’ve already spent? They have to have gone through Phase I already, and getting a drug even that far isn’t cheap. Without an actual approved, useful drug, most pharmaceutical companies would go under, right-to-try sales or not. It would only slow down their folding a little. Delay to capitalize on right-to-try seems like a losing strategy.

      • baconbacon says:

        Getting someone forcibly addicted to herion isn’t a good business model if that person can walk to CVS and buy it for a couple of bucks. It only works when they can’t get it anywhere else and you know that they are highly likely to come back to you for their fix.

        • Alphaceph says:

          I’m not frightened of it as a business model, I’m frightened of people using forced addiction as a way of wrecking someone’s life without the inconvenience of facing murder charges if they get caught.

          And it might not be a clear cut case of spiking. They might
          get someone drunk, then persuade or overpower them and inhect heroin. They might use peer pressure to force someone young, vulnerable or frightened into taking it. How many times do you need to take heroin before you are physically addicted?

          Also, the existence of easily available heroin is a severe test of human rationality. Rationally, there is absolutely no reason anyone would want to take it unless they were terminally ill.

          Adults are adults … but drugs with severe physical addiction potential are like landmines. There’s no reason to have them dotted around our cities, even if they are clearly labelled.

          I suspect that if every drug that didn’t fall into the category of “severe physical addiction potential in 90% of people” was made legal, then the bad ones would be harder to get as dealers had less of an economy of scale, and as police resources were focused onto the really bad drugs.

          • stillnotking says:

            So-called “physical addiction” is a red herring. The physical effects of withdrawal go away very quickly; anyone who’s motivated to kick can do it. The problem is that most of them end up relapsing at some point, because the underlying psychological reason for the addiction is still present. (Not to mention that the term assumes a non-existent distinction between neurochemistry and mental state. Either all addiction is “physical”, or none of it is.)

            As the old joke goes: Quitting smoking is easy! I’ve done it hundreds of times.

          • Alphaceph says:

            > anyone who’s motivated to kick can do it

            If it turned out that Heroin and crack cocaine are actually pretty much OK for you in most cases, then I would agree to add them to the list of “things you should be able to legally buy albeit with a massive warning label”.

          • Alphaceph says:

            BTW I read a few tragic stories about people (adults) being peer pressured into starting either a heroin or crack habit and within a week being full-on addicts with addiction and physical dependence and having their lives ruined.

            Many people get into it through a “failure of rationality” (think they can handle it for just a week, end up addicted for 10 years and OD)

    • Deiseach says:

      And if you don’t have regulation about safe and effective you get hucksters like Shkreli selling any old crap because they’re in it to make money, screw the customers. If you’re relying on lawsuits for wrongful death to sue them out of business, they can shrug and say “Hey, if it’s so dangerous, why isn’t it illegal?”

      I keep banging on about this because it’s not the case that regulations came first; nearly every restriction you can think of came about because people abused their freedom and liberty and other people got hurt and even died because of it. We have age of consent laws and statutory rape because asshole rich guys who could buy 12 year old girls from their parents for sex defended themselves in rape trials with “it was consensual, go ahead and prove otherwise, she said ‘yes’ and since the law says 12 year old girls can consent, it wasn’t rape”.

      We have laws about food purity and adulteration because dairies and bakeries used to put everything from chalk to lead into their products. The reason you can buy a loaf of bread in your local supermarket and be sure you won’t get poisoned is because of pesky government regulatory interference.

      Medicines and drugs are dangerous. There was a case recently in the news here of a woman who died from an accidental overdose of paracetamol (she had been self-medicating). Imagine how much more harm if anybody could set up “Dr McSrooge’s Snake Oil Manufactory” and sell who the hell knows what in suspension, pill and tablet form?

      • Scott Alexander says:

        I’m not sure how true this is. The modafinil you get from sketchy Internet sites works pretty well and I have heard of zero recorded cases of serious side effects. The nootropics sold by the nootropics communtiy tend to be pure and safe (effectiveness possibly limited by the science itself but not by the manufacturing process). There were a few cases where some people got bad batches of nootropics, sent them off for analysis, found they were indeed bad, posted about it, everyone heard, those companies went out of business, and the companies that the clued-in people buy from now are pretty legit.

        • Deiseach says:

          I remain unconvinced 🙂

          I like to know a bit more about “If this doesn’t work, I can take it back to the seller and find out where it came from”. Anything that’s in a grey area may be fine as long as Joe is the guy in business making it, but if Joe gives up making it and Bill takes over, how do I know to trust Bill?

          You pays your money and you takes your chance, I suppose!

        • Pku says:

          This is somewhat atypical though; the sort of people who buy modafinil are exactly the (rare) sort of people who would go through the process of sending a drug they weren’t sure about for analysis.
          (That said, I agree that the level to which we enforce regulations should be pretty flexible, and in some cases it is – modafinil is technically illegal, but apparently no one’s ever been prosecuted for it and you can get it pretty easily despite it. So we get that in the best example of where we shouldn’t have rigid regulations, we really don’t – so it looks like things are more or less okay. It’s not always this straightforward, of course, as the war on drugs shows, but “work on gradually improving the regulation system” seems like a much better conclusion than “down with all regulations!”)

        • Ethan says:

          Well, the nootropics consumers are likely to be smarter than average, no? If anyone is likely to be doing careful research on what drug they’re buying, it’d be the nootropic community.

          “Average” people are willing to put all kinds of stuff in their body if you tell them it’s good for you. Look at the supplements industry or even the cleansing fads–it’s all scientifically garbage, but there’s no end to it.

        • It seems to me that “I have not heard of people having serious side effects when taking internet drugs” isn’t a good reason to believe that internet drugs are generally safe.

          1) People may be averse to openly admitting that they take drugs ordered over the internet.

          2) There’s a big gap between “is perfectly fine” and “kills everyone who takes it.” Internet drugs might have serious contaminants that hurt 1 out of 25 people who take it – enough to dissuade you from using it while still making voluntary public statements about its side effects even more rare.

          3) How did people know that they got “bad batches” of nootropics before they had them tested? Did they take them and have mild side effects? Seems relevant…

      • Alphaceph says:

        > I keep banging on about this because it’s not the case that regulations came first; nearly every restriction you can think of came about because people abused their freedom and liberty and other people got hurt and even died

        nice one sided analysis. How many people died *because of* the regulation?

        It needs to be cost/benefit, otherwise the regulation ratchet and occasional flukes will ban/regulate everything.

        • Deiseach says:

          Okay, Alphaceph. Here is this nice imported bottle of Chinese mineral water. Now, it may be from a legit manufacturing source that really does operate to the highest levels and draws its water from a 1,000 year old well that is monitored for trace contaminants, bacterial and viral levels, and mineral contents.

          Or it could be one of the cheap’n’cheerful forgeries that is full of raw sewage and has been swashed around with some bleach to take the brown colour out of it.

          Who knows? We’ve done away with those pesky regulatory brakes and if you’re so fussy, pay an independent analytical lab yourself full retail price to work out if it’s fit for human consumption or not – isn’t that way better than putting any hold on the market?

          • Alex Z says:

            You’re strawmanning the opposite position. Don’t do that.

            But to answer your question, as somebody who lived in a developing country without safety regulations for almost a decade, I can definitely say that you can find safe things. Sure, it means you need to do a bit more research (though for common items such as bottled water you do your research once) instead of grabbing just anything off the shelf, but you can definitely find trustworthy manufacturers.

            So no, I won’t drink a randomly-selected bottle of water by some unidentified Chinese manufacturer. But give me a day to chat with locals and I will easily find some water bottle I’m happy to drink.

          • Alphaceph says:

            > Who knows? We’ve done away with those pesky regulatory brakes

            My suggestion (upthread) is not to get rid of the FDA, Food Standards, etc. You can keep all the internal machinery exactly the same, the same inspections and personell, etc.

            The only difference is what you do with the output.

            If your regulatory body finds that the water is made from raw sewage, that has to be written on the front of the bottle, in big red writing, with the actual name that the manufacturer chose in small font, and the package has to be plain apart from the manufacturer name, ingredients and FDA warning.

            (And furthermore, for the most egregiously unsafe products such as heroin or crack, I think they should still be banned because of their potential as a weapon to use against somebody. EDIT: and because it seems to me that physically addictive substances deserve special treatment in regulation)

          • Alphaceph says:

            BTW I am in the odd position of arguing the libertarian side in one thread and the nanny state side in another thread……!!

  16. Saul Degraw says:

    Another thing to point out is that the dude got caught because he raised the price significantly in one swoop. If he was more cautious and raised the price slowly but surely over many months/years, he probably would not have incurred so much rage or gotten called out/caught.

    • Alex Z says:

      I suspect his style is what attracted the lightning. Had he been more conservative in his style, he probably would have not been targeted in such a hideous manner.

    • Somewhere, I’m not sure if it was in a comment here, I saw an ingenious if not too likely theory about what he was really doing.

      Step 1: Buy the rights to the drug.
      Step 2: Short stocks in a variety of drug companies.
      Step 3: Raise the price of the drug enormously and make sure the fact becomes public knowledge, resulting in lots of outraged commentary, proposals for drug price regulation and the like.
      Step 4: Wait until step 3 has pushed down the stock prices of drug companies and close out your short sales at a large profit.

      Potentially much more money to be made than from the drug itself, and it does seem to fit the background of the gentleman in question.

      • Matt says:

        This is illegal.

        • John Schilling says:

          Which statute do you think it violates, and why?

        • RCF says:

          I think that there might be legal bases for going after someone engaging in such behavior, such as tortious interference.

        • Douglas Knight says:

          Combining two legal actions need not produce a legal action. There are many things covered by your last paragraph that are illegal Market Manipulation. I think this example would easily count in Britain, but is more ambiguous in America.

        • Loquat says:

          Well, Bill Ackman was able to try the same tactic with Herbalife (short their stock and then publicly declare the company a pyramid scheme a few years ago) and hasn’t been prosecuted for it yet, but apparently prosecutors are now looking into the matter. They might be more interested in allegations that he’s been engaging in insider trading and faking/paying for evidence of people being victimized in the absence of significant numbers of genuine victims coming forward than in the basic idea of trying to profit on the effects of his own actions, though.

  17. Rhys Fenwick says:

    Pyrimethamine actually looks *extremely* easy to synthesise (as in ‘first-year undergrad chem class’ level). As long as you claim it’s not for human consumption it’s more or less legal to produce and distribute, right? I’m, ah, asking for a friend.

  18. Steven Flaeck says:

    My understanding is that Turing isn’t the manufacturer, however. There are three or four manufacturers of the pill, contract labs, basically, and all of them signed exclusivity agreements with the other companies which held the Daraprim brand. Then Turing acquired the brand plus those contracts, becoming the new sole maker. It’s not that someone managed to get a monopoly by outproducing, then reaped the rewards of driving everyone from the market. They just paid off contract labs to become their sole customer for it.

  19. Emlin says:

    Although processes could be streamlined and costs reduced, bioequivalency testing itself is extremely important and currently not always stringent ~enough~

    http://www.webmd.com/depression/news/20121005/teva-high-dose-generic-wellbutrin-xl-withdrawn

    When a generic is introduced, oftentimes insurance will cover only the generic. If there are multiple generics, oftentimes the patient will receive a different generic every month depending what the pharmacy has that day. When generics aren’t actually equivalent, this can cause tons of problems, especially in particular conditions such as epilepsy for example.

    • Held in Escrow says:

      Might that not be a good argument for subsidizing the process of determining bioequivalency then?

      • Emlin says:

        Perhaps! I’d also like pharmacies to give patients choice regarding generics, or at least consistently stock the same ones, so they aren’t changed back and forth constantly but I’m not sure how to encourage that to happen.

  20. Nita says:

    So, does anyone want to explain the 40-fold price difference for the generic cancer drug in different pharmacies? I’m pretty sure that some people ended up paying that $455 price, and anyone who is not savvy enough (or, e.g., too disabled) to call around or use GoodRx is paying similar high-end prices (or letting their illness progress) right now.

    Of course, from a capitalist perspective, this is the market working as intended. The dumb losers here are the Costco CEO and small pharmacies, who apparently did not get the memo that cancer patients are desperate to live.

    • A Definite Beta Guy says:

      Pharmacies do not have identical business models. Pharmacies like CVS and Walgreen’s offer convenience and access to a wide array of insurance networks. You cannot just walk into any pharmacy and have them accept your coverage: both CVS and Walgreen’s have huge divisions to negotiate access to pharmacy networks.

      They also offer different services. Go into a CVS or a Walgreen’s and your prescription is practically instantly available at anywhere else in the entire nation. They have direct billing to almost every major PBM in the country, not to mention the Medicaid clients.

      They aren’t the same companies.

      Here’s Costco:
      “•Your order will be processed within 1-4 days of the pharmacy receiving your prescription.”

      My major pharmacy notices that I am out of drugs and calls my doctor for me and then receives an electronic script and I can fill it anywhere in the nation and this process takes maybe an hour.

    • RCF says:

      Perhaps it’s industry-wide price discrimination.

  21. krpr says:

    I thought it was pretty clear the Turing CEO was trying to create political outrage against big pharma, driving down biotech share prices so he could sell their stock short. Given how biotech stock prices dropped after his performance, he would have made way more in a few days that way than by selling a low-demand pharmaceutical for years.

    • Nita says:

      That seems plausible at first glance — he is primarily a finance guy, after all. A rational munchkining genius who will soon be smiling at us from the top of a giant heap of utility!

    • Deiseach says:

      Then the guy is even worse, because he’s actively damaging the pharmaceutical companies who do the research and development of new drugs (they’re the losers when their share price goes down) all for the sake of his own personal profit.

      Whatever his real strategy or intentions (we all know he wants to make tons of money), he’s poisoning the well.

    • Scott Alexander says:

      If true, that would be amazing.

      But couldn’t he get hit on insider trading laws? He’s gone from “scummy but legal strategy” to “jail as soon as the SEC finds out”.

      • Anon says:

        So long as he was trading in biotech stocks that had nothing to do with drug at issue, I don’t think so. He wouldn’t have any inside information about those other companies in particular, just knowledge that the biotech sector may be in for a rough ride in general. (This assumes, of course, that he was not exposed to nonpublic info in any such stock trades by virtue of being a biotech CEO).

        • brad says:

          I agree insider trading wouldn’t fit, but perhaps something like securities fraud under a theory similar to pump and dump. But it’d be a big stretch.

      • Nornagest says:

        I’m not a finance expert, but I thought insider trading required privileged knowledge of what the companies you’re trading are planning to do. Making it illegal to plan something yourself and then trade in unrelated companies on that basis would have some weird consequences — it would for example make it illegal to short oil if you’re about to commercialize nuclear fusion.

        • Alex Z says:

          It’s complicated. For instance, knowing unpublished third-party analyst predictions can under certain circumstances be insider trading.

    • Esquire says:

      There’s no way that’s really true. He raised $90M for his company – way more upside in trying to make that work than in a crazy and illegal stock market manipulation scheme.

      Anyway, do you think he really could have predicted this backlash? (A) These price increases are not actually that unusual. (B) Negative press attention for one tiny company is FAR from guaranteed to torpedo the whole biotech index.

    • And that’s the comment that provoked mine above–I forgot where I saw it.

  22. Deiseach says:

    This is part of my point about capitalism (i.e. it is not a divinely-ordained system handed down along with the Ten Commandments on tablets of stone on Mount Sinai) but a human-created system that has faults and virtues like all other human-created systems.

    Then I get mobbed with (mostly) Americans telling me Free Market Capitalism is the greatest thing in the history of the universe that has raised more people out of poverty and caused the entire advance of human civilisation than anything else in the history of mankind, and daring to breathe one word about it being less than totally perfect is questioning their god and their religion (and I probably want to burn the flag, drown puppies, and kick Mom in the teeth while I’m at it).

    Come back to me when you have a free market. Big companies suing the pants off potential competitors to establish a de facto monopoly sure doesn’t sound to me like the model I’m being quoted how “The beauty of the system is that competition encourages innovation and efficiency and consumer choice and drives down price”.

    What you say about the pharmacies charging various prices rings true to me, not just about nationwide chains of chemists and not just in America: My family, like everyone else in Ireland, was a customer of our national telecoms provider for years (mainly because it was a monopoly until competitors finally entered the market in the 90s) and we never got any offers on the pricing structure. You want a landline (and this was before mobiles became common), you pay our charges and put up with our crappy service.

