Boring from Within

Here's an interesting move by some hospital chains to try to beat the drug companies at their own game.

Some of these incidents of shark investors scooping up generic drug companies and immediately jacking up the price have gotten major publicity, viz. notorious "pharma bro" Martin Schkreli, now doing 7 years for fraud -- but jacking up the price of Daraprim by a factor of 500 was perfectly legal. (Is there a nano-scale violin?) But there have been innumerable other instances. The problem is that manufacturing generic drugs isn't highly profitable and requires a substantial investment to get FDA approval. Often that means that there is only one generic manufacturer, or a large one that only has small competitors who can't produce an adequate quantity. If people have no choice but to buy the drug -- it's life or death -- the predators can move in and make their killing.

So now this consortium of hospitals is going to set up its own generic drug manufacturing business. They're secretive about which medications they plan to produce, and they haven't announced a schedule, so we'll see what happens. But the idea is beautiful -- non-profit organizations setting out to beat capitalists at their own game. Their plan is to keep prices low and sell to other health care organizations as well as themselves. It's hard to think of other corresponding monopolies that could be broken in this way, but it's a potential solution to one real problem.

Plenty of pharmaceutical skullduggery will still go on, of course. Here's Marcia Angell on the ongoing corruption of medical research by the drug companies. We'll fix that next.