Members of the House Oversight Committee were probably giving each other high-fives Thursday for making Martin Shkreli look like a smug jerk under their questioning about the high drug prices at his former company, Turing Pharmaceuticals.
You know what? He was a smug jerk, smirking through his appearance before the committee as he repeatedly pleaded the 5th Amendment. But the lawmakers should stick their glee in their pockets. Not only is it no big challenge to make Shkreli look like a jerk, but the responsibility for sky-high prices charged even for old generic formulations is entirely their own.
The truth is that the possible solutions to the drug price crisis are well understood, and they all lie within congressional jurisdiction. While Shkreli smirks, Senators and members of Congress sit on their hands. Who are the bad guys here?
Let's recap. Shkreli is the youthful investor whose former company, Turing, acquired the exclusive rights to Daraprim, a generic drug for the parasitic infection toxoplasmosis and raised its price from $13.50 per pill to $750, bringing the total treatment cost to $63,000. Because cancer and HIV patients bear the highest risk from toxoplasmosis, this looked like an especially crass move.
It didn't help that Shkreli carries himself like a willful juvenile and is unapologetic about his strategy, asserting that it's just business. No surprise that he became the face of drug profiteering and labeled "the most hated man in America," among other monikers.
Shkreli is under indictment for an alleged fraud scheme unrelated to his drug marketing exploits, which naturally limits his ability to respond to questioning under oath. The members who questioned him Thursday were aware of that and made the most of it, peppering him with innocuous questions in full knowledge that he couldn't answer anything without ceding his right against self-incrimination.
Some of them were smug jerks about it themselves. (I'm looking at you, Reps. Jason Chaffetz [R-Utah] and Trey Gowdy [R-Va.]) Others managed to miss the point entirely: Rep. Elijah Cummings (D-Md.) accused Shkreli of running a Ponzi scheme, evidently because his plan was to use revenue from Daraprim to buy up other drugs to exploit. Whatever that is, it's not a Ponzi scheme.
"You can go down in history as the poster boy for greedy drug company executives or you can change the system," Cummings told Shkreli. This is absurd. It's Cummings and his colleagues who can change the system.
In truth, people like Shkreli aren't the real cause of the high drug prices that afflict American consumers. For one thing, the market for Daraprim is small. Gilead Sciences, which markets two hepatitis C cures that cost more than $80,000 per treatment and address a market of potentially millions of patients, has a much larger impact on many more people and on public and private healthcare providers as well. The company has been criticized by Congress, too, but its executives are at least smart enough not to parade their glee at their profits in public.
The reason that the U.S. leads the world in stratospheric drug prices is that government policy allows it. For example, the largest single pharmaceutical customer in the U.S., Medicare, isn't permitted by law to negotiate drug prices with manufacturers. U.S. customers are forbidden to acquire their drugs in Canada or overseas, where they're often cheaper. Reverse those policies, and the magic of price competition would begin to bring costs down.
The Food and Drug Administration already has the authority to quell drug profiteering in generics, as we documented last month. The agency could prioritize the approval process for competing generics to counter unwarranted price increases. Instead, its backlog of approvals runs to years and covers thousands of drugs.
The FDA's formal approval of a new use for an old generic, even when that use has been recognized by doctors for years, can give its manufacturer the right to keep rival manufacturers out of the market for up to seven years. That's what happened when Makena, a drug to prevent premature births, won FDA approval as an "orphan drug" in 2011. Its manufacturer took advantage of its exclusivity period to raise its price 100-fold, driving the cost of a full treatment to $25,000, from $250, and ending access to the treatment for thousands of women.
These rules aren't written in stone. They're amenable to legislative action by Congress and congressional pressure on the FDA. By the same token, a recent Senate report observed that "members of Congress are forbidden by law to have access to information regarding price discounts and rebates agreed to by drug manufacturers as part of the Medicare and Medicaid programs." It added that "the public may be surprised" to learn this. Well, yes. But who made the law barring Congress from having this information? Congress did.
Why won't Congress act? As always, it comes down to money. Pharmaceutical companies are consistently among the biggest contributors to Washington campaign chests. Most of the money goes to Republicans, but Democrats get a healthy share, too. How close is the relationship? Former Rep. Billy Tauzin (R-La.) was head of the House committee with oversight over the drug industry when he retired from politics in 2005. Days later he surfaced as the new president and CEO of the Pharmaceutical Research and Manufacturers of America, the industry's lobbying arm. (He retired from Phrma in 2010.)
Congress is great at expressing dismay at high drug prices and even outlining the disconnect between research and manufacturing costs and prices at the pharmacy. Almost invariably, however, its committee reports stop short of recommending fixes. That was the case with a recent Senate Finance Committee investigation of Gilead and its hepatitis drugs. The report ran to 144 pages, but not a single page contained a recommendation for legislative action.
Upbraiding Martin Shkreli for being smug is easy. Wiping the smirk off his face requires action. That's what Congress won't do.