Go Lean Commentary:
While “Greed maybe good” for incentivizing innovation, it “sucks” to apply massive increases to existing products because … well just because.
This appears to be the scenario in the following news article and VIDEO; a former Hedge Fund Manager buys the rights (patents) to an older drug and then increases the price … 5500 percent. See the story here:
Title: Ex-hedge funder buys rights to AIDS drug and raises price from $13.50 to $750 per pill
By: Tom Boggioni
A former hedge fund manager turned pharmaceutical businessman has purchased the rights to a 62-year-old drug used for treating life-threatening parasitic infections and raised the price overnight from $13.50 per tablet to $750.
According to the New York Times, Martin Shkreli, 32, the founder and chief executive of Turing Pharmaceuticals, purchased the rights to Daraprim for $55 million on the same day that Turing announced it had raised $90 million from Shkreli and other investors in its first round of financing.
Daraprim is used for treating toxoplasmosis — an opportunistic parasitic infection that can cause serious or even life-threatening problems in babies and for people with compromised immune systems like AIDS patients and certain cancer patients — that sold for slightly over $1 a tablet several years ago. Prices have increased as the rights to the drug have been passed from one pharmaceutical company to the next, but nothing like the almost 5,500 percent increase since Shkreli acquired it.
Worrying that the cost of treatment could devastate some patients, Dr. Judith Aberg, the chief of the division of infectious diseases at the Icahn School of Medicine at Mount Sinai asked, “What is it that they are doing differently that has led to this dramatic increase?”
According to Shkreli, Turing will use the money it earns to develop better treatments for toxoplasmosis, with fewer side effects.
“This isn’t the greedy drug company trying to gouge patients, it is us trying to stay in business,” Shkreli explained, saying that many patients use the drug for far less than a year and that the new price is similar to other drugs used for rare diseases.
Shrkeli also defended his small pharmaceutical company saying, “It really doesn’t make sense to get any criticism for this.”
This is not the first time the fledgling pharmaceutical executive has come under scrutiny.
He started the hedge fund MSMB Capital while in his 20’s and was accused of urging the FDA to not approve certain drugs made by companies whose stock he was shorting.
In 2011, Shkreli helped form Retrophin, which also acquired old drugs and immediately raised their prices. Retrophin’s board fired Shkreli a year ago and has filed a complaint in Federal District Court, accusing him of using Retrophin as a personal fund to pay back angry investors in his hedge fund.
As for Shrkeli’s claim that he will put the excess profits back into research, doctors say that isn’t needed in this case.
“I certainly don’t think this is one of those diseases where we have been clamoring for better therapies,” said Dr. Wendy Armstrong, professor of infectious diseases at EmoryUniversity in Atlanta.
VIDEO Title: Ex-hedge funder who hiked AIDS pill cost by 5,500 percent says drug ‘still underpriced’ – https://youtu.be/bCIMUn_WNz0
According to the Person of Interest in the foregoing article and VIDEO, 32 year-old ex-Hedge Fund Manager Martin Shkreli, “Drugs need a profit motive to sponsor innovation”. He posits that the process of research and development for new drugs require the appeal of capitalism, where people invest hoping to get a BIG return later.
To argue with this business logic is to argue with the tenets of capitalism.
So be it! Let the argument begin!
“This is what happens when you turn over healthcare to the capitalist” – says one patient and sufferer of Multiple Sclerosis, Dionne Sarden, of Greater Detroit.
Drugs and healthcare should pursue the motives of the Greater Good, not the “greater profit”. If you do not agree with this statement, just re-visit the Hippocratic Oath, here, that every doctor is required to vow at the start of their medical career:
I swear to fulfill, to the best of my ability and judgment, this covenant:
I will respect the hard-won scientific gains of those physicians in whose steps I walk, and gladly share such knowledge as is mine with those who are to follow.
I will apply, for the benefit of the sick, all measures which are required, avoiding those twin traps of overtreatment and therapeutic nihilism.
I will remember that there is art to medicine as well as science, and that warmth, sympathy, and understanding may outweigh the surgeon’s knife or the chemist’s drug.
I will not be ashamed to say “I know not,” nor will I fail to call in my colleagues when the skills of another are needed for a patient’s recovery.
I will respect the privacy of my patients, for their problems are not disclosed to me that the world may know. Most especially must I tread with care in matters of life and death. If it is given me to save a life, all thanks. But it may also be within my power to take a life; this awesome responsibility must be faced with great humbleness and awareness of my own frailty. Above all, I must not play at God.
I will remember that I do not treat a fever chart, a cancerous growth, but a sick human being, whose illness may affect the person’s family and economic stability. My responsibility includes these related problems, if I am to care adequately for the sick.
I will prevent disease whenever I can, for prevention is preferable to cure.
I will remember that I remain a member of society, with special obligations to all my fellow human beings, those sound of mind and body as well as the infirm.
