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Manhattan Institute

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MI Responds: "Pharma Bro" Martin Shkreli's Congressional Testimony

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MI Responds: "Pharma Bro" Martin Shkreli's Congressional Testimony

February 4, 2016
Health PolicyFDA ReformDrug Development

"MI Responds" features real-time commentary from Manhattan Institute scholars on breaking news and developing issues. Click here to view more.

Congress subpoenaed testimony on ‘rising prescription drug prices’ from notorious former Turing Pharmaceuticals CEO Martin Shkreli, who raised prices on Daraprim by nearly 5,500 percent. As promised, Shkreli pleaded the Fifth today, and the hearing as a whole offered little substance.

The implication of such hearings is that prescription drugs are simply too expensive. But the accompanying call to impose price controls on drugs would critically damage the market, harming investment incentives and therefore the possibility of researching and developing innovative new cures. Research shows that even limited cost controls that cut revenue by 20 percent would shorten life expectancy for children today, and impose costs of $51,000 per capita.

The price hike in Daraprim justifiably elicited outrage. But Daraprim was unique. Ordinarily, a competing company would have undercut Turing on price, but the FDA’s backlog of generic drug approvals and lack of reciprocal approval with other advanced countries has stymied competing drugs’ ability to enter the market and drive down prices.

It is critical not to conflate outrage over Daraprim with other drugs. While innovative lifesaving drugs may deliver nominal sticker shock, their high upfront costs belie long-term savings. A Sovaldi regimen to treat Hepatitis C, for example, may cost $84,000, but can prevent an even costlier $200,000 liver transplant in the future."

Yevgeniy Feyman is a Fellow and Deputy Director of Health Policy at the Manhattan Institute.

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