    Only when I finally rang up to close the account because I was switching to someone else, then I got the “Stay with us and we can offer you these discounts and knock this much off the quarterly charges!” hard sell, which I declined and still switched.

    They don’t compete unless absolutely forced to do so, and they can only be forced to do so by outsiders, not from within their own area of the market. And it does sound like the court system in the US should have some guidance about cases where big companies sue pre-emptively on out-of-patent drugs or ones that have been in the public domain for decades in order to ward off potential competitors.

    The only good thing about Turing (which apparently bought the rights from a company that bought the rights from a company that bought the American rights from GSK, the original manufacturers) is that up to now, Daraprim had too small a market and was cheap as dirt so nobody was interested in coming up with an alternative. Now that this has sprung up out of the blue, it might encourage even a small manufacturer to try a different drug for the same range of conditions because even if they charge $50 a dose, they’re still going to be way cheaper by comparison. So some real competition might ensue.

    I also wonder, if GSK still retain the European/rest of the world rights, could they either sell those to someone else or make the original recipe Daraprim and export it to the USA (possibly with enough of a new tweak to the molecular structure to make it different enough not to infringe Turing’s licence)? After all, they’ve already spent the money on the original research and even if they bump up the price to something outrageous like $100 a tablet, they’ll still look good and be cheaper by comparison.

    • Tracy W says:

      As a frequent defender of capitalism, I like hearing someone complain that it’s not implemented thoroughly enough.

      • Deiseach says:

        Well, I do think that although it’s claimed to be a free market, there’s an awful lot of difference between theory and practice: Bob the Rational Actor makes jars of salsa in his home kitchen. Bill the Rational Actor buys Bob’s salsa. Tom the Rational Actor, perceiving a market for salsa, starts making salsa in his home kitchen and is now in competition with Bob for Bill’s custom. In Lovely Theory Land, Bill is now in a dominant position as the customer with a greater choice, supply is outstripping demand and there is a glut of salsa, so prices must come down. In the real world? Not so much.

        I don’t disagree with letting companies protect proprietary information, but when you start off with (for example) letting firms patent naturally occurring genes or derivatives so that anyone else can’t use the plant or the extract to make their own competing version of whatever, then you’ve gone beyond common sense – at least until the Supreme Court made a decision in 2013. And so you get firms like Turing being founded which took no risks, invested no money, did no work, and are merely creaming off the profit from the work of others. Obviously, there must be enough demand for the drug to enable profit to be made by hiking the price to such a degree: if only twenty people per year in the USA needed it, it doesn’t matter how expensive the drug is, it wouldn’t pay Turing to make it.

        So possibly an answer is to licence small firms to make these kind of low-volume drugs for the big companies which created them and put a limit on the amount of price-hiking that can be done. Or loosen up the law so generics can compete fairly.

      • Saul Degraw says:

        I believe in Market Forces but I don’t always believe that market forces are sources for good.

        I trust Capitalism to deliver me a wide variety of consumer products. But I think certain goods like health care are human and social goods, not consumer goods.

        • John Schilling says:

          Are consumers now inhuman or antisocial? Seriously, I don’t understand what the distinction you are trying to make here is, unless it is really just “important” vs. “trivial”, in which case don’t obfuscate.

    • Zakharov says:

      The people that keep going on about how great the free market is are precisely the people that complain the loudest about companies abusing the legal system to create monopolies.

    • Ever An Anon says:

      If they’re anything like me, reflexive defense of capitalism comes mainly from opposition to the sort of people who reflexively attack it. Generally if someone leads in with “capitalism is overrated” you can bet your bottom dollar their spiel will end with suggesting either a technocratic command economy or anarcho-primitivism to replace it. I’d much rather make do with the devil I know than the other much much scarier devil I also know.

      Of course that doesn’t apply to you or most intelligent Catholics. I think Distributism would almost certainly underperform a more traditional capitalist economy: after all, guilds impose as a matter of course the sorts of monopoly rents we’re complaining about here. But it probably wouldn’t be a disaster either, and the lost productivity would be worth it if we could actually reverse the process of social atomization that way.

      • Wrong Species says:

        It probably wouldn’t be a disaster compared to socialism but still. Can you imagine if the US government just one day banned interest rates?

        • Banning interest rates

          The experiment has been done, although not in the U.S., by Jewish, Christian and Muslim societies over a period of many centuries. The usual result is that ingenious people devise contractual forms that pay interest in ways that don’t look like interest. Other ingenious people, at least in Judaism and probably the other two as well, devise rules intended to prevent such evasions. The first set of ingenious people … . It raises transaction costs and adds unnecessary uncertainty, since one way of not paying interest is a loan where the expected value of the amount paid back is larger than the amount lent but it takes a form, such as lending in one currency and repaying in another, where the actual value is uncertain, so no promise of interest. But it doesn’t eliminate lending.

          My favorite story, from Rodinson’s Islam and Capitalism, was an Arabic contractual evasion that was copied by the Christians, retaining its Arabic name.

  23. Deiseach says:

    But why doesn’t the insurance company do one the thing everyone in health care agrees insurance companies do best: send whiny faxes complaining that they’re not going to pay you? I don’t know.

    Because Dr Scott is only one individual doctor, so the insurance company can tell you “Piss off, we’re not paying for that.”

    I know nothing about American companies, but I imagine if Rite-Aid is pretty much a generic term for “chemists”, then it and Wal-Mart etc. are honking big national chains with hundreds or thousands of stores and way more purchasing power than you can command, so the insurance company (let us call them MediSure) has to play nicely with them or else they’ll say “Piss off, we’re not taking your insurance any more to pay for prescriptions, we’re dealing with your competitors” and then the patient goes in to their local Rite-Aid (as it were), finds they don’t take MediSure, then says “Sod this for a lark, I need my medicine” and they switch to the competitor who is accepted instead, and MediSure potentially loses thousands (if not more) of customers nationally.

    • Tracy W says:

      I read that bit in the post as Scott expecting health insurance companies would be writing to the drug companies and pharmacies demanding lower prices, not Scott writing to the health insurance companies.

    • A Definite Beta Guy says:

      For how this plays out in practice, please see Walgreens and Express Scripts.

    • Creutzer says:

      Is switching your health insurance easy enough for this to work? A priori, I wouldn’t expect it, but I’m not even in America.

  24. Steve Sailer says:

    Scott writes:

    “wherever there is a big manufacturer with a sizable market share involved, they will sue, just to try to eliminate more competition from the market.”

    For example, Pfizer, maker of the biggest pill in the world, Lipitor, sued the one company that had the right to make a generic version. The two companies’ lawyers huddled and then announced that, in effect, Pfizer’s patent would get extended a couple of years. Or something. It was pretty hush-hush, even though billions of dollars were on the line.

    • Jordan D. says:

      Speaking as someone who is much more fond of regulation than most folks around here, this is my largest issue with regulated markets.* The fix would seem to be harder than just imposing court costs and attorney’s fees on the frivolous plaintiff- it would need to be something more like ‘actual damages imposed by the delay’, which I imagine Congress would never do.

      *In general, that is. The FDA has special problems.

      • baconbacon says:

        The “fix” is to end patents and destroy monopoly power.

        • Jordan D. says:

          It is not at all obvious to me that abolishing patents will have good outcomes.

          In any event, it certainly has nothing to do with gated regulatory markets, which are made monopolies not because of intellectual property but (at least in theory) to ensure that all providers in a sector meet certain legal requirements in their provision of services. That is to say, gated markets are supposed to address externalities. Entities entrenched within the system sue newcomers as a matter of course in order to increase the cost of establishing a new service and in the hopes of knocking out new competitors before they even exist.

          Obviously there are two basic ways to address this- either try to 1) disincentivize or prevent the suits or 2) remove the gated market’s gating. I think the first should always happen, and the second should happen sometimes. I haven’t got enough knowledge about the FDA and its industry to be absolutely sure that the second should happen, but the first is an obvious default.

          • baconbacon says:

            Gated communities without patents tend to be much weaker. With patents one (or a small number) of producers get years of information, experience and brand building (as well as regulatory connections) which add to the barriers that potential competitors face when the patent expires.

            The primary way to alliviate the current problems with gated communities is to lower the cost of entry for quality particicpants. The best way, IMO (if we are keeping a regulatory structure) is to allow any company that thinks it is competant to enter the marketplace. You could ask for a large bond that would cover damages if they were found to be of low quality but that would be returned to the company after they had cleared the outcome hurdles.

          • Jordan D. says:

            That wouldn’t be a terrible idea, although it would mean that we’re keeping the market restricted to businesses which can secure very big bonds. Still, an improvement!

        • For people interested in a book arguing for the abolition of intellectual property, both patents and copyrights, I recommend Against Intellectual Monopoly by Boldrin and Levine. True to their principals, the authors have a version webbed where you can read it for free. I’m not sure they are correct, but they make an interesting case.

          One of the things I discovered teaching IP theory a few years back was that whether IP was a good or bad idea was a live issue well into the 19th century, with serious people on both sides.

          http://levine.sscnet.ucla.edu/general/intellectual/againstfinal.htm

    • Winter Shaker says:

      Pfizer, maker of the biggest pill in the world

      I know it’s not what you meant, but…
      https://www.youtube.com/watch?v=Xbq3kc29Tmg
      🙂

  25. amoeba says:

    And is it not possible in the US to order generic Daraprim from other countries, e.g. from Europe? If not, would it be legal to go to Europe, buy a large stash and return home to US? Or is this vastly complicated because it’s a prescription drug?

    • Nornagest says:

      IANAL, but I don’t think it’s illegal to import prescription drugs that you bought elsewhere into the US for personal use, provided they’re not scheduled. You might have trouble getting a large stash past customs, though.

      I do think it’s illegal to mail-order prescription drugs from other countries while in the US, but I don’t think it’s commonly enforced unless you’re trying to buy morphine or something.

      • Saal says:

        I’ve been telling this to everyone I know for years, but I’ll just say it again. Buy your drugs from Canada online. They’re not as cheap as the Indian/Chinese options, but less risky, I’ve NEVER had issues with customs, and they save so much freaking money and hassle over going to a physician, maybe getting shuffled off to a specialist, heading to the pharmacy, and fighting insurance every single step of the way.

        I don’t know how applicable this is to more specialized drugs, but it works pretty damn well for most common unscheduled medications.

      • Pku says:

        Legally, you can bring “up to three months’ supply of prescription medication for personal use”, according to the TSA.
        @Saal, I don’t think this works with modafinil – what kind of drugs have you used it for?

  26. Lancelot Gobbo says:

    About ten years ago, generic manufacturers in Canada got together and formed a cartel related to the production of tricyclics. One would make amitriptyline under the ancient brand name of Elavil, one would get imipramine and so on. They would not cross-compete and all raised prices about ten times. All because tricyclics in small doses made a big comeback for altering sleep architecture in chronic pain and there was an opportunity to profit. To be honest, I hate out generic companies far more than the brand name companies, especially since production has gone overseas and frequently large batches of staple drugs have to be condemned for safety reasons. It would make sense tome to give the original inventors good patent protection and the right to recoup their development investment, but at the end for there to be a government generic plant that would sell the drugs at cost price to the provinces. Sadly, our generic companies are amongst the biggest donors to political parties, so there’s not much chance of that happening.

  27. Murphy says:

    To be fair, if you’re going to rail against the requirements for equivalency tests you should probably at least mention why they’re required: Lots of people died before they were required because manufacturers did things like making childrens cough medicine out of deadly substances.

    You rightly worry about the price but it’s also not nice having to worry that the drugs you prescribe will suddenly start killing your patients because they changed the formulation without testing it on a single person.

    http://www.fda.gov/aboutfda/whatwedo/history/productregulation/sulfanilamidedisaster/default.htm

    “The company’s chief chemist and pharmacist, Harold Cole Watkins, experimented and found that sulfanilamide would dissolve in diethylene glycol. The company control lab tested the mixture for flavor, appearance, and fragrance and found it satisfactory. Immediately, the company compounded a quantity of the elixir and sent shipments–633 of them–all over the country.

    The new formulation had not been tested for toxicity. At the time the food and drugs law did not require that safety studies be done on new drugs. Selling toxic drugs was, undoubtedly, bad for business and could damage a firm’s reputation, but it was not illegal.

    Because no pharmacological studies had been done on the new sulfanilamide preparation, Watkins failed to note one characteristic of the solution. Diethylene glycol, a chemical normally used as an antifreeze, is a deadly poison.”

    • Paolo G. Giarrusso says:

      Thanks. I’m no expert, but I was surprised that Scott didn’t even consider your point *explicitly*.

      Hence, the real question seems: is there a cheaper way of ensuring the same safety? For instance, why can’t you just offer to perfectly copy the drug, excipients included, to avoid testing?

      • Murphy says:

        Oh I agree, the current system in the US appears to be a mix of good sense combined with political interests and corruption.

        There’s certainly better ways to deal with such things but just ordering drugs from “some guy” in china is a good way to end up with a lot of dead kids and no trust in pharmaceuticals.

        You’d probably still need to test the drugs to make sure that the company is as competent as they claim to be though that could probably be done with a mass spectrometer rather than a crowd of human subjects.

    • Peter says:

      This I think is the problem with the large anti-regulatory camp here.

      Yes, sure, the regulations cause all sorts of deviations from ideal markets, and this allows rent-seeking monopolists to extort money from people and cause all sorts of inefficiencies. Regulatory capture means that this is worse than it (in some sense) needs to be, OTOH regulatory capture is pretty much inevitable so in another sense things are exactly as bad as they need to be.

      On the other hand, the regulations are necessary. Also, someone was griping about patents – in this case patents are irrelevant, but generally, drug discovery isn’t cheap and if you want for-profit drug discovery you have to have patents or something like it.

      The worst-system-of-economics-except-for-all-the-others, assuming people aren’t complete ideologues, is going to end up with a messy system of patches and fixes on top of patches and fixes, each layer fixing or at least mitigating some of the problems introduced by the layer below and introducing new problems of its own. So it’s very tempting to scrape away all of those layers of cruft and get down to the shinyperfect thing underneath… except I’m pretty sure that a fair chunk of the cruft is actually necessary, and Bad Stuff happens when it isn’t – or more precisely, wasn’t – there. Chesterton’s Fence[1] and all that. Kicking the cruftball into the long grass and starting again with something completely different – even worse. Hence the “except-for-all-the-others” bit…

      [1] Sorry, I just have to say “‘Ere mate, wanna buy a paradox real cheap? Fell off the back of a lorry it did.” whenever that phrase comes up.

    • Scott Alexander says:

      Purity tests take a week and $50. Half the people in r/nootropics send in the latest chemical they’ve ordered for purity tests. Equivalency tests seem like a much higher bar.

      There are some drugs where bioequivalency is really important; for example, if you change your anticonvulsant dose even a little you might get a seizure. There are other doses where bioequivalency doesn’t matter as much: half of my patients on Prozac 20 mg say stuff like “I forgot what dose you told me to take, so I took 40 mg, that’s okay, right?” and even though I’m mentally facepalming in practice it doesn’t make too much difference.

      Different individuals’ metabolisms can alter drug blood levels by at least a factor of two or three, more in rare cases. As anyone who’s had to be on warfarin knows, stupid things like eating too much cabbage or starting an exercise program can alter your blood levels dramatically. For everything except warfarin, we just take this in stride.

      I think if generics had weaker bioequivalency testing, we would just have to worry a lot about the dose when switching people from brand names to generics, or among generics. And we do that anyway, because half the time the bioequivalency testing doesn’t seem to have worked very well.

      • Murphy says:

        But drugs aren’t typically pure, they come in pills made of things like waxes, pigments, silicates, sugars, preservatives, flavourings, oils, acids, bases, oxides, gelatins, proteins etc and quite a few have effects on how the drug is absorbed.

        A lot of psych drugs are quite forgiving (if something is dangerous when taken erratically by someone suffering from mental health problems then that’s likely to affect how often it’s prescribed or the guidelines on how to prescribe it) but that isn’t true in every field.

        If you’re giving someone a drug you don’t want them to suddenly go into anaphylactic shock because this weeks batch from china checked out fine for likely contaminants of the active chemical but happened to have egg protein in the mix.

        So all we need to do to know which drugs can be cleared via Purity tests rather than Equivalency tests is to figure out which drugs are potentially dangerous to some fraction of people if taken with some different set of excipients.

