Outrage over Turing Pharmaceuticals, which increased a price of a drug by 4,000 percent overnight, is misplaced anger that should focus on overregulation by the Food and Drug Administration.
So argues Will Wilkinson in a piece for the Niskanen Center.
Martin Shkreli, the founder, exploited patent laws and a limited market in drugs available to consumers. The $55 million purchase was the FDA approval for the right to sell Daraprim, the generic drug at the center of the controversy.
Without FDA approval, no other company can manufacture and sell the drug. Nor can Americans import the drug from foreign countries such as India, where each tablet costs 5 cents instead of $750, because the United States prohibits drug importation without FDA approval.
Essentially, Shkreli has used the FDA to limit his competition and make a profit that would be otherwise unobtainable.
“The culprit is a regulation—a restriction on capitalist acts between consenting adults—that makes it illegal for Americans to buy well-tested, imported generics on the open market. Shkreli’s cashing in precisely because the American pharmaceutical market is so far from free,” Wilkinson notes.
The regulatory actions of the FDA, to protect Americans and ensure they only have access to safe and effective drugs, has make consumers worse off in a way that would be impossible without the FDA.
Shkreli, in fact, has used the bureaucracy and restrictions of the federal government to his benefit, at the cost of everyone else. His example is a cautionary tale in the urge to use regulation as a panacea to social problems.
The overcautious nature of the FDA creates an approval process that is long and expensive for drug companies. That hesitancy to approve drugs can harm consumers beyond higher prices.