Costly drug development and lack of competition contribute to high prices

When the price of Daraprim, a drug used to treat parasitic infection, was increased from $13.50 to $750 per pill by Turing Pharmaceuticals, company executive Martin Shkreli became the poster child for what was perceived as a profit-driven, villainous pharmaceutical industry. Daraprim is only one example of the sky-high pricing for prescription drugs that has led to public outrage and highlighted a clear need for lower-cost alternatives. Generic alternatives create competition for brand name drugs and, in doing so, should drive down market prices. Unfortunately, drug pricing does not play out so simply. A recent New York Times article considered the case of Syprine, a drug used for the treatment of the rare Wilson disease.

Syprine, manufactured by Valeant Pharmaceuticals International, jumped in price in 2015 from around $500 to over $20,000. Teva Pharmaceuticals announced a generic competitor but unfortunately did not offer the discount patients may have been hoping for: a bottle of one hundred pills will cost $18,375.

Although the price is extremely high, it is not totally unexpected. Wilson disease affects only around 10,000 people in the United States, and Teva's generic is the only competition for Syprine, which had already set the market price at over $20,000. Having multiple competitors for a single drug can be helpful in reducing prices. So, because Syprine has limited reach and limited competition, Teva's generic discount was limited as well.

The FDA publishes a list of off-patent drugs without competition in order to encourage the manufacture of generics. On the manufacturing side, the cost of developing drugs is estimated to be anywhere from several hundred million to $5 billion, according to a Washington Post article. For drugs that treat rare conditions, like Syprine, there is a limited reach and a relatively lower number of annual prescriptions to be filled. For for-profit pharmaceutical companies, the cost benefit may not be worth the investment unless the price of the drug is high enough.