        Perhaps someone could run a trial, I wonder who should pay for that…

        Look, the American system is messed up, that seems to be a theme when 50% of the politians involved in any program or department are trying to poison it while 49% of the remainder are trying to line their own pockets but switching to Some Guy In China Sent Me This isn’t a good alternative.

        • Alex Z says:

          Replicating the set of excipients seems like it would allay the concern. I’m also wondering how often changing the excipients will cause something bad to happen. If that number is low enough, we could simply accept that as part of the risk of living in a world with cheap abundant medicine. (We could also require disclosure.)

          I also think your “some guy in china” line is a bit of a straw man. If the legal regime changed, it would probably be “some lab in the united states whose owners will go to jail if they decide to put arsenic in the cough sirup”.

    • Edward Scizorhands says:

      Surely the only two choices available to us are not “completely unregulated market where companies can put arsenic into my aspirin” and “it takes millions of dollars to show we have a generic that does the same thing.”

    • “Lots of people died before they were required”

      You cite a single example, which I think is the one example always cited for this argument. Do you have five more?

      • Murphy says:

        Adulterated Quinine

        During the course of the war, 1,773
        Americans were killed in action with an
        additional 13,271 dying from other causes.
        This high number of collateral casualties
        shocked the nation, and calls came from
        across America for an investigation.
        Although the high death rate had many
        contributing factors from compromised
        food provision and poor living conditions to
        infectious diseases, public outrage focused
        on the medical care given to soldiers. It was
        concluded that adulterated drugs supplied to
        the Army had caused the large numbers of
        deaths among soldiers.

        This enraged the public, and the outcry
        led Congress to pass the Drug Importation
        Act of 1848, the first federal drug law.

        https://www.cbp.gov/sites/default/files/documents/mexicanamericanwar.pdf

        Tetanus-infected diphtheria antitoxin

        in 1902, the Virus, Serum and Toxins Act (Biologics Control Act) was passed in response to tetanus-infected diphtheria antitoxin which was manufactured by a small laboratory in St. Louis, Missouri. Ten school children died as a result of the tainted serum. No national standards were as yet in place for purity or potency.

        https://books.google.co.uk/books?id=R0W1ErpsQpkC&pg=PA327&lpg=PA327&dq=%22in+1902,+the+Virus,+Serum+and+Toxins+Act%22&source=bl&ots=oCPne21-xp&sig=g8Cwrt7ybddfCRGwmyGnBR_d54c&hl=en&sa=X&redir_esc=y#v=onepage&q=%22in%201902%2C%20the%20Virus%2C%20Serum%20and%20Toxins%20Act%22&f=false

        Also prior to the FDA common food addatives included Formaldahyde and Borax because private industry had basically zero incentive to find out if their addatives were toxic or deadly.

        Borax defeated, the poison squad moved on to test other common additives, including sulfuric acid, saltpeter and formaldehyde. One of their targets, copper sulfate, was especially disturbing: used by food producers to turn canned peas a bright shade of green, it also caused a host of health woes, including nausea, diarrhea, vomiting, liver damage, kidney damage, brain damage, and jaundice. Today, it’s commonly used as a pesticide.

        http://www.esquire.com/food-drink/food/a23169/poison-squad/

        The food stuff is pretty easy to find examples for: private industry was very happy to poison people, drugs are harder because there were also poor records about them back in the 1800’s. If people died it was rare to be able to pin it on a batch of drugs even if it was straightforward poisoning.

  28. Corwin says:

    Hm, and what if there were uncensorable websites that sold any pharmaceutical one could want, sending them stealthily, paid with magic internet money, that could even easily coordinate the crowdfunding of batches of medicines on enough demand?

    This is precisely why some of us are Calling Up That Which Can Not Be Put Down.

    And about the quality control … Let me tell you the story of the Avengers.

    There was once a black market site that sold recreational drugs. The market was opaque and lots of products were of shitty quality. Then an user posted a thread on its forum, saying “I will coordinate testings of the drugs in this thread.” They did it: users could have drugs sent from vendors to the Avengers, or send them themselves, or post lab reports to the thread. Doing that raised the quality of all the drugs on the market, basically overnight.

    Of course it wouldn’t scale up to country-scale as it was there. But that crowd-managed quality control was better, even when gameable, than no control at all. Vendors could have cheated that system in various ways, but they didn’t bother and just began to sell good product. It was easier to sell good drugs than to cheat the quality control system just to go on selling shitty ones. There might well be some way to set up incentives to do the same thing on larger scales.

    • Ethan says:

      I’m trying to figure out if this is pro- or anti- FDA. When a bunch of people get together and decide to do something for the common good, that is “government”, right?

  29. Iajawl says:

    Seems strange to me that more people don’t think the answer is not having for profit healthcare.

    • Adam Casey says:

      That’s a way of doing it, if you trust your government to run healthcare…

      But it seems really really weird that the obviously correct way to deliver needful things to people is the free market, EXCEPT if those things are medicines. Like … if having the government run medicine was for some reason necessary or correct then surely for the same reason they ought to be handling the supply of bread?

      • Murphy says:

        Even the NHS doesn’t run it’s own drug factories. (at least not much)

        I can’t find numbers but also can’t find people complaining about it so I suspect it’s far cheaper than in the US but companies still have to establish bioequivalence,

        A quick google gives a few companies specialising in generics. This one for example has 44

        http://www.consilienthealth.com/products/generic-products

        To get an idea of the amounts of money involved we can look up how large they are.

        https://companycheck.co.uk/company/05427634/CONSILIENT-HEALTH-UK-LIMITED/summary

        https://companycheck.co.uk/company/IE347231/CONSILIENT-HEALTH-LIMITED/summary

        Less than 10 million EUR net worth. Not a big company so I’m guessing they’re not handling anything like the ~100 million that it would take to get that many drugs through the US system.

      • birdboy2000 says:

        They are handling the supply of bread. US does it less directly than Rome, but even here we have food stamps and farm subsidies.

        A right to food is not a bad idea.

      • John Beshir says:

        It isn’t the only thing which you don’t deliver through the market. Aside police, one other example would be the third major emergency service: the fire brigade.

        You could have the market take care of that, and just subsidise putting out fires where the person can’t afford to pay the fire brigade to put it out to help the poor if you wanted.

        But there isn’t going to be decent competition on price (in this case, due to limited size of market in each area), people who just had their house catch fire without prearranged coverage are not in a workable position to shop around, and people will routinely not buy insurance ahead of time if not forced because the bulk of people discard low probability events, and this will suck for them and also suck for the wider society because of all the houses which don’t get put out if they catch fire before the whole city is burning. And your subsidising of the poor is going to get absurdly expensive as a result of the high prices people pay due to the state of the market.

        On the other hand, you have food, which you can take that “give them subsidy/money if you want to help poor people have it” approach to as well. Food is available from a whole bunch of different stores which all compete quite aggressively on price. It doesn’t come in the form of sudden crises, or disable the person, so they can shop around to get it. Since needing food isn’t a low probability event needing insurance it doesn’t run into problems of people discounting need for insurance for it.

        Different markets work more or less effectively at settling the price at a stable minimum needed to motivate someone to do the job. The latter is a healthy, well-functioning market that works well. The former is wildly dysfunctional, full of situations where there’s only one viable seller of a service and situations where buyers have little ability to negotiate. So we have the state take over the former but not the latter.

        Healthcare, it seems to me, sits closer to the fire example here. It’s certainly dysfunctional enough that you need some market-shaping actions on the part of the government to make it work well, even if your system is largely private, e.g. the individual mandate (also present in Switzerland’s system and in Singapore’s in the form of compulsory savings).

        The above should be sufficient, but an additional reason is that government is also tampering with healthcare by setting safety standards and awarding patents. This creates some particular kinds of dysfunction like the situation discussed in the article, where costs are distributed to parties not responsible for making the decisions which generate them and in a very haphazard, sometimes extremely painful or quality of life degrading manner.

        If you’re not going to scrap drug patents- which could severely impede and possibly halt drug development, or move decisions over it to the government anyway- having the government run healthcare fixes the distribution of costs problem and makes it internalise the costs of its regulation, rather than those costs being an externality to it.

      • Cadie says:

        Medicine – specifically prescription medication – is different than food, hygiene products, and most other necessities. Food is a relatively cheap business to get into and the regulations are far fewer and lighter than for pharmaceuticals. If you don’t like one brand of bread, you can buy another. It’s extremely unlikely to hurt you if you don’t have an allergy; it’s food. If you hate them all, you can buy flour and yeast and make your own at home. Or just not eat bread, and eat something else instead. There’s a lot of inherent competition in the food business. Toilet paper may not be optional (especially if you don’t have a bidet) but again we have lower barrier to entry and lots of choice.

        With prescription medication, the consumer doesn’t have much of a choice. I’m on a medication cocktail that, luckily, is all generics so it doesn’t cost me an arm and a leg, but if the price of venlafaxine suddenly went up 1000% I can’t just say “fine, screw you, I’m going to take citalopram instead.” I’d have to get a new prescription, plus venlafaxine is the only currently affordable drug that works for me so that wouldn’t be a good idea anyway. Unlike bread, you can’t make it at home or substitute something totally different. Unlike toilet paper, you often don’t have 8 different brands to choose from if one company decides its product is worth its weight in gold. Unlike clothes and cars, you don’t have the option of buying used goods at a heavy discount.

        Whether more government regulation or more free-market solutions would lead to better outcomes, prescription pharmaceuticals ARE a different and possibly unique case.

      • Iajawl says:

        Well I trust my government to run healthcare yes. The reason why I like it is because it means that whoever is pricing stuff has to bargain with the whole country. Individuals cannot always shop around so easily but governments can.

        I’ve never been convinced that the best way to do anything is the “free market”. I am not an economist but I don’t think free markets exist at least not according to the literal definition I get from looking it up.

        The reason you don’t need the government to supply bread vs medicine is because it would take a collaboration of all bread sellers to drive up the price of bread to the point where it would cause trouble for the population and I am pretty sure there are laws against that. In some circumstances a single company can decide to increase the price of medication by silly amounts.

        Also if you don’t eat bread nothing bad happens to you. Eat something else. Medication works differently though.

    • Tracy W says:

      Yes, because it’s long been known that the way to make human greed go away is to tell people that they’re working for a non-profit. It’s the economic equivalent of vaccination.

  30. These older Marginal Revolution links are relevant again:

    http://marginalrevolution.com/marginalrevolution/2011/06/drug-shortages.html
    http://marginalrevolution.com/marginalrevolution/2012/06/drug-shortages-caused-by-the-fda.html

    tl;dr: around 2010, the FDA tightened regulation on generic production, including a general “zero tolerance” policy on manufacturers.

  31. Jeff Kaufman says:

    So if I want to do a kickstarter to produce the Lyme disease vaccine I need to raise ~$2M?

  32. Ton says:

    From the longecity post:

    “When I was like seven, I read a story about a kid in a science fair who invented a chemical that let people photosynthesize, and the government made him stop because it would destroy the food industry (my childrens’ books were better than yours).”

    I read that book too! It also had some great points about how the media really works.

    Also, it wasn’t so much as “invent” as “mash a bunch of common ingredients together and accidentally produce it”.

    • Deiseach says:

      Also, it wasn’t so much as “invent” as “mash a bunch of common ingredients together and accidentally produce it”.

      Sounds like the kind of thing that would get you arrested in a Texan school 🙂

  33. njnnja says:

    Next unicorn idea: the Uber of generic Rx.

    While you are correct that you can probably make a molecule in a Chinese lab for a very modest cost, then you have to *ingest something made in China for dirt cheap.* It’s like taking a discount helicopter tour – no thanks, I’ll pay full price.

    BUT, somehow Uber gets people to get into a car with a stranger all the time, without some fancy government stamp of approval. What if you had a database that has user reviews of hundreds of labs around the world. A patient (or doctor, or insurance company) could put in a request for a particular drug, by a particular date, and when there are enough requests (Groupon-like) for the economies of scale to hit a certain point, then a batch is produced.

    Also like Uber, you need a massive about of bird-flipping to regulators, but Uber hasn’t been shut down yet.

    • Adam Casey says:

      This is the whole reason that brand names and trademarks were invented. It’s not like uber is some magical new way of doing things, it’s just much faster and you can communicate with more people.

      Even if you can’t uberise everything: don’t by things from xxillegalcihnesemedZZZZ.xxx if they’ve been running less than a month and have bad news stories about them, do buy things from importedpharmacy.org who have been running for decades and have lots of independent organisations recommending them.

    • Scott Alexander says:

      It’s called “Canadian shipping pharmacies”. Probably the only reason they haven’t caught on is that no one of them is big enough to become a household name and they can’t exactly advertise.

      • njnnja says:

        I would argue that the only real innovation that Uber did was to completely ignore [taxi] regulations. If a “Canadian shipping pharmacy” caught on to that innovation then they *could* advertise.

        Of course, Uber managed to get young and hip West Coasters and Washingtonians as customers, and therefore on its side, to help shield it from the regulator blowback, while all that this hypothetical high profile, lots of advertising, Canadian shipping pharmacy would have going for it are a bunch of sick people who are too poor to pay for drugs. Not sure how to make that part work 🙁

        • Mengsk says:

          Not so much. The FDA puts really strict regulations on what you can and cannot advertise. Flipping them the middle finger gets you sued/fined really, really hard. Not so much with taxi regulations.

      • eqdw says:

        Several of my friends used to work on the software backend for one of the biggest ones.

        Incidentally, it sounds like they’re having some legal issues of late http://www.cnbc.com/2015/08/19/canada-pharmacy-charged-in-78m-drug-export-scheme.html

  34. onyomi says:

    Isn’t it pretty well known that the FDA is a classic case of “better 1000 deaths occur because we were too cautious than 100 deaths occur because we were too liberal/and/or are perceived as not doing our jobs”?

    And also that housing, education, and medical care are the three industries (besides the financial industry) in which the govmt is most heavily involved and also, by some strange coincidence, the industries where pricing is crazy and incomprehensible and getting more expensive all the time?

    In the 50s it cost something like 2x the median annual salary to buy a house. Now it’s like 20x. Good thing it’s so easy to get a subsidized loan!

    • baconbacon says:

      I generally agree with the sentiment, but total house price to total income isn’t a good metric at all.

      • onyomi says:

        Why not?

        • baconbacon says:

          The cost of homeownership isn’t fully reflected in the price, nor are the quality differences between a house built a few years ago and one built prior to 1950. Average sq footage of new homes has gone way up as have the extras in a house (air conditioning etc). Costs of homeownership include interest rates (for most buyers) insurance, taxes, repairs etc. A $200,000 loan at 4% is not twice as expensive as a $400,000 loan at 6%.

    • Murphy says:

      closer to 3x in the 50’s and 8 to 10 x now.

      http://www.economicshelp.org/images/housing/ftb-hp-earnings-2014-q3.jpg

      In the “because we were too cautious” calcs don’t forget to include estimates for deaths due to people losing trust and refusing to take drugs that could save them because they’ve heard of too many fuckups.

    • Wrong Species says:

      At least with medical care and housing there’s a market. The education system is so government controlled that no one even dares think of privatizing it. The closest we can get is charter schools.

      • brad says:

        The are private k-12 schools, I went to two of them (one secular, one parochial.)

        I think in some ways the housing market is the worst. You can’t escape the costs of massive government interference and it is a huge part of almost everyone’s budget.

        • jaimeastorga2000 says:

          The are private k-12 schools, I went to two of them (one secular, one parochial.)

          They are not an alternative in terms of your budget, because you are still paying the taxes to fund public k-12 schools.

          • brad says:

            All the people without school age children have to pay those taxes too. They aren’t tuition. Parents of children in private school presumably share in whatever positive externalities justify publicly funded education to begin with.

            It is true that private school isn’t free, so the government option is a tough deal to beat, but that’s oddly described as “no one dares … privatize it”.

      • “The closest we can get is charter schools.”

        Vouchers are a little closer, and becoming gradually more common and closer to the full amount of the cost of the government schooling they replace.

    • SanguineVizier says:

      And also that housing, education, and medical care are the three industries (besides the financial industry) in which the govmt is most heavily involved and also, by some strange coincidence, the industries where pricing is crazy and incomprehensible and getting more expensive all the time?

      I agree with the broad sentiment here, but I would dispute the facts. I work in the pharmaceutical industry myself, so I can confirm it is heavily regulated. However, I have some acquaintances who work at a nuclear power plant, and based on their reports, I think that nuclear energy is definitely more interfered with than pharmaceuticals and almost certainly more so than housing.

