Dean Baker on “This Hedge Fund Guy”

Dean BakerThis is an old drug. It’s a generic drug — there’s no patent on it. Ordinarily, we’re looking at high priced drugs because you have a drug company like Gilead Sciences owning a patent on Sovaldi — the hepatitis C drug. They did develop that — or played a role in it (that’s an issue) — but they played a role in developing it — they brought it to market. They’re ostensibly recovering research costs. There’s at least some truth to that. In this case, what they discovered — this hedge fund guy discovered — was that you have an old generic drug that is not widely used, but it is very important for the people who need it. It’s a life and death proposition — no easy substitute. [The company that makes Daraprim] is the sole producer. They have a de facto monopoly.

Now, someone else could get into the market. But it wouldn’t be worth it to them to take the time to get FDA approval because it’s a very small market. So he found this little niche, and he’s able to jump in there and charge outlandish prices because there is no one else there. That’s actually happened with several other generic drugs over the last three, four, five years. And this is just a failure of antitrust regulation. That’s really what that’s about.

The more typical story has to do with how we finance research more generally. And I meantion in the case of Sovaldi — the hepatitis C drug — from Gilead Sciences. There’s charging $84,000 a year for a treatment. The generic price for that would be less than a thousand. Now that speaks to how we finance research and I think that’s very, very problematic. But it’s at least a very different question than what this hedge fund guy did. Which is really just basically price gouging — pure and simple.

—Dean Baker
Interviewed on CounterSpin

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