If I do not violate this oath, may I enjoy life and art, respected while I live and remembered with affection thereafter. May I always act so as to preserve the finest traditions of my calling and may I long experience the joy of healing those who seek my help.
Written in 1964 by Louis Lasagna, Academic Dean of the School of Medicine at Tufts University, and used in many medical schools today. Source: https://en.wikipedia.org/wiki/Hippocratic_Oath retrieved September 23, 2015.
Alas, the Person of Interest in this consideration is not a medical doctor, he is a Hedge Fund Manager. Some would consider his actions to be just “par for the course” … for a Crony-Capitalist. (Consider this sample of his “immature” Twitter messages).
This consideration is in conjunction with the book Go Lean…Caribbean which asserts that Crony-Capitalism is the scorn of American life that reaches into every fabric of society; in this case the life-and-death decisions for healthcare. The book urges the Caribbean region not to follow the American example in this regard. (Previously Go Lean blogs have cited the good non-profit-motive example of Cuba. While Cuba is a Failed-State in so many other areas, in this one case, drug-pricing, they get it right; “even a broken clock is right twice a day”).
The Go Lean book is focused on economics primarily, but also considers the realities of security and governance. For the background on economics, the book relates the historicity of the father of modern macro-economics Adam Smith.
Adam Smith, the 18th century Scottish political economics pioneer, is best known for his classic work: “An Inquiry into the Nature and Causes of the Wealth of Nations (1776)“. Through reflection over the economics at the beginning of the Industrial Revolution the book touches upon broad topics as the division of labor, productivity, free markets and the division of incomes into profit, wage, and rent . While Smith attacked most forms of government interference in the economic process, he advocated that government should remain active in certain sectors of society not suited for profit-seekers. These sectors included public education, mitigations for poor adults, the judiciary, a standing army, and healthcare. He posited that these institutional systems may/should never be directly profitable for private industries.
Hedge Funds and Crony-Capitalist obviously hold a dissenting view.
Beyond Adam Smith, the field of Economics features public choice theory – the application of economic thinking to political issues. This field asserts that “rent-seeking” is the more appropriate labeling for certain activities. This “rent” refers to seeking to increase one’s share of existing wealth without creating new wealth. The demonstrated effects of these efforts are reduced economic efficiency [in the community] through poor allocation of resources, reduced actual wealth creation, lost government revenue, and increased income inequality, and, potentially, national decline. (The word “rent” does not refer here to payment on a lease but refers to gaining control of land or other natural resources).
So why is the cost of drugs so high in the US? Based on these experiences, it is not just the motivation for profit, but for rent!
This theory was detailed further in a recent Go Lean blog that related that Big Pharma, the Pharmaceutical industry, dictates standards of care in the field of medicine, more so than may be a best-practice. The blog painted a picture of a familiar scene where Pharmaceutical Sales “Reps” slip in the backdoor to visit doctors to showcase their latest product lines; but relates that there are commission kick-backs, rebates and “spiffs” in these arrangements, to incentivize the doctors to order these drugs for their patients. The Go Lean book posits that the Caribbean must take its own lead in the battle for health, wellness and pharmaceuticals because this US eco-system is motivated by such a bad ethos: profit and even worst, rent.
The Go Lean book strategizes a roadmap for economic empowerment in the Caribbean region, even including the indisputable need for healthcare and pharmaceutical drugs. Clearly any quest to elevate the region must detail a comprehensive plan for healthcare. The Go Lean book proves this; it goes beyond a plan and provides a roadmap … to make the Caribbean a better place to live, work, heal and play. At the outset of the Go Lean book, in the Declaration of Interdependence (Page 11), these points are pronounced:
viii. Whereas the population size is too small to foster good negotiations for products and commodities from international vendors, the Federation must allow the unification of the region as one purchasing agent, thereby garnering better terms and discounts.
ix. Whereas the realities of healthcare and an aging population cannot be ignored and cannot be afforded without some advanced mitigation, the Federation must arrange for health plans to consolidate premiums of both healthy and sickly people across the wider base of the entire Caribbean population. The mitigation should extend further to disease management, wellness, mental health, obesity and smoking cessation programs.
The Go Lean serves as a roadmap for the implementation and introduction of the technocratic Caribbean Union Trade Federation (CU). The CU‘s prime directives are identified with the following 3 statements:
- Optimization of the economic engines in order to grow the regional economy to $800 Billion & create 2.2 million new jobs.
- Establishment of a security apparatus to protect the resultant economic engines.
- Improve Caribbean governance to support these engines.
Previous blog/commentaries addressed issues of capitalistic conflicts in American medical practices, compared to other countries, and the Caribbean. The following sample applies:
The foregoing news article and VIDEO provides an inside glimpse of American Crony-Capitalism as it touches on vital areas like healthcare. Obviously, the innovators and developers of drugs have the right to glean the economic returns of their research. The Go Lean roadmap posits that there is a better way, a scheme in which more innovations can emerge and investors can get their Return on Investment (ROI).