  35. Handle says:

    This is what effective altruism should be doing, right? Paying ‘pharmaceutical ransom’ to license-holders and/or the FDA (in the form of paying to get through their approval process) to get generics to market for marginal cost. Sounds like a good ‘givewell’ kind of charity. Does it already exist? If it doesn’t, anybody want to start it with me?

    • Douglas Knight says:

      I think you have missed the point of the article. You sound like you are focusing on the recent headlines, where the problem is inadequate competition between drug companies. But the point of the article is that there are a lot of other ways in which generics are expensive. Why is generic modafinil so expensive? Is it the lack of competition between drug companies? Maybe, but large price differences between drug stores suggest that it is more complicated. And there are examples of much more extreme price differences between drug stores.

      But even the recent headlines about high prices on monopolies might be a poor choice for charity because the market is so small.

      Lancelot’s example of collusion would be a good target for your suggestion.

      • A Definite Beta Guy says:

        Functioning markets are all alike, dysfunctional markets are all dysfunctional in their own way.

        Orphan diseases are essentially natural monopolies due to high fixed costs of regulatory approval.
        Varying prices for other generics are price discrimination behavior.

        Price discrimination and natural monopolies are two different concepts. Your electric company is a natural monopoly and your movie theater and grocery store engage in price discrimination. VERY DIFFERENT THINGS. DIFFERENT POLICY RESPONSE REQUIRED.

        Of course, the answer can indeed be single-payer: the government can set prices for everything, including my groceries, the movie theater ticket, and the price of my electricity.

        • Urstoff says:

          I’m not sure that price discrimination implies that the market is dysfunctional. After all, price discrimination can actually be a progressive force: those that can afford it pay more and those that can’t pay less.

          • A Definite Beta Guy says:

            Price discrimination certainly implies non-competitive markets, at least in the purest sense. How big of a deal you make of this? That’s a different question.

          • RCF says:

            In fact, perfect price discrimination eliminates dead weight loss.

    • Emlin says:

      Not to mention drugs that are needed, but not not by enough people for anyone to want to manufacture them… I would certainly subscribe to your newsletter 🙂

    • I suggested some time back that what a large budget charitable organization, such as the Gates Foundation, should do was buy the patent rights to the second best AIDS drug (or something similar), make it public domain, and then let anyone who wanted make it. You buy the second best because it costs much less than the best, which is being sold at a high price to people to whom it is really important. And, unlike governmental solutions, you are increasing, not decreasing, the incentive to develop better drugs.

      To put the point a little differently, the consumer surplus from providing the drug at cost is much more than the profit that could be made by selling it at the profit-maximizing price, so the charity can produce a lot more utility/$ that way than by giving away money.

      And if the charity is rich enough, buy the first best.

      • RCF says:

        I analyzed the economics of this, and came to the conclusion that the deadweight loss from profit-maximizing pricing is at most half of the consumer surplus from pricing the drug at marginal cost. I’m interested in whether you disagree with my conclusion.

    • RCF says:

      Beware Systemic Change notwithstanding, it might be even more productive to get the government to buy patents, although getting a fair process for determining purchase price might be problematic. It might be easier to get an initiative passed for a single state to buy a statewide license, rather than the national government buying a nationwide license.

      • LHN says:

        Given the legal and practical limits on restricting trade between the states, how do you enforce a license that covers a single state?

  36. baconbacon says:

    The price descrepancies between pharmacies can usually be explained fairly easily. Costco will have low prices because their clientel have already demonstrated that they are willing to put in the effort and expense to find lower prices (and also have cars and can afford modest up front costs). When you look at competing pharmacies like CVS/Rite Aid they often have slight differences in pharmacy hours that actually can make a big difference. For an extreme example take a 24 hour pharmacy. Normal hours are in the neighborhood of 8am-9pm so a 24 hour pharmacy has to pay a pharmacist 13 hours more pay (at crappy night shift hour rate) so they need higher prices to compensate. Those higher prices have to be a lot higher because you will sacrifice some of your daytime business due to higher prices, and 3 am script refills are a low volume business.

    • Nita says:

      a 24 hour pharmacy has to pay a pharmacist 13 hours more pay (at crappy night shift hour rate) so they need higher prices to compensate

      Good point. But does it typically result in a 4000% increase in prices?

      Also, the highest price for Letrozole was at a Target pharmacy. Do they tend to work longer hours?

      • baconbacon says:

        My reply should have been phrased more as an example- the main point is that even though a Rite Aid and a CVS look extremely similar their policies/locations etc can make big differences. Convience is frequently a big one and is why people are willing to pay a buck or two more for basic goods at a 7-11 than they would at the grocery store 2 miles away.

        • baconbacon says:

          also I am not claiming this explians a %4000 markup, that anomoly probably has some other weird situation going on.

    • Scott Alexander says:

      But how come people who buy drugs during the daytime will still go to the pharmacies with the higher prices?

      • A Definite Beta Guy says:

        Laziness? Lack of knowledge?

        • Deiseach says:

          It can be convenience. If you’re working full time, you may only be able to get in to fill your prescription at 7 a.m. in the morning before you go into work, or after 6 p.m. in the evening when you get out (if my local chemist was open at quarter to eight when I’m walking past it to work in the morning, it would make my life a lot easier instead of trying to juggle “make sure your prescription doesn’t run out until the weekend when you can call in to get a refill without having to be in a rush”).

          Maybe the 24-hour chemist is the only one in your area. Maybe you’re lazy. Maybe the pharmacist knows you and gives you good advice about your medication, or is willing to help you find a cheaper generic. Maybe you take the hit on higher prices to support it because for the one time in a blue moon when you need an open-all-hours chemist because you or one of the kids woke up and started vomitting at 3 a.m. you were damn glad this place was in business and if it had to shut down because people are shopping elsewhere that would be awkward and inconvenient.

          • A Definite Beta Guy says:

            Convenience and laziness are in the same bucket, except for moral posturing.

            I don’t disagree with you, some pharmacies are absolutely more convenient than others.

          • Leo says:

            People are lazy for going to work early and leaving late? Weird bucket you got here.

          • Cadie says:

            Location, too. I can save $4/month by filling one of my prescriptions in a different place, but the hassle and time spent driving to another pharmacy, plus gas cost, makes it not worth the savings. I’d rather spend the extra four dollars and be able to fill all of them in one place that is luckily a mile from home than drive about 10 miles out of my way. If the price different was substantial I’d do it. $4 isn’t enough.

          • A Definite Beta Guy says:

            Leo,

            This isn’t the 60s, most major businesses are open for quite long periods of times most days. Costco does home delivery for your pharmacy needs. The website says 5 Am to 7 PM hours, but I don’t know enough about Costco to know if that’s in-store hours or not.

          • RCF says:

            But that doesn’t really explain the different prices. Why would Walmart be more capable of charging more for convenience that Rite-Aid?

            As for the costs of staying up late explain why a store would need to charge more, that is quite different from why they can. What reason is there for a open-24-hours store being able to charge more during the day, that doesn’t also apply to a store that isn’t open 24 hours?

      • Hemid says:

        The last time I was prescribed a medication was at least twenty years ago. If I were told tomorrow that I should go buy some drugs, I’d go straight to the place down the street that’s called a “drug store” and pay whatever they say, because I have no idea what else to do about it.

        If drug shopping is outside people’s routine—and I suspect that for almost everyone it is—they won’t know how to do it.

        Sign says “drugs.” There they are.

        • baconbacon says:

          I think the majority of drug sales are repeat business- people with chronic conditions or terrible lifestyles that leave them open to illness.

      • baconbacon says:

        Convience is probably really big factor. A few years ago I spent a month working two bakery jobs, my schdule was bascally midnight to 7 at one and 8 to 2 at the 2nd. If I had to pick up a perscription during that time frame I would hapily pay a few bucks to be able to get it prior to my first shift rather than after my 2nd. This means I would have chosen a pharmacy with 24 access (had I been doing it more than a month) and basically out of habit/ease I would have kept using that place after Istopped working 2 jobs (at least for a while). Now as a stay at home dad if there was a pharmacy next door to my pediatricians office or directly on my way home I would happily pay a modest premium not to have to drive an extra 10-20 mins with a sick kid (or two) in the car.

      • Professor Frink says:

        Convenience? If your script is on file at CVS or Walgreens, they’ll deal with your doctor for you. They’ll deal with your insurance for you. They’ll have your prescription available in about an hour, and they can do this almost anywhere in the entire country.

        Costco, by contrast, often takes a week to fill a prescription, if I fill there I have to deal with my own insurance reimbursement. When a routine medication is running low on refills, they don’t call my doctor, I have to call my doctor and arrange for them to send in another script, etc.

        • A Definite Beta Guy says:

          Walgreen’s claims they use more satellite data than anyone besides the US government. Which really means besides maybe NASA and the military. Retail pharmacy is srs bsns.

    • Douglas Knight says:

      But the people getting the convenience are not the people paying the bill. If the insurance company is willing to pay the 24 hour store one price, why doesn’t the daytime pharmacy raise prices to match it?

      • baconbacon says:

        Copays

        • Douglas Knight says:

          Your copay is different at Riteaid and Walgreens? I don’t believe you.

          • LHN says:

            My copay is a percentage of the overall cost (with, I think, upper and lower limits). So it would tend to vary with those, and be different at Walgreens and Rite-Aid if the amount they charge is.

            (It used to be a fixed amount, but that changed on our plan some years back.)

          • brad says:

            @LHN
            I believe it is standard to refer to that as “co-insurance” rather than “co-pay”

            @Douglas Knight
            I don’t have different co-pays at different retail pharmacies, but I do have a lower co-pay at a mail order pharmacy affiliated with my plan.

          • baconbacon says:

            My copay is higher than the cost of the drugs being discussed in this article- I would be paying the full amount for a good number of generic drugs if I needed them.

          • A Definite Beta Guy says:

            Your copay is different at Riteaid and Walgreens?

            Oh my friend, the rabbit hole goes so deep here.

  37. David Wong says:

    On the subject of Modafinil … what the post recommends doing is absolutely breaking the law, correct? Modafinil is a Schedule IV drug, meaning it’s illegal to purchase or import it without a prescription and if you get caught, you absolutely can be prosecuted. I was curious so I went to that site and immediately saw how they promised to scrub my payment information and suggested I used bitcoin instead. You know, because it’s breaking federal law and I’d be buying illegally from a black market. Seems like a pretty important piece of information to just skip over.

    • Scott Alexander says:

      What which post recommends doing? The only recommendation I’ve made here is to check GoodRx before buying anything.

      As far as I can tell sites like ModafinilCat and Canadian shipping pharmacies are illegal – that’s what ignoring the appropriate regulations means – but tolerated because elderly people who want cheap drugs have good lobbyists and nobody wants a “GOVERNMENT ARRESTS AREA GRANDMOTHER WITH CANCER” story on the front page.

    • Nick T says:

      This pretty much never happens. In general, knowing that something is against the law isn’t very useful without also knowing (or having good priors about) whether the law is enforced.

      • CJB says:

        So, supposing that a purely hypothetical-for-legal-reasons person was to USE ModafinilCat, they wouldn’t get their credit card info stolen? That’s good to know.

        Thanks Scott, I’ve been hypothetically looking for such a place.

  38. vV_Vv says:

    But according to Nootriment, a month’s supply of modafinil at real bricks-and-mortar pharmacies costs anywhere from $469.23 (Costco) to $850.84 (RiteAid). I’m not totally sure what’s going on, but my guess is that ModafinilCat buys it from people who haven’t gone through the FDA’s bioequivalence testing, and RiteAid buys it from people who have.

    I don’t think I understand this.

    Can ModafinilCat legally sell modafinil in the US? If they can’t, then why doesn’t the US government shut them down? If they can, then why can’t you tell your patients to buy modafinil from them and have their insurance company pay for it?

    • Saint_Fiasco says:

      It’s probably a liability issue.

      Scott can choose to ignore bad regulations by the FDA because he is a doctor and knows what he is doing.

      A normal patient however, cannot make an informed choice.

      So if Scott were to die or acquire superpowers from bad medicine, it would be Scott’s own fault, and if it happened to a patient of his because of his recommendation, it would also be Scott’s fault.

      • CJB says:

        The rule is this-

        Lets say I make a drug that treats acne. On the label, it says “to treat acne.” And it also just so happens to be really effective at treating smoking addiction.

        I, the manufacturer, cannot, in any way, go “hey, this is also great for treating nicotine addiction!” unless I go through the long process to demonstrate it clinically and update my indications with various regualatory bodies. If a doctor calls and asks me about this, I’m required by law to say that it’s only for use in treating the indicated conditions.

        A doctor, however, can prescribe anything they like for anything they like- they’re a licensed medical professional. If they want to use this drug to treat baldness, they can. The caveat being that they can get nailed for malpractice and off label use leading to serious injury or death would probably be a big issue.

        It also gives me some cover- if they go off-label to treat nicotine addiction, and the patient has a super rare reaction, I might well be off the hook as far as reporting responsibilities go (reporting serious complaints resulting from the use of your product is also a Big Furry Deal).

        Basically, these sort of things allow the doctors to have leeway and the company to be covered.

        • Deiseach says:

          Your acne drug example may or may not be pertinent, given the allegation that a certain acne drugs increases or causes suicidality in teenagers.

          Regulatory testing may be a pain in the neck and may be excessive, but given the chance that if anything goes wrong with your new drug and you’ll be sued for millions, it does enable you to cover yourself by “We tested this extensively and saw no such reaction” rather than “We just slapped it together and sent it out on the market”.

    • Scott Alexander says:

      No. I think they’re illegal but ignored. The site is probably in a foreign country, and the customers probably don’t get prosecuted because lots of elderly people with good lobbyists tell the government not to prosecute people buying from Canadian pharmacies and this is pretty much the same thing.

      I’ve added a clarification about legality to the main post.

      • vV_Vv says:

        The site is probably in a foreign country

        A whois lookup on the domain name returns a Russian obfuscation proxy service, while the IP addresses seem to be owned by an American “web accelerator” company. Looks shady…

        and the customers probably don’t get prosecuted because lots of elderly people with good lobbyists tell the government not to prosecute people buying from Canadian pharmacies and this is pretty much the same thing.

        I suppose that they typical ModafinilCat customer is considerably wealthier and has a higher social status than your typical patient. It never ceases to amaze me how laws are selectively enforced based essentially on class in such a blatant way.

      • CJB says:

        So a friend of mine, named “plausible deniability” did use this service, and the transaction showed up on their online bank tracker A- for the precise amount indicated on the bill and B. going to “YI MING SHANGHAI”. A quick google seems to connect that to “Shanghai Soho-Yiming Pharmaceuticals Co., Ltd.” which seems to be a perfectly reputable pharma company.

        So, basically- 99.9% confident in this decision, which is as it should be, as a grand was bet on the idea that they aren’t about to drain the account.

      • Loquat says:

        It may also be that the government thinks actually prosecuting buyers wouldn’t be a cost-effective method of deterrence over and above just having Customs keep an eye out and confiscate the illegal meds whenever they find any.

  39. alexp says:

    So how shady is modafinilcat? Seems like something with a small but real chance of getting in trouble for using.

  40. PDV says:

    What would be the drawbacks of the FDA establishing reciprocity with other countries? (hat tip: Jen) This would massively enlarge the market for the small-patient-pool drugs, which would, if not necessarily eliminate this problem, reduce it massively, and probably reduce the overall cost of bringing drugs to market as pharma can shop around for the cheapest accepted-as-safe regulator.

  41. Sigivald says:

    As an aside on the topic of pricing vs. insurance:

    I take a pair of boring, boring maintenance drugs (lisinopril DX, pravastatin).

    Both are actually a dollar cheaper ($6 vs $7 per 30) if I buy them *off insurance* at my local pharmacy, rather than using my insurance coverage.

    Riddle me that one.

    • A Definite Beta Guy says:

      Sigivald,

      Drug pricing is….uhhh…complicated. Insurance companies go through PBMs and the PBM may be charging you a fee for using the PBM that you don’t have to pay through cash.

  42. ryan says:

    Brief idea on how to change the FDA’s work up generics plan.

    Have whatever company did the safety/bioequivalence study document the costs incurred. Then give them a right to a royalty on sales of the drug for X years or until they’ve been paid time adjusted 115% of the work up costs.

    There are still some obvious problems, but one company monopolizing the drug and raising the price 10000% is probably not one of them.

    • Erebus says:

      How about this: As soon as the drug goes off-patent, have the FDA or a standardization organization like ISO create a “standard formulation.” What goes into a drug, after all? Any standard formulation would only need to specify:

      -Dosage per capsule or tablet.
      -Excipients used.
      -Active ingredient.
      –Crystalline or amorphous?
      –If crystalline, what crystal polymorph?
      -Capsule or tablet size.

      Am I missing anything?

      Anyway, if generics conform to the specifications of the standard, there should be absolutely no need to prove bio-equivalence in a clinical setting, and thus no need for any company to buy drugs from its competitors in order to perform bio-equivalence studies. The FDA’s current system is overkill — expensive, unnecessary, and even harmful — the sort of thing you get with a bureaucracy gone haywire.

      • John Schilling says:

        Am I missing anything?

        Well, you’re missing the type and quantity of allowable impurities, and if no impurities are allowable then you’re effectively outlawing generics.

        More importantly, you’re missing some other stuff and I don’t know what it is. And neither does anyone else. There are still surprises waiting to be discovered in the field of drug-human interactions, and if you want the highest possible level of confidence in safety and efficiency even for a nominally identical drug, nothing but a clinical trial will do. Anything less does involve a chance, however small, of another Thalidomide, and a larger chance that a bunch of people will be taking a drug that just doesn’t work until enough of them get or stay sick that their doctors start comparing notes.

        Clinical trials are expensive, and if it’s a choice of a slight chance that a bunch of toxoplasmosis patients are stuck with an ineffective treatment for a few months (and a nigh-infinitesimal chance that their kids are born with flippers), and every toxoplasmosis patient from now until forever paying (or passing on to the rest of us) $750/pill for treatment, I lean towards the first plan. But the counterargument for that plan isn’t based entirely on hot air and greed.

        • Erebus says:

          >Well, you’re missing the type and quantity of allowable impurities, and if no impurities are allowable then you’re effectively outlawing generics.

          Granted. But the FDA already has regulations for chemical and pharmaceutical purity which extend to this case — and, interestingly, also extend even to cosmetics and nutritional supplements. This is necessarily the case, as every batch of every chemical product is different & has a different impurity profile.

          The rest of what you’re saying seems to be an attempt to push an argument beyond its reasonable bounds. Surely you’re not suggesting that two essentially-identical hydroxyprogesterone or pyrimethamine (for example) formulations could possibly lead to wildly different endpoints, to say nothing of “another Thalidomide”? At what point is cringing regulatory caution taken too far?

          • Deiseach says:

            Surely you’re not suggesting that two essentially-identical hydroxyprogesterone or pyrimethamine (for example) formulations could possibly lead to wildly different endpoints

            The trouble is, you’re putting those batches into people, and people have idiosyncratic reactions. It’s only anecdotes, but I’ve heard plenty of “The doctor switched me to a generic and it didn’t work as well as the original so I asked him to switch me back”.

            And maybe that’s the placebo effect: the drug really does only work as well as the generic, but the subliminal effect of years of advertising that BigMed plc is the one you can trust and 99% of cats owned by dentists prefer it means that patients think they do better on it, but you still have to take into account that maybe BigMed’s little pink pills and Generic’s little pink pills are subtly different in some way.

          • LHN says:

            And of course it doesn’t help much if the generic manufacturer just lies.

            Instead of making three medium-size exhibit batches and testing those for bioequivalence and stability, as required, Ranbaxy tested earlier and much smaller research-and-development batches that were easier to control and less costly to make. In some FDA applications, it represented these as much larger exhibit batches and presented the data as proof. And then there was the ultimate shortcut: using brand-name drugs as stand-ins for its own in bioequivalence studies.

            (Whether having the FDA helps in quashing this sort of thing is too soon to tell; they’ve imposed repeated temporary suspensions on the companies that did it, but whether that deterred the bad behavior or just made them more careful about getting caught remains to be seen.)

          • Erebus says:

            >’I’ve heard plenty of “The doctor switched me to a generic and it didn’t work as well as the original so I asked him to switch me back”.’

            >’And of course it doesn’t help much if the generic manufacturer just lies.’

            That these things are happening under the current, onerous set of FDA regulations suggests that they are to some extent inevitable. The first is probably some combination of the placebo effect with increased drug tolerance. The second is human nature — for a recent example, see Volkswagen.

            Would more regulation stop these issues? No.
            Would we be better off with more regulation? No.
            Would we be better off with laxer regulations than the ones currently on the books? Abso-fucking-lutely. We’d see broader access to medicines, far lower prices, and, I am convinced, better outcomes overall.

  43. Tom Scharf says:

    Where to begin…

    “During this time, they can and do price-gouge as much as they want. After twenty years, the drug becomes public domain and anybody who wants can compete to produce it, usually leading to a precipitous fall in costs.”

    The price differential before public domain allows a company to recoup R&D costs. I think I read somewhere it costs approx. $1B to bring a new drug to market on average. Nobody makes that investment for a disease that affects 10K people.

    Drugs fail clinical trials. Drugs prove to be ineffective after looking promising. Bad side effects or drug interactions are discovered. Guess how much the public pays for these drugs? Exactly zero or all of it depending on your point of view.

    Generic companies don’t need to do this R&D. They just send the drug to a chemistry lab and have it analyzed. Their relative cost is about zero.

    Somebody has to pay for this R&D. and “most pharmaceutical company CEOs are assholes” who have to figure out how to get this paid for. It’s a high risk / high reward industry and a lot of these companies go bankrupt.

    The government can spend as much of the NIH budget as they want to do this R&D and release drugs to the public domain immediately upon discovery and FDA clearance.

    This is about the clearest case of wanting your cake and eating it too. I definitely agree that if we ignore the R&D, marketing, and manufacturing costs we are being way overcharged for our prescriptions. All we need is a fairy to whisper us the chemical formulations during our sleep and then ask China to whip us up a batch.

    I wonder if the author’s profession is full of assholes who would line their pockets if given the opportunity? Possibly they are all Chinese robbers?

    For the record, I am no fan of the pharmaceutical industry, and there is a lot to fix here.

    • Scott Alexander says:

      Notice that this entire article is about generics and has nothing to do with brand-name issues or R&D at all.

      • John Schilling says:

        Except that “develop a manufacturing process that produces Compound X with the same purity, bioavailability, etc, etc, as the process used by someone else’s factory twenty years ago, without using any of their trade secrets, and provide experimental proof that you have done this even though you don’t even know what all the potentially relevant ‘etcs’ are”, is actually research and development. And not trivial research and development, either.

      • Tom Scharf says:

        Right, I see your point. However I was responding to you inferring “usually leading to a precipitous fall in costs” was based on greed, not trying to balance the books. Then the comment of “most pharmaceutical company CEOs are…” was not isolated to generic companies, when in fact generic companies are usually where you get cost efficiency, and the name brand CEO’s are more worthy of potential scorn here.

        A better target I think is when pharmaceutical companies slightly revise a drug formula to get a new patent (extended release…) and then market this as a major advance. This is fairly common and the fact that they withhold this “advance” until the first patent expires even though they could market it way earlier is where you get into clear moral issues IMO.

  44. John Sidles says:

    A MODEST PROPOSAL

    Scott Alexander opines “The CEO of Turing is an asshole who is lining his own pockets with zillions of dollars by gouging AIDS patients.

    Observation  The CEO of Turing is condemned for acting like a market-efficient corporation, not as a sympathetic human being.

    Tradition  Human beings who act like assholes are ostracized from their communities … the stability and health of the community requires this.

    Implication  Corporations who act like assholes should be ostracized from their communities … the stability and health of the community requires this.

    Legislation  Be it enacted, that directors of any corporation can be replaced with public appointees, by plebiscite of the electorate, upon grounds of incivility.

    Reflection  The chess maxim “The threat is mightier than the execution” would suffice to motivate better citizenship from the nation’s corporations, as it presently suffices to motivate civility in human social relations.

    Otherwise there’s no barrier to sociopathic corporations like Volkswagen from replacing their old sociopathic directors with new sociopathic directors … is there?

    • Deiseach says:

      Volkswagen was a very surprising case (to me at least) because you don’t expect this kind of carry-on from a company with their reputation. Seeing as how they’re German, there’s a good chance that heads will actually roll (the CEO has resigned already if I’m correct) and the mess will be cleaned up instead of swept under the carpet.

      I mean, the Swiss really are going after Blatter! It’s not just putting on a show and business as usual! 🙂

  45. mulp says:

    As a doctor, you probably still have the right to write a prescription to have chemicals compounded for your patient by a pharmacy that can produce whatever you prescribe, as long as they are not compounding the drug on a volume basis. Given many of the drugs are low volume, that would not seem to be a problem.

    Of course, you the doctor would assume liability for the effectiveness and any harms from the prescription.

    • Deiseach says:

      have chemicals compounded for your patient by a pharmacy

      The original method, where doctors wrote out “My patient needs a course of toadspawn and newts’ eyes for the bloody flux” and the patient brought it to the apothecary who made up the batch of medicine according to the receipt.

      I think they still do the same in traditional Chinese medicine, unless I’m gravely mistaken? You go along to the herbalist’s shop and they pull all the ingredients out of the drawers and mix up your batch of tonic or ointment or dried frog pills?

  46. RCF says:

    “getting samples of the drug, and figuring out how to make the generic product”

    Isn’t the whole point of a patent that the government gives the inventor a monopoly, and in exchange the inventor tells the government exactly how to make the invention? If it’s not obvious from the patent application what the drug consists of and how to make a generic version, then the application is defective.

    Also, is melatonin a drug? I’ve seen commercials for Mid-Nite claiming that it contains no drugs, and after doing a web search, it appears that the main ingredient is melatonin, which means that either melatonin is somehow consider to not be a “drug”, or they’re putting bald-faced lies in their ads.

    • BBA says:

      Under US law melatonin is considered a “dietary supplement”, not a “drug”, for reasons that aren’t particularly clear. As such it can be freely produced and sold by anyone as long as it’s accurately labeled.

      • CJB says:

        On the other hand- there are limits.

        The most unregulated this are GRAS- generally recognized as safe. These can be used in just about anything without any regulation. On the other hand, some companies have gotten Warning Letters (this is very, very, very Bad in the regulatory world) for using it in drinks and such.

        Example:
        http://www.fda.gov/ICECI/EnforcementActions/WarningLetters/ucm201435.htm

      • Deiseach says:

        for reasons that aren’t particularly clear

        I wonder if it’s for the same reasons as cosmetics? You (well, maybe not you in particular) regularly read articles in fashion magazines etc. about the latest new (say) anti-wrinkle cream that pushes “packed full of alpha-hydroxy acids, scientifically proven, yadda yadda yadda”. The point here is that the manufacturer can stuff as much of the ingredient into the product up to the point where it would actually become effective, which then makes it a drug and invokes regulation.

        So the very fine print is that alpha-hydroxyl (or melatonin?) is “scientifically proven” to work – if this amount is consumed. But that amount or over in a product classifies it as a drug, so as long as the manufacturer only puts in (say) 499 mg instead of 500 mg (the effective dose), it’s not (yet) a drug, it’s a dietary supplement or cosmetic ingredient or approved food additive.

        • HeelBearCub says:

          @Deiseach:
          Intended use is the key phrase.

          It’s not the amount of the drug, but whether the manufacture intends to treate a condition. If they do, it’s a drug. If they only want to cosmetically change the appearance, and not treat a condition, it’s a cosmetic.

          I’m sure manufactures walk up to the line and play chicken with the FDA. This means that they are trying to market the product like they would a drug, but still claim to the FDa it’s only a cosmetic.

  47. CJB says:

    So- I work in regulatory affairs, and interact with both FDA and European regulatory bodies on a regular basis- any interest in a write up from my perspective on these things? I don’t want to spend a bunch of time writing up a post that no one is interested in….well, I do that all the time. But this is kinda like work, and thus my brain treats it differently.

    • Whatever Happened to Anonymous says:

      Naturally.

      Unless what you have to say contradicts my views on the matter, in which case keep it to yourself.

    • Deiseach says:

      I for one would be fascinated – we have a vague idea over here in Ireland that America is stricter on things, (given all the law suits we read about), and then along comes someone like Scott and says that basically anyone can print “free range” on an egg carton even if they’re keeping what are for all intents and purposes battery hens, and hence labels are meaningless for any practical purpose.

      • Loquat says:

        We have all these huge well-publicized lawsuits, but when our regulators are actually drawing up the regulations, they’re subject to the same pressures as regulators anywhere, particularly on issues where all the money and lobbying efforts are on one side. I’m sure most of us (who want the government defining such terms in the first place) would prefer that “free-range” be defined such that most of the chickens actually spend time outside, but hardly anyone is willing to spend a lot of time and money lobbying the government over it.

        • HeelBearCub says:

          We have a different farm and corporate culture in the US than in many places in Europe. My understanding (citation needed) is that most European chicken farms are actually very clean and the chickens have plenty of room. They use antibiotics far less frequently, as they haven’t put the same disease pressures on the birds. But I don’t think this is down to regulation, but rather that farmers aren’t part of an ecosystem that includes Perdue and Walmart trying to wring every last 1/100 of a cent of profit out of each bird.

          Actually, that should be all treated as hearsay. I know I have read this, but I can’t cite it and I’m not sure how reliable it is.

          • Douglas Knight says:

            Livestock antibiotics have very little to do with disease and thus very little to do with crowding. The main reason for giving antibiotics to livestock is that they grow faster with less food. No one know why, but presumably it is due to changes in gut flora. My understanding is that Europe uses more antibiotics per animal than America, but I don’t have any figures.

          • Loquat says:

            Apparently European usage varies by country, even though the EU banned antibiotic use for growth promotion in 2006 – for example, Denmark requires farmers to document all the antibiotics they administer and fines anyone who uses more than a certain limit, while the Netherlands didn’t do much enforcement (at least prior to 2011) so their farmers just raised their usage of “medical” antibiotics to compensate. (cite)

            And since you mention Perdue, they apparently have been cutting down on antibiotic use. They ended the use of antibiotics used for humans (there are some used only for animals) for growth promotion in chickens entirely in 2014, and they say only about 5% of their chickens receive human antibiotics for disease treatment. They’re also reducing the use of animal-only antibiotics, and have a no-antibiotics-ever product line which over 50% of their chickens currently qualify for. So, even giant corporations will do the right thing if customers are willing to pay for it.

          • keranih says:

            We have a different farm and corporate culture in the US than in many places in Europe.

            Possibly. Define “corporate”. Define “Europe”. Ask what fraction of food consumed in the EU is from the EU, rather than being “farmed out” to places with less strict regulation.

            My understanding (citation needed) is that most European chicken farms are actually very clean and the chickens have plenty of room.

            Define “clean”. Define “plenty of room”. And yes, the people who are telling you that the USA is unnecessarily abusing their chickens would like you think that it’s perfectly possible to raise chickens in other ways for the same profit margins, the same feed efficiency, and for the same population.

            A more likely option – the people raising livestock are just as smart as you and have as large of hearts with regards to animal suffering, they just have much more experience in the field than any animal activist.

          • Linch says:

            “the people raising livestock are just as smart as you and have as large of hearts with regards to animal suffering”

            You know this claim is unlikely to be literally true, right? I’m willing to bet 2:1 odds on either of the below claims:

            1)The median farmer has an IQ below 110.
            2)HBC has an IQ above 115

          • Deiseach says:

            1)The median farmer has an IQ below 110.

            Well, the closest I can find to an answer to that is here if you trawl through to the graphs at the end; for farmers in Wisconsin 1992-94 median IQ range from 75-115, if I’m reading the thing off the screen correctly.

            You being smarter than me can work out what percentiles fall where on the bars.

            So I suppose I might take it that you are trying to say tactfully:
            (a) stupid(er) people are crueller to animals (and other people?) than smart people
            (b) farmers are, ipso facto, cruel to animals
            (c) therefore farmers are stupid(er)

            Am I correct?

          • HeelBearCub says:

            @Deiseach:
            Lunch is responding to a comment that farmers are likely smarter than I am. He isn’t ascribing anything to farmers, just knocking down an argument.

            An argument that has some merit, but seems poorly worded and framed. Farmers have more practical experience in farming than anyone who hasn’t been one.

          • keranih says:

            @ HBC –

            [Lunch] isn’t ascribing anything to farmers, just knocking down an argument.