The Caribbean Union Trade Federation has the prime directive of optimizing the economic, security and governing engines of the region. The foregoing VIDEO depicts that research is very important to identify and qualify best practices in health management for the public. This is the manifestation and benefits of Research & Development (R&D). The roadmap describes this focus as a community ethos to promote R&D in the areas of science, technology, engineering and medicine (STEM).
The following list details additional ethos, strategies, tactics, implementations and advocacies to optimize the region’s health deliveries and R&D investments, especially on Caribbean campuses and educational institutions:
|Community Ethos – Deferred Gratification||Page 21|
|Community Ethos – Economic Systems Influence Individual Choices and Incentives||Page 21|
|Community Ethos – The Consequences of Choices Lie in the Future||Page 21|
|Community Ethos – Governing Principles – Lean Operations – GPO’s; Ideal for Healthcare||Page 24|
|Community Ethos – Governing Principles – Return on Investments (ROI)||Page 24|
|Community Ethos – Governing Principles – Cooperatives||Page 25|
|Community Ethos – Non-Government Organizations||Page 25|
|Community Ethos – Ways to Impact Research & Development (R&D)||Page 30|
|Community Ethos – 10 Ways to Promote Happiness||Page 36|
|Community Ethos – Ways to Impact the Greater Good||Page 37|
|Strategy – Integrate and unify region in a Single Market||Page 45|
|Strategy – Agents of Change – Globalization||Page 57|
|Tactical – Fostering a Technocracy||Page 64|
|Tactical – Growing to a $800 Billion Economy – Case Study of Adam Smith||Page 67|
|Tactical – Separation of Powers – Health Department||Page 86|
|Tactical – Separation of Powers – Drug Administration||Page 87|
|Implementation – Ways to Pay for Change||Page 101|
|Implementation – Ways to Implement Self-Government Entities – R&D Campuses||Page 105|
|Implementation – Ways to Deliver||Page 109|
|Planning – Ways to Improve Trade||Page 128|
|Planning – Ways to Make the Caribbean Better||Page 131|
|Advocacy – Ways to Improve Healthcare||Page 156|
|Advocacy – Ways to Better Manage the Social Contract||Page 170|
|Advocacy – Ways Foster Cooperatives||Page 176|
|Advocacy – Ways to Improve Emergency Management||Page 196|
|Advocacy – Ways to Impact Foundations||Page 219|
|Advocacy – Ways to Impact Persons with Disabilities||Page 228|
|Appendix – Emergency Management – Medical Trauma Centers||Page 336|
The Go Lean roadmap does not purport to be an authority on medical or pharmaceutical research best practices. This economic-security-governance empowerment plan should not direct the course of direction for medical research and/or treatment. But something is wrong here, as portrayed in the foregoing article and VIDEO. The pharmaceutical industry cannot claim any adherence to any “better nature” in their practices.
This is not economics, which extols principles like the “law of diminishing returns”, or “competition breathes lower prices and higher quality”. No, the American pharmaceutical industry, at this juncture, is just a pure evil version of Crony Capitalism. Just … rent!
This is not the role model we want to build Caribbean society on.
Capitalism versus Socialism …
Many people feel this type of discussion in this commentary is really a clear indictment of the premise of the American Healthcare system, based on capitalism (right-leaning). Opponents of this status quo advocate for a more socialistic approach (left-leaning). Socialized medicine is the premise for Canada, the UK, and all the 27 EU countries. So the alternative to the American system is not so radical. Alas, even America’s capitalized healthcare schemes are not as far-right as in times past; with the implementation MediCare (in the 1960’s), VA hospitals, and Affordable Care Act (ObamaCare) Health Insurance mandates; these are now reflections of socialism in the US system.
How do we measure the effectiveness of success of left-leaning versus right-leaning healthcare schemes? While most “Well-being” measurements are obviously subjective, there is one exception: life expectancy. Life expectancy calculation is all binary, 1 versus 0, On versus Off, Life versus Death. The Organization of Economic Cooperation and Development maintains a Better Life Index that measures “Well-being” in the 34 OECD Countries. The following details apply:
There is more to life than the cold numbers of GDP and economic statistics – This Index allows you to compare well-being across countries, based on 11 topics the OECD has identified as essential, in the areas of material living conditions and quality of life.
One of the 11 topics measure “Health”, with considerations to the binary Life Expectancy and the subjective Self-Reported Health. On this chart related to Life Expectancy (based on when the average age for non-trauma deaths), the US appears on the list in position 27. See chart here.
The Go Lean movement asserts that the US should not be our model for healthcare. We can do better in the Caribbean; we have done better (Cuba), and must do better throughout the region. We can impact the Greater Good and still preserve economic realities. This means life-or-death. 🙂
Download the book Go Lean … Caribbean – now!