            Unfortunately, not one that I made. (I said “just as smart”, and as I think we can cut out those with IQs below 1 SD south of national average (highly unlikely to be able to successfully manage a business, purchase land, medicate animals, or qualify for a pesticide application license) I am comfortable putting the average farmer IQ in the same neighorhood as those posting here.

            An argument that has some merit, but seems poorly worded and framed.

            …I am intrigued. Please feel free to expand on this.

          • HeelBearCub says:

            @kerinah:
            The argument is poorly worded and framed (IMHO, of course) for the following reasons: 1) The phase “just as smart” is under-specified. This leaves you vulnerable to misinterpretation. 2) What percentage of farmers are two and three SD above average in IQ? What percentage here? My guess is that this blog has a much higher percentage of 2 and 3 SD above average IQ than farmers in general. 3) The intelligence of farmers (and especially the average farmer) really has little bearing on the argument. 4) The core of the argument is that farmers know their specific kind of farming in great detail, and, much like any professional, will kick the proverbial ass in a debate of anyone not so well versed in the details. This seems fairly incontrovertible. The average blog commenter here knows far less about farming and the specific challenges this entails than even a very run of the mill farmer. Much like a mechanic, what really matters is applied, practical knowledge, not theoretical.

            I think point 4 is actually a quite strong point. What I would offer as a counter balance is Henri Petroski’s formulation. “Form does not follow function. Form follows form.”

            What I mean by this is that any farmer making a living at it today will have a very hard time conceiving of the broad systemic changes that would allow chickens to be mass produced in a manner that is very much different than today. I think this is true of many/most professionals (and frequently they are right!) but that does not mean systemic change is impossible.

            The Temple Grandin biopic illustrates the idea quite nicely, although I’m sure some of it is not quite accurate.

          • keranih says:

            @HBC –

            Thanks for the reasonable response. If my reply fails to match in polite charity, please to forgive.

            As my point on “don’t assume other people haven’t solved the problem to your liking because they are stupid and mean” evidently didn’t come through clearly, I will cop to not being specific enough there.

            For the purposes of general debate, though, I would question the (assumed? unspoken?) assertion that SSC – or any other debate/investigative forums – are necessarily populated by people more likely to solve a particular problem than the general run of people who are grappling with that problem on a daily basis. (I’m not sure where your statement about relative intelligence being irrelevant falls, here.)

            I’m not familiar with the Petroski formulation – but I think I can see the merits of the statement, particularly in biolology – once you (you-the-organism) start specializing in one direction, it takes far less effort to refine that specialization than it does to back track and re specialize in a brand new direction.

            (As an aside – this concept and the eyeballs of squid are one reason I’m a theist.)

            So as far as you say “chicken farmers know how to reduce chicken misery while raising lots and lots of cheap animal protein better than anyone who isn’t a chicken farmer, but they won’t invent artificial protein substitutes that remove chickens (and their misery, and their happiness) from the equation entirely, because that’s too far out of their area of focus” – well, actually, no argument there. I agree. History is full of people outside of buggywhip making who make buggy whips immaterial.

            But this is (IMO, and my read) completely separate from the discussions of so-called “factory farms” and “animal misery” – which are – so far as I see – primarily aimed at increasing the labor and capital required to produce animal protein, so that (again, imo) we have even less free labor and capital to tackle inventing vat-grown protein. (Or inventing vegan-compatible, parasite-invisible, non-plant harming humans, which would be the logical outgrowth of a need to have vat-grown protien.)

            If we claim that the virtue of SSC, et al, its its capability of out-side-the-box theorizing, then we should outside the box theorize. And not waste time on trying to press minor modifications of systems which we do not understand in enough detail to effectively (*) modify.

            IMO.

            (*) effectively, fruitfully, positively, substantively, and all the other words that don’t include the aesthetic preferences for food labeled with pictures of chickens walking on grass over the same food labeled with the words “cheap eats!”

          • HeelBearCub says:

            @keranih:
            Your reply seems perfectly charitable to me, but I appreciate the desire to make sure that things aren’t misinterpreted.

            “SSC – or any other debate/investigative forums – are [not] necessarily populated by people more likely to solve a particular problem than the general run of people who are grappling with that problem on a daily basis.”

            I really have no issue at all with this statement. You do have an unspoken assumption there that the people here are the only ones trying to solve the issue. I think that the strong desire for citation and the interest in novel, published approaches to thorny problems cuts against that though. (Not saying that is in evidence here, but EAs interested in animal suffering (not not opposed to eating meat) should produce something like that at some point, and I imagine people here would be very interested in that.

            Henry Petroski is a civil engineer. I am most familiar with his book “The Evolution of Useful Things” which is an easy read, and very thought provoking. The basic idea is that humans rarely engineer solutions from scratch, they tweak something that already works. As such, this leaves us very vulnerable to missing the forest for the trees. What it means is that the average farmer on their farm is not the most likely candidate to re-think the entire system.

            Small aside, the modern day zipper is the result of a turn-of-the-century 20th century effort to come up with an automatic hook-and-loop closing device for women’s boots.

            “discussions of so-called “factory farms” and “animal misery” – which are – so far as I see – primarily aimed at increasing the labor and capital required to produce animal protein”

            OK, that part doesn’t seem to comply with the principle of charity. I’m sure some folks view those efforts as a “tip of the wedge” type thing, but the vast majority are really concerned about exactly what they say they are.

      • keranih says:

        basically anyone can print “free range” on an egg carton even if they’re keeping what are for all intents and purposes battery hens

        Eh. No, not really.

        “Cage free” means “kept in a barn.” The density is fairly tight, but depends a lot on the age, species and type. (Turkey toms have more space per bird than turkey hens, and the ‘heavy’ hens (which are slaughtered at an older weight) have a bit more space than the light hens (which are slaughtered younger and smaller.) Broiler (meat) birds are kept tighter than layer hens, but layers are more flighty and fight more, and live in the same barn for a year or more, in contrast to the 55-65 days of meat birds.)

        (Crazier birds like pheasants and quail can’t be kept as dense because they beat each other up too much.)

        No one is going to write a rule that “free range” animals have to be shoved out into a snowstorm, or 44 deg C heat, or that they can’t be penned up when there are coyotes or hawks about. So the rules allow for a farmer to keep the animals inside when necessary, and in general to allow them access to the outdoors as the animal chooses, instead of forcing them out. Also putting feed and water outside attracts pests like rats (who eat the chickens) and wild birds that carry diseases. So the feed and water is kept inside.

        And after all, the farmers moved to ‘confinement’ housing (ie, inside barns) because fewer of the animals got sick and died that way (or were eaten by hawks, or killed by dogs, or any of the other things that happen to poultry of very small brain.) In particular, young birds have to be kept in very strict temperature to keep from dying. So they are older before being exposed to the outside. The birds look at the outside with the heat and the cold and the rain, and they look at the inside with the feed and the water and all their buddies, and the birds say, nah, actually, I’m good here.

        “Battery” or caged layers are something different – they are penned in small groups in relatively small cages. When layers are loose in barns (ie, ‘cage free’) they tear each other up more, damage themselves trying to fly/land, and lay their eggs in the poop on the floor. Some people prefer the injuries and damage and poop on the eggs (and workers in hand labor gathering eggs, and extra cost) to the enclosed cages. It’s a trade off between choices, not a good vs evil.

        TL;DR: ‘Cage-free’ means something, ‘free-range’ is something else, ‘pastured’ is a third thing. None of them mean anything about how many of the layers died – although you can make some generalities about how many died (ie, the “more freedom” a bird has, the more die early) and of what (predator/parasite vs injury vs other injury) – for every hundred dozen eggs a year. To get that info, you have to be educated/experienced in the industry for that nation/region.

        The differences between the USA organic rules and those for most countries in the EU are even more interesting, but I am likely already tedious.

  48. Loquat says:

    Drug prices are also crazy on Medicare – I just ran modafinil through the medicare.gov cost estimator, which will estimate your out-of-pocket drug costs for every plan in your zip code (I used my own, in PA). Now, for reasons relating to the ridiculous way the drug benefit was set up, patients do need to be aware of the full costs of their drugs, and so the estimator will show that too. Just looking at one plan from Cigna, their “full cost” for 30 pills of 200mg modafinil was $200 at Riteaid, but $530 at CVS! Their mail order service, which gives you 3 times as much, was only $450. For comparison, an AARP plan had a “full cost” for 30 pills of $320 at Riteaid vs $230 at CVS, while Humana had apparently laid down the law with the pharmaceutical negotiator and was paying $115 at both.

    Any actual user would be paying a fraction of these prices, of course, but since on many medicare plans the most expensive drugs are priced at a fraction of *whatever the full cost is at that pharmacy* it still pays to shop around.

  49. Is there a startup opportunity here? A marketplace for group buying of “not-intended-for-human-consumption” drugs?

    Would anyone use it to cure themselves? I’d be pretty wary of untested labs in China.

  50. Deiseach says:

    OT: I saw your post on the alleged deaths of people struck off disability benefit. You might be interested in the Nudge Unit, a pet project of David Cameron, set up to encourage social change by the use of behavioural economics (it says on the tin) and since sold off, as it was so successful, as a private company (or at least partially private, with the Cabinet Office holding shares in it).

    Reading the Wikipedia article sounds very innocuous and indeed virtuous (getting people to donate a day’s salary to charity, for instance) but naturally people get suspicious about government using psychology to influence their behaviour, and the benefits assessment changes are seen as part of this same “self-help you can if you believe you can” mindset about getting people motivated to seek work – not bad in itself, but if the assumption behind it is that people are not really as severely disabled as they think, and they only need the carrot-and-stick approach to get them off welfare, then not so good either.

  51. Sciencebzzt says:

    People have been keen from the start to use this as an example of market failure. That’d be fine if the pharmaceutical industry were actually a free market. However, that’s far from the case. A free market is an almost perfectly contestable market, which has three main traits… no barriers to entry; no sunk costs; and universal access to the same technology for new firms as well as existing firms. The pharmaceutical industry is actually a perfect example of the exact opposite of a contestable market.

    This whole Daraprim issue is a good argument for drug approval reciprocity at least with other first world nations. Remember that GlaxoSmithKline sells Pyrimethamine (generic Daraprim) in the UK for 60 cents a pill. And it’s sold in India for pennies per pill. Customers in the US could easily buy those medications and have them shipped… if it weren’t illegal. Indeed, the whole pharmaceutical market in the US could be called a market failure, but it’s a failure of the political market, not the private market. To quote David Friedman:

    “[In a free market economy] …individual actors usually receive most of the benefit and pay most of the cost of their actions, making market failure the exception, not the rule. But on the political market, individual actors—voters, politicians, lobbyists, judges, policemen— almost never bear much of the cost of their actions or receive much of the benefit. Hence market failure, the exception on the private market, is the rule on the political market.”

    Also, I think the high cost of pharmaceuticals in the US is likely the result of the insurance companies practice of negotiating a lower price for everything. Pharma companies/hospitals/etc realize this, so they raise the “on paper” price. What the insurance company ends up paying is usually less than half of that “paper” price.

    Back to Turing Pharmaceuticals though… they’re lowering the price of Daraprim because of all the outrage now. But if they’d kept the price at $750, wouldn’t that end up being better for customers in the long run? It’s obvious that the reason other companies aren’t producing generic Daraprim is because the market for it is too small. But that doesn’t necessarily mean there are too few customers… it just means there isn’t enough money to be made, which isn’t the same thing. It could also mean the established price is too low.

    So if Turing Pharma kept their inflated $750 price, wouldn’t that create a large enough incentive for other companies to finally enter the generic Daraprim market? If they did, the competition would surely lower the price. The only question is, would the end result of the competition be a price lower than the one Turing Pharma has now voluntarily lowered it to? But even if not, wouldn’t more manufacturers in the market still be better for customers in other, less tangible, ways? For instance, better availability in the event something happens to their main supplier.

    • Deiseach says:

      It’s not much good ten companies manufacturing Daraprim or its generic relatives at $750 a pill if people can’t afford to take it; if the true cost is much less than $750 and a profit can still be made by bringing it down to $300 or even $50 a pill (up from the cost of $13.50 a pill previously), then Turing is still grossly profiteering.

      So an artificially high price isn’t doing anyone much good. Maybe if competitors see they can price the pill much more cheaply and still turn a profit, it’s good – which is why, I imagine, Turing is keeping such a tight rein on distribution so that competitors can’t get their hands on samples to run the necessary bioequivalence tests.

      Which again means they’re afraid the pill or an analogue can be sold (not made, it apparently costs only pennies to make) at a much cheaper price than they charged, so again that’s gross profiteering. And Turing can’t even argue they’re making returns on risk, since they are the third-hand buyers of the US rights to manufacture this and so incurred no expenses in researching, developing, testing or marketing the drug.

      It really does look like Turing operated on “Here’s a small market but one where if you need this, you really need this and will pay any price to have it” – the equivalent of asking a drowning man to turn over all his bank account to you when you throw him a life buoy and pull him in. But even worse, since the drowning man can always repudiate the agreement as made under duress when he’s safely on the river bank, but the sick people can’t tell Turing to take a hike since (it would seem) there is no better alternative to Daraprim out there.

      That’s why it looks like a good bargain for Turing – yes the potential market is small, but there’s no competition since the alternative treatments have worse side-effects and are not as effective (if I’m reading the accounts correctly), since it’s so small the big companies are not interested in making a rival product, and yet if you need this drug you really, really need it, so they more or less have a monopoly and can charge what they like from the desperate.

    • Deiseach says:

      Remember that GlaxoSmithKline sells Pyrimethamine (generic Daraprim) in the UK for 60 cents a pill

      And this is the crux of the matter; I think we all got side-tracked by arguing about generics, regulatory bodies yea or nay and so on.

      GSK sold the licence for manufacturing Daraprim (patents dating 1951-54 and nothing more recent) for the American market to Amedra which then sold the rights on to Impax which then sold the rights on to Turing (if I’m getting all the steps in the chain correct, and I think there may have been another one in between). Each company bumped up the price of Daraprim as it acquired it, but none were as blatant as Turing.

      Shkreli has form in this, as he founded Retrophin for precisely the purpose of making money off under-valued drugs (until he was kicked out by his own company and sued for using it as his personal piggy-bank to pay off debts for his hedge fund investors whom he had allegedly defrauded, poetic justice indeed):

      Retrophin’s stated goal was ferreting out value in biopharma by acquiring assets with potential in rare and neglected diseases, a process that can mean acquiring an underused drug and jacking up its cost to take advantage of rare disease pricing.

      So we can safely assume he’s not interested in medicine or pharmaceuticals per se other than identifying assets to be acquired and exploited. Standard business approach, as he’s an ex-hedge fund manager.

      And he’s not the only one doing this kind of thing, he’s just the most bare-faced profiteer out there, and the FDA has used temporary solutions:

      When shortages of generic drugs have led to high prices, the FDA has responded by temporarily approving drug imports or working with domestic manufacturers to help increase production by helping to expedite companies’ ability to integrate new raw-material resources into their production lines.

      It seems to be an upcoming business strategy for this type of drug: something long-established, out of patent or nearly so, not in enough demand to be worth the bother for the big companies which created it to keep making it, so they sell the licence to small companies which establish themselves for precisely this type of niche drug, which don’t invest in R&D and whose business model is “hike the price up when we buy the rights”.

      And it’s all perfectly legal:

      Although high prices charged for albendazole and other drugs by manufacturers that hold a monopoly (or a near monopoly) on them can hinder access for certain patients, U.S. antitrust laws protect consumers only from anticompetitive strategies such as price fixing among competitors. Manufacturers of generic drugs that legally obtain a market monopoly are free to unilaterally raise the prices of their products. The Federal Trade Commission will not intervene without evidence of a conspiracy among competitors or other anticompetitive actions that sustain the increased price. Amedra did acquire albendazole’s only near-term potential competitor, mebendazole, from Teva in 2013, though that move may not rise to the level of anticompetitive behaviour.

      Including using restrictions so that competitors can’t get their hands on samples to make their own knock-off versions. So what if this inconveniences patients and the hospitals? The blessed rights of private property (including intellectual property) have been preserved!

      For inpatient procurement, institutions can no longer order from their general wholesaler. Instead, they must set up an account with the Daraprim Direct program. Once enrolled, orders may be placed with the company until 6 pm Monday through Friday and will be delivered the next business weekday, because there is no weekend delivery at this time.

      For outpatient procurement, patients can no longer obtain the medication from their community pharmacy. All prescriptions must be transmitted to a single dispensing pharmacy: Walgreens Specialty Pharmacy. Upon insurance verification and co-pay collection, the prescription will be mailed to the patient’s home, and most prescriptions can be mailed overnight.

      And though much has been made of “Daraprim as AIDS patient medicine”, it is treatment for people who are vulnerable to infection because of a weakened immune system which includes people undergoing chemotherapy and pregnancy, so anyone could find themselves in need of this drug.

      This is not primarily a drugs regulatory testing problem. This is an “exploiting loopholes to make a profit” problem and one which is going to increase as financiers see a potential profit in this kind of business model: buy up old, cheap pharma licences for rare diseases, set up small manufacturing-only companies, and hike the price up to an arm and a leg.

      This isn’t a problem for the FDA, it’s a problem for financial regulatory bodies. If laws against profiteering can be made during wartime, surely laws about profiteering can be made about health?

      • Jiro says:

        <blockquote.Including using restrictions so that competitors can’t get their hands on samples to make their own knock-off versions. So what if this inconveniences patients and the hospitals? The blessed rights of private property (including intellectual property) have been preserved!

        The restriction that keeps a competitor from getting hold of samples to prove the competing version is as good only matters because of government regulations that require such proof. That isn’t private property, that is government interference.

  52. Tibor says:

    I got quite intrigued by modafinil (I’ve never heard about it before)…could anyone send me a link to a good source of information about it (including how one would go about buying it without prescription…do they just sell it at the pharmacy (in Germany or Bohemia) or would I have to buy it online (shipped to the EU, again either to Germany or Bohemia…there might be some special EU regulation for imported drugs for all I know)? From the very little I read about it now, it seems like something wort trying out (although I would probably hesitate to use it regularly).

  53. Jaskologist says:

    This whole thread is a good example of why I don’t really buy into the thrive/survive model. The right-wing answer at its most extreme is “abolish the FDA, let the market sort it out. The left wing wants another layer of FDA to make sure that everything is absolutely certainly safe. Their concerns are even literally ones of purity/contamination; regulators are the only thing standing between us and poison pills. This is the exact opposite of what the model would predict.

    • Doctor Mist says:

      @Jaskologist:

      Very interesting observation.

    • John Schilling says:

      There’s also a big fairness issue in play, in that it is unfair by almost any standard to charge $750/pill for Daraprim. This also is being presented as a threat to survival rather than a “thrive” issue, which is not surprising given that we are talking about a medicine used to treat sometimes life-threatening diseases.

      But you are correct that the left has no trouble envisioning threats to survival, and will at need offer up visions of a dystopic future of slavery, oppression, and various forms of ugly death if we don’t follow their agenda and vote for their favored politicians. They see different survival-type threats than the right, but they haven’t been doing much to promote visions of a thriving future lately.

      • In my lifetime, I think the left has been much more inclined to believe in threats to survival than the right. The only right wing one that the left didn’t buy into, at least the only one I can think of, was communism. The left has successively argued for catastrophic threats from nuclear war, overpopulation, nuclear winter, and global warming. On the most recent, it’s common to see people claiming that human civilization, or the human race, or all life on Earth are threatened.

        • Deiseach says:

          On the most recent, it’s common to see people claiming that human civilization, or the human race, or all life on Earth are threatened.

          On that last, I am seeing an increasing amount (or it seems to me I am seeing) of “To hell with humans – but save the sharks/cute fuzzy animals/rainforest/horrible vicious venomous thing that kills people but we shouldn’t even look crossly in its direction” messages.

          Now, probably part of this is being stupid enough to have a Facebook account which means that I get spammed, in along with the common memes, chain letter type messages, and inspirational glurge, the posts from my evangelical vegan/animal rights activist sibling’s likes and friendeds.

          But I do think it’s part of a rising trend that a lot of people don’t much like humans (so far I am on board, I don’t much like humans myself) and wouldn’t mind at all if humanity dropped dead of a plague in the morning and the planet was left to the whales, sharks, bunnies, wolves, and ground elder.

          • Nita says:

            Hey, at least these new misanthropes believe that what humans deserve is (relatively quick and merciful) death, not eternal torture. Perhaps Western society is gradually growing nicer after all 🙂

          • Tibor says:

            I suspect this is, more than anything else, signaling. It is strange, but somehow verbally promoting all-human genocide makes you look like a better person in some circles 🙂 Basically, you say “All these people in the world do all these bad things, I am distancing myself from them as strongly as possible, therefore I am a Good Person.” Also, on a very superficial level it makes you look “intellectual” to be a misanthrope (but you have to make sure to hate all groups of humans equally, otherwise you are a retarded bigot :D).

            I would be surprised if there were no variants of this from the past which more or less conveyed the same message. In any case, I think this is one of the cases where words don’t match actual beliefs and desires almost at all.

          • Deiseach says:

            I would be surprised if there were no variants of this from the past which more or less conveyed the same message.

            Yeats, “From Oedipus at Colonus”:

            Endure what life God gives and ask no longer span;
            Cease to remember the delights of youth, travel-wearied aged man;
            Delight becomes death-longing if all longing else be vain.

            Even from that delight memory treasures so,
            Death, despair, division of families, all entanglements of mankind grow,
            As that old wandering beggar and these God-hated children know.

            In the long echoing street the laughing dancers throng,
            The bride is carried to the bridegroom’s chamber through torchlight and tumultuous song;
            I celebrate the silent kiss that ends short life or long.

            Never to have lived is best, ancient writers say;
            Never to have drawn the breath of life, never to have looked into the eye of day;
            The second best’s a gay goodnight and quickly turn away.

    • Deiseach says:

      Jaskologist, I would certainly not describe myself as being on the left, and I’m pro-regulation, for the good reason that history shows us laws and standards are pretty much the only thing standing between us and poison pills.

      Now, I know that we are not as robust as our 19th century forebears, who used to take medicinal doses of arsenic to pep up their systems, but even they (eventually) blanched at strychnine in their beer:

      Brewers too, often added mixtures of bitter substances, some containing poisons like strychnine, to ‘improve’ the taste of the beer and save on the cost of hops

      • Erebus says:

        You didn’t think this one through, did you?

        (A) Standards are not the same thing as laws; it’s possible to have the former without the latter. (B) There are many ways to prevent abuses that do not rely upon heavy-handed government intervention. (C) Even if you’re right & some measure of government regulation is necessary, care needs to be taken that these regulations don’t do more harm than good — and I’d argue that we’re well past that point already. (D) There are many examples of unregulated industries working really quite well — the fledgling nootropics industry has been mentioned in this comments thread many times already — and this would indicate that the risk of “poison pills” is exaggerated.

        • Nita says:

          You didn’t think this one through, did you?

          Hey, that’s a bit rude. (American English version: What the fuck would you say that for?)

          the fledgling nootropics industry has been mentioned in this comments thread many times already

          Note that nobody has to buy nootropics to avoid early death, or to prevent their children from suffering a painful illness.

          • Erebus says:

            -I didn’t mean to be rude. My apologies if it came off that way.

            -All the more reason that we should look for ways to make access cheaper and easier. $750 per pill is, of course, a travesty. But $15 per pill, the old price, is also a disgrace. The costs associated with regulation exceed, by several orders of magnitude, the costs associated with the actual manufacturing of the drug itself. (Which, in Daraprim’s case, is about 1 cent per pill in active ingredient, and a few cents in excipients and encapsulation.) In a free market, generic Daraprim would be cheaply available to everybody in need of it. Wouldn’t this be the most desirable outcome?

        • Deiseach says:

          Great. We have standards that beer without strychnine is healthier than beer with strychnine. If it’s legal (or not illegal, rather, since there are no laws compelling brewers not to put strychnine in their beer) to use additives that are pennies per pint cheaper than using hops, then some brewer will decide that the savings on thousands of gallons of beer per year over five years’ is worth using strychnine-flavourings rather than real hops.

          Sell it at the same price as real hop beer, make more profit. Your beer tastes cheap and nasty? Knock down the price to below real hop beer. People may think it’s cheap and nasty, but it’s cheap and somebody will buy it in enough quantities to make it profitable.

          People die of accumulated strychnine? Not your problem, you’re not forcing them to pour pints of the stuff down their throats, and hey, it’s perfectly legal!

      • Tibor says:

        Regulation can be very useful sometimes, but I think it is a mistake to think that it has to (or should) be done by the state. I have a subscription to a magazine (well, nowadays, mostly a website) called dTest (I don’t know what the d stands for). It is a Czech magazine which tests various products on the Czech market, ranging from food and cosmetics through household appliances over to car tires and lawn mowers. Whenever I am buying something, I check their website and the three best rated products among those I am looking for (they sometimes lower rating of a product because of a feature I don’t really care about and also they do not include price in the rating so when something is 2% better but costs twice as much as the next product, I usually just buy the second best). Now, if there were no FDA-like organization in the Czech republic (it is probably an EU-wide organization nowadays, though), the likes of dTest could simply take over that. Whoever wants the info can subscribe the service, if it starts also selling advertisements (which it does not right now) for products it is not reviewing (say, you are looking at reviews of healthy nutrition products – it shows you adventure holiday ads), it could still keep the subscription low-cost or even get rid of it entirely. One would probably have various models, such as there are online newspapers which rely solely on advertisement, some that mix it with subscription and some which are only available to people who subscribe (and probably contain fewer ads). If you want to buy medicine labeled as rubbish or even dangerous by something like dTest, you are free to do so, but I can hardly see why anyone should pity someone who does. In fact, I would expect that such products would hardly be sold at all anyway, because pretty much nobody would want to buy them. Why does not dTest simply give good reviews to those that bribe them? Well, they could do it once or twice, then someone finds out, their reputation lies in ruins and the competition rolls all over them. Even today, Fiat has a reputation of making cheap and low quality cars, despite the fact that for the last 20 years or so the quality of their cars is on par with other brands (or at least I would say so). These things just tend to stick and reputation is the most valuable thing you have – and it is if you are a rating company – then the price of a bribe you would accept gets prohibitively large, basically it has to be high enough for you to close down.

        Why did this not work in the 19th century? Well, I think their problem was insufficient communication technology and products that were probably too varied. Then, pills were made by the local chemist (as was worchester sauce 🙂 ) and testing one means spending a lot of money on something which interests maybe 50 people…probably not worth it. Today, you buy pills from big pharmaceutical companies that sell millions of those pills. But the amount of testing you have to do stays the same. It could mean that some really small-scale local producers would not be able to get their stuff tested, or they would have to pay for it. But that is exactly what they have to do today, except that there is no competition on the regulation market and so the prices and terms are fixed.

        • Nita says:

          @ Tibor

          That sounds like a good service, but testing winter tyres or coffee makers is a lot easier, cheaper and lower risk than testing drugs. E.g., trying one coffee maker is good enough, but giving medicine to one patient is not.

          • Erebus says:

            This is false. Testing generic drugs for chemical purity and identity is very easy if you’ve got the gear: HPLC or TLC for purity; mass spec and NMR for identity; XRD to determine whether crystalline or amorphous, and, if crystalline, which polymorph. (Solid-state NMR and thermomicroscopy can also help with crystal polymorph identification.) The tests for heavy metal and biological contamination are too simple and cheap to even bear mentioning — those tests are common not only for drugs, but also for food and household products. If you want to cover all your bases, a simple ICP analysis can identify metals down to the parts-per-trillion — but there are older and cheaper methods that should also suffice.

            …It’s the clinical and pre-clinical testing of new chemical entities that’s hard and unpredictable. Testing drugs chemically is downright easy; testing them in biological systems is something else entirely. Fortunately, there’s no need to run additional clinical trials on generics…

          • Nita says:

            Testing generic drugs for chemical purity and identity is very easy if you’ve got the gear

            So, this kind of testing is an option only for new production lines of already tested drugs, using the exact same ingredients and the exact same process as the original production line.

            I think that in these special cases of chemically identical drugs regulators should accept the results of chemical analysis as sufficient, and patent applications should include exact recipes and descriptions of the manufacturing process.

            In all other cases, are there any viable proposals from the anti-regulation side?

          • John Schilling says:

            … using the exact same ingredients and the exact same process

            Why do we care about this? If the end result is truly and provably the same molecule, then it doesn’t matter what order we attached the side chains to the benzene ring or whatever. And if a different process produces a different product, we should be able to catch that in the testing the same way we’d catch a different product that came out of a sloppy implementation of the same process.

            You do need to do a chemical test of a new process, or even a new production line using the original process, but it should only be a chemical test.

            I think that in these special cases of chemically identical drugs regulators should accept the results of chemical analysis as sufficient

            But that’s not a special case. That is A: the majority of the world pharmaceutical market and B: the particular subject of this post.

            The case where we’re dealing with Compound X, and we only have a theory and maybe a computer model for what Compound X does in real people, obviously you would rather have a clinical trial for that. That’s the special case, and we do have special rules for it. The general case is, we’re dealing with dejavuitol, and we know perfectly well what dejavuitol does in people. We just need a check to make sure we’re not accidentally mixing up batches of something else.

            As noted, those tests are cheap enough that Consumer Reports can do them without straining their budget, cheap enough that Some Guy on Yelp will pay for the test and scream to the internet if it isn’t the right stuff. There’s a case to be made for having the government pay for its own tests, or maybe even force the manufacturer to pay for the tests (are you really going to trust the test the manufacturer pays for?). The case for mandatory clinical trials for generics, though, is looking pretty weak.

          • Nita says:

            If the end result is truly and provably the same molecule, then it doesn’t matter what order we attached the side chains to the benzene ring or whatever.

            I meant the ingredients and process for incorporating the active ingredient into usable products (e.g., pills), not for synthesizing it. Sorry, that was unclear.

            It may seem like a trivial stage of the larger process, but this was the stage at which cough medicine was turned into poison by dissolving it in ethylene glycol. It’s also the stage where modern medication becomes either “extended release” or not — and that matters a lot to some users.

          • John Schilling says:

            Right; all of the compounds that go into the pill have to be considered. Even then I think you’d want some leeway for substitution of Generally Recognized as Safe additives to prevent a manufacturer from gaming the system by spelling out “…and 0.0002% Mauve Dye #357”, made from the extract of the bark on a tree that grows only one island which they happen to own.

      • John Schilling says:

        history shows us laws and standards are pretty much the only thing standing between us and poison pills

        Well, that and the fact that if you poison your customers they won’t keep paying for your product. And in the internet age, they’ll figure that out much faster than they would have otherwise.

        But, OK, you want laws and standards as well.

        Which laws?

        We’ve already got laws that say you can’t put strychnine in your pills, and laws that say your customers can sue you into oblivion if your pills make them sick. Nobody here is proposing to change those laws. We apparently have a law that allows the FDA to test the drugs that are actually being produced, though it seems they haven’t actually been doing this all that often. That’s not at issue here either.

        The only law that is at issue here, the one that allows Turing to charge obscene profits, is the one that says they (not the FDA) have to do millions of dollars of testing on basically the first batch of drugs they produce at their factory, to prove that they are perfectly safe and effective and absolutely identical to the original brand and oh yes strychnine-free. After which they can sell as much as they want of whatever they want as long as they say it’s the same stuff, we’ll take their word for it.

        That’s roughly equivalent to saying that Volkswagen has to spend millions of dollars testing the first diesel Rabbit off the production line, to prove that it is safe and clean and efficient and all the other good stuff, and we’ll take their word for it that all the ones out on the world’s streets and highways are just like it.

        This is the law you want to protect you from strychnine in your meds?

        If all you’ve got is “we need laws and standards to protect us from Rapacious Big Business, look, here’s a law that says it’s to protect us from Rapacious Big Business, we need this!”, all you’ll get are the laws that don’t protect you but do protect Rapacious Big Business. Like this one. And if, when this finally reaches your notice, you say, “…OK, so we need another law to protect us from Rapacious Big Business”, then there’s no helping you.

        • DensityDuck says:

          “as long as they say it’s the same stuff, we’ll take their word for it.”

          It’s…not just the first batch, bro. Part of the FDA’s approval requires a demonstration that multiple batches all turn out the same, and the FDA’s agreement that the process being used is not going to allow sudden and unnoticed swings in the product quality. Oh, and they need to stay in regular contact with the FDA (including unannounced inspection visits) if they want to keep selling the stuff and getting paid for it.

          • John Schilling says:

            Since the FDA doesn’t seem to actually do very many of the unannounced inspection visits, that really kind of does come down to “take their word for it”. And whether or not the FDA does conduct such investigations, is orthogonal to whether or not the original license is granted on the basis of a written copy of the original process or on a multimillion-dollar clinical trial, which is the issue actually at hand.

            Also, I’m not your brother.

          • DensityDuck says:

            “the FDA doesn’t seem to actually do very many of the unannounced inspection visits”

            And you know this because…?

            “whether or not the original license is granted on the basis of a written copy of the original process or on a multimillion-dollar clinical trial, which is the issue actually at hand.”

            Allow me assuage your concerns, bro: There *is* a multimillion-dollar clinical trial that takes place when bringing orphan drugs to market. Even if those drugs have been sold for years, even if they’ve been used for the indication in question for decades. And part of that clinical trial does indeed involve a review of the process and demonstration that it does indeed produce the same pills every time.

            I mean, you know this, right? You’ve had direct experience in clinical trials, right? You’re not just talking out of your ass, here, right?

          • HeelBearCub says:

            @Density Duck:
            “bro”

            I probably on your side, but John asked (maybe not nicely, but he did ask) for you to not do that. Larding a comment with implicitly derisive terms doesn’t make for good conversation.

  54. Anonymous says:

    On a related note, I think the current grey-market setup is a model of what would be near-optimal for many drugs.

    Consider: there are many unregulated drugs which are only available through means which one would not discover unless in a certain environment (drug discussion forums, here, erowid, etc.). These environments select for literate, smart, internet-savvy users who are capable of not only determining which drugs to use but also which sources are safe. I’ve seen many users citing this model as an argument that drug deregulation at large would work, but what they fail to consider is the selection effect. Most people are NOT as scrupulous or attentive to detail as grey-market users, or if they are they lack the time to do their own research. There are many drugs which are commonly used by people in these communities but see horrible misuse when in the hands of the naive user. One such example would be the use of performance enchancing drugs (PEDs) such as anabolic steroids (AAS), human growth hormone (HGH), and others. Some of these are illegal without a prescription while others (which remain unlisted) are completely legal. They all see safe use by responsible members of these communities; however, users who have not done their research permanently fuck up their body or even die. Most substances are in a certain “happy medium” where they are restricted but these restrictions are usually not enforced except against large sellers, so the experienced user can still buy them.

    I use AAS because they are a popular class of drug, but unlike other “recreational” drugs, a few instances of misuse can have serious long-term consequences. Smoking meth or injecting heroin only have this danger if for example you have heart problems or are drunk, respectively. Except for instances like those, most commonly-used drugs inflict damage over time. But misuse of drugs that specifically affect hormones can mess you up in so many ways, and even the administration can be fatal (if you hit a vein).

    The current model is awful, but — pardon the elitism — I really think only a certain type of person should have near unhindered access to drugs. What the rest need is less regulation, but still regulation.

  55. DensityDuck says:

    “As terrifying as charging thousands of dollars for a chemical that costs pennies to make?”

    There’s an old joke about an engineer who walks into a factory, makes a chalk mark on one of the gears, and says “that’ll be ten thousand dollars, please”. He turns to the factory manager and says “one dollar for the chalk mark, ninety-nine ninety-nine for knowing where to make it.”

    Bioequivalency is not actually what the FDA wants. It’s what the FDA accepts, knowing that otherwise there wouldn’t be anybody making these drugs at all. See, for example, sterile injectables, where the FDA tried to crack the whip on manufacturers and get them to improve their quality and practices, and manufacturers responded by going Galt.

    What they want is for someone to come in and develop a modernised, controlled, standardised method for getting and testing the raw materials, ensuring that the amount of actual drug is a known value rather than “whatever”, making certain that only pills go in the bottle rather than anything else, and (as important as the rest) maintaining a clear chain of responsibility and communication with the FDA in case there are problems that need to be addressed–say, maybe it turns out that someone’s been filling your pill bottles with cyanide capsules.

    And doing all that costs money. If you want to make drugs in a modern factory and not the double-wide next door, that costs money. If you want to get your process reviewed by subject-matter experts instead of some guy saying “yeah, those’re pill-shaped all right”, that costs money. If you want the FDA to test it and agree that you’ve done a good job, that costs money (oh yeah–the FDA review process is funded by user fees!)

    And, unless you’re Warren Buffet, you don’t have that kind of money just sitting in the bank (hey, hot topic for Ethical Altruism: orphan drugs!), so you have to go ask for it. And you have to convince the people that they’d do better giving money to you instead of just investing in the bond market. And, given that the FDA’s exclusivity guarantee expires in a pretty short time frame, the math becomes easy; number of doses per year, times price, times years of patent, equals expected revenue, and that better be a big enough number to get investors involved.

    “oh but they don’t have to do that because people are already selling it which means a process exists” yeah, so, Scott brings up colchicine but he forgot to mention how it’s actually poison that will fucking kill you. It’s not regulatory capture that leads the FDA to grant exclusivity to people who do the legwork to standardise production of these orphan drugs; it’s a vested interest in public safety!

    “well people can just easily do independent tests and determine which manufacturers are good ones” The goal here is to ensure that people don’t consume poison that will kill them (or, worse, not kill them.) It has been established that process control is the best way to do this, in lieu of testing each and every individual pill. Because if I’m not using a controlled process, then I can always screw up without knowing it–maybe I use my own pilling-machine design instead of a standard one (because it’s cheaper to do it myself) and a liiiiiitle bit of extra powder falls near the pill mold, and sometimes it goes in and sometimes it doesn’t, and mostly it doesn’t matter until someone with bad kidneys gets an extra-strong pill and their veins melt.

    So, to sum up: There actually are valid reasons why the FDA wants companies to work with orphan drugs, and why it grants exclusivity to those companies that do, and why those companies price the orphan drugs as high as they do.

    “So what do we do about it?” Extend exclusivity agreements, for one. If you let a company sell the drug for ten years instead of two you achieve a fivefold cost reduction.

    Another is to just accept it. If you want clean drugs that are guaranteed to be safe, then this is what that looks like. And it’s easy to say “well, but if we want that safety we should just do the investigation ourselves!” but I kind of doubt that an uninsured AIDS patient has access to a gas chromatograph.

    • Erebus says:

      Your post was loaded with “vein melting” rhetoric and hot air, so I had a hard time grokking it. Let me see if I’ve understood you correctly. As far as I can tell, you’re saying that:

      1. Manufacturing generic drugs costs lots of money.
      1.1 Getting and testing pharmaceutical generic raw materials costs lots of money.
      1.2 Post-production analytical testing costs lots of money.
      1.3 Filling bottles is expensive and difficult.
      1.4 Regulatory and cGMP paperwork and record-keeping requirements are expensive and cost money.
      1.5 Modern drug manufacturing (encapsulation/analytical) equipment costs exorbitant amounts of money.
      2. Thus, companies who want to work on generics need to get a lot of investors involved.
      3. The FDA rewards the hard work of these companies with exclusivity arrangements, and that’s a good thing.

      Just about everything asserted above is demonstrably false & can be dismissed out of hand. Everything that you claim costs lots of money is actually relatively inexpensive, for starters, and this is easily provable. (I guarantee you that I could establish a factory to produce Daraprim, one which could produce enough to meet the entire world’s demand, and that doing so would cost me less than $1M. Far less.)

      It’s also worth noting that your argument, as I’ve understood it, implies by extension that low-cost and high-quality generics cannot exist in foreign markets. But, to the contrary, generic drugs here in under-regulated East Asia are generally comparable in quality to American generics, and they cost next to nothing. So surely manufacturing itself doesn’t cost very much? Then the question must become: At what cost your regulations and exclusivity arrangements?

      • DensityDuck says:

        “Just about everything asserted above is demonstrably false & can be dismissed out of hand.”

        This is the part where you describe your experience in American clinical trials and pharmaceutical manufacturing. (When you get done doing that, you can explain how it trumps the experience of someone with actual experience in American clinical trials and pharmaceutical manufacturing.)

        “I guarantee you that I could establish a factory to produce Daraprim, one which could produce enough to meet the entire world’s demand, and that doing so would cost me less than $1M.”

        So why haven’t you?

        (if your answer is “because there’s no money in it” then congratulations, you’ve shown that the economic reasoning behind raising the price of Daraprim is justified!)

        “generic drugs here in under-regulated East Asia are generally comparable in quality to American generics”

        ah-ha, so you’re not actually involved in the American market and you know jack shit about this conversation. Moooooving on, then.

        • Erebus says:

          Seriously, though, did I understand your argument correctly? Are you actually asserting that it’s ultra-expensive to actually manufacture these capsules/tablets to spec?

          …If so, you are mistaken. Virtually all of the costs involved in making drugs available to the public, and all of the barriers and delays that drug manufacturers face, are due to industry regulation. Case in point: I can’t sell Daraprim to the US market for a number of reasons — the “exclusive marketing rights” were sold to Turing, “closed distribution” means that they won’t sell me enough for the necessary bioequivalence studies I’d need to bring a competing formulation to market, etc. (To say nothing of the fact that those ridiculous and wholly unnecessary bioequivalence studies cost orders of magnitude more than it costs to actually manufacture the drug!)

          …And there’d be no point in selling generic Daraprim to China or Thailand, as competition has driven prices down so far that there’d be very little profit in it!

          I’ve worked with the pharma industry before, and I know what the situation in the USA is like, although I no longer live there. I don’t see how this is relevant, anyway. Even industry insiders feel that the market exclusivity that the FDA has granted companies like Turing is excessive, and that room should be made for more firms so that they can compete on price.

          • DensityDuck says:

            “ultra-expensive to actually manufacture these capsules/tablets to spec? ”

            Did ya read my whole post?

            Making one pill is cheap. Putting together the factory and the procedure (and securing approval of those) is very much not cheap.

            Not gonna go back-and-forth today, so congratulations, you win by last-post.

  56. H Phillip Becker says:

    I truly enjoyed the above article. However you are missing what this ‘CEO’ did. He said on TV that he is a hedgefund manager and that his investors deserve the best returns so he was raising the price by 7000 percent.

    OK. He has done this before at another drug company. He searches out drug/generic that produce a drug that no one else produces. and it has a very narrow useage. So other generic pharma companies won’t make the drug. Once he takes over a company he raises the price to whatever he wants. Makes his money and leaves.
    Now he goes to Turin. Based on his knowledge as a hedge fund manager and his past experiences he was almost certain to gain national publicity by raising the cost by 7000%. so congress says they will investigate PHARMA pricing, Hilary makes a statement and guess what…PHARMA goes straight down.
    Looking at the PHARMA ETF (exchange traded fund that consists of big pharma). went from 79 to 64. a drop of about 20%. By using PUT options, making a bet a stock or ETF goes down is easy. PUTS on the PJP (pharma symbol for ETF) went from $0.35 to $9.00. that’s about 30 times your money. Knowing that his outrageous annoucement would get a reaction from Congress and news, as a hedge manager he became the catalyst for the market going down. You’d like to have tomorrow’s paper today. Well he created a fantastic trade. How much he made on the shorts I have no idea but think. with market at $79 prior to his national news TV, papers, Congress etc. buying the $75 put was 35 cents. when PJP hit $64 the PUT was worth $9. Nice trade.

    He doesn’t care about the health of AIDS patients HE IS A HEDGE FUND MANAGER and has used negative publicity to short stocks in the past. How great when he can create his own force to makes millions. maybe $100s of millions. then he can reduce price of the drug to $27 a pill or just 100% higher. He has made his money already.

    someone should look into this. however it is likely not illegal.

    • Murphy says:

      I’m pretty sure shorting your own company based on knowledge about decisions you haven’t yet announced is illegal.

      • HeelBearCub says:

        Shorting the market (other companies) not his own.

        Even that may still be insider trading, I believe.

        • Doctor Mist says:

          @HeelBearCub:

          Going long on your own company’s stock is really an awful lot like going short on your competitors’ stock. If you based either one on insider information about your company, it’s hard to see why latter would be considered less unfair.

          On the other hand, looking through various sources (SEC, Wikipedia, Investopedia) I don’t see that equivalence being made explicit. Moreover, my impression is that the kind of “material infomation” they worry about is information about imminent mergers or product announcements. Suppose somebody worked for the part of Apple that is (alleged to be) designing a car, and they knew that the car was going to be really, really awesome, and they bought a lot of Apple stock and shorted Tesla and Toyota, and they made a ton of money from it when the car gets announced in 2019. Would they get nailed? I doubt it.

          I don’t claim any analogy between that and the (hypothetical) short sales by Shkreli; I’m just noodling around.

  57. James Picone says:

    So, people talking about regulatory capture: Why is a private reviewing company not subject to the same problem?

    I get the model, at least I think I do. There’s a market of pharmaceuticals, there’s a market of pharmaceutical reviewers, and they buy & test the drugs the pharma companies make, and then they publish those reviews. Maybe they charge for access to a website, maybe they do advertising, maybe they solicit money from the pharma companies in return for marketing reviews for their drugs, some combination of all three. Maybe instead of doing the reviews themselves, they operate like Amazon and allow user reviews of drugs. Maybe they’re Metacritic and they have user reviews and their own expert reviews from people who own fancy hardware. Whatever.

    It’s supposed to resist regulatory capture because there isn’t a monopoly on reviewers. If one company starts selling good reviews, another takes market share from them and the market makes it work.

    But if that’s supposed to be the case, why doesn’t it happen with any of the actual review companies that we have for services where there isn’t a government reviewer?

    Consider, for example, videogame reviews. If they’re from an actual company, they’re almost always completely goddamn useless for determining how good the game being reviewed is. About all you can determine is which companies paid the reviewers the most. They’re just another line of marketing. User-driven reviews are much better, if you filter out the obvious sockpuppets and hope that this particular game doesn’t have non-obvious sockpuppets. But user-driven reviews for pharmaceuticals are just plain not going to work – they can’t review process, they’re going to be polluted by people who don’t understand statistics or placebos, and they won’t help you much with a wide range of problems (“Pills sometimes are poison”, “Nominal dosage is complete lie”)

    Reviews for computer parts are similar, in my experience. You can trust nothing but any numbers they give you, and if you don’t know how to interpret those numbers and how to determine if and how the test was rigged, well you’re up shit creek.

    Related question: How does economic theory handle information asymmetry and people not being homo economicus? Because maybe that’s a reason why reviews are shit and a bunch of pharmacies have wildly varying prices.

    • John Schilling says:

      Consumer Reports seems to remain uncaptured, and I haven’t heard of a rash of people being electrocuted by shoddy toasters so I’m assuming UL remains in good hands. Amazon’s book reviews are pretty reliable even when they are about indie publications that the traditional publishers would pay real money to suppress, and so are GoodReads.

      And heck, for at least a subset of drugs we have Crazymeds, which I am told is reliable and useful.

      The market is working here. In order for the market to work, there has to be competition, and that means winners and losers, but pointing to just the losers and saying “look what crap the market churns out” does not lead to an accurate assessment. For anything that I am seriously interested in buying, and that doesn’t have an Official Designated Government Review Agency, I have almost always been able to find a reliable source for product reviews in the private sector. Sometimes even when there is an ODGRA.

      And in the case of pharmaceuticals, there’s another advantage: So long as we still have a private-sector health insurance industry in the United States, that’s a whole lot of money and a whole lot of high-level professional interest in securing reliable information about which drugs work and which ones don’t. Anthem Blue Cross isn’t going to be willingly paying $750/pill for Daraprim (or even the special negotiated discount of $300/pill) unless they have sound reason to believe it actually is safe and effective.

  58. TK-421 says:

    Loopholes to the rescue!

    According to Baum, his company’s mix of the two drugs has not been approved by the Food and Drug Administration. However, both the ingredients themselves and the company’s compounding work have been approved. The drug can only be sold after being prescribed by a doctor to a specific individual. The company is selling a bottle of 100 pills for $99 through its website.

  59. Chris Green says:

    I am HIV positive and have friends in the community who have been ordering their more expensive medications from specific pharmacies who specialize in generics. I have been taking the normal brand name version of it for years, and have already had to refill a month’s supply since the price hike. I am lucky enough to have decent insurance rates, but I did have to pay a hefty increase even with my prescription plan. After consulting some people I knew, one of which was actually a doctor, I ordered a generic version from this site http://goo.gl/F00H8d, and have been taking it for about a week in place of the brand name with no ill effect. I still have the brand name, normal prescription here, but the price difference really is enough for me to consider using the generic full time as long as there are no problems, as I am not making alot of money right now. Has anyone here had any expedience with any generic Daraprim versions that have hit the market recently?