The Radical Center
Published in

The Radical Center

The War on the Sick: The Regulatory State and Crony Capitalism

Bernie Sanders is seeking the spotlight again. It is said there’s no fool like an old fool and Sander is in the Senate’s top ten when it comes to age and foolishness.

Sanders is screaming that a pharmaceutical company was handed a monopoly and used it to jack up prices. The Federal Drug Administration — one of those regulatory agencies Sanders goes orgasmic over — gave Catalyst Pharmaceuticals the exclusive right to produce Firdapse, or anything similar, in the United States.

With the might of the FDA behind them Catalyst immediately issued new prices for the drug exceeding $1000 a day. And insurance companies will be required to pay it under other regulations. Regulatory maleficence created the problem and a private company took advantage of a politicized market—not a depoliticized one.

That’s what the regulatory state does so well — it hands crony capitalists artificially high profits. Sanders has long been an advocate of state control of the marketplace. And in this case state control created another disaster. Sanders only blames the market, not the way the FDA rigged the market. Sanders is one of the worst in this regard and the blame for the disaster should be laid at his feet.

Firdapse is used to treat a neuromuscular disease called Lambert-Eaton myasthenic syndrome. CNN’s Wayne Drash says:

Patients had been able to get a version of the drug for free through a compassionate use program through the US Food and Drug Administration. In November, Catalyst acquired the North American license for Firdapse and then announced, in a December 13 phone call with investors, its intention to set the list price at $375,000, according to the letter.

Drash is getting only part of the story.

Until now LEMS has been successfully treated by physicians with a similar drug, 3,4-DAP. It was done without formal FDA approval but it worked. And it has been working since the 1980s. Yet the FDA falsely claimed, with the approval of Firdapse, “There has been a long-standing need for a treatment for this rare disorder.” As noted 3,4-DAP has been used to treat this disorder quite successfully for almost half a century! What changed is, as the press release admitted, “The FDA granted the approval of Firdapse to Catalyst Pharmaceuticals, Inc.” Given the regulatory system they granted Catalyst the equivalent of the right to print money.

The problem started when Catalyst used FDA regulations the way crony capitalists do — they applied for a special monopoly from the regulator. They claimed the drug was an “orphan drug,” which “qualifies the sponsor of the drug for various development incentives of the ODA, including tax credits for qualified clinical testing.” They get various processes for approval subsidized and, most importantly, as NPR notes, the orphan drug category “would give the company exclusive rights to market the drug for seven years.”

The problem started when Catalyst used FDA regulations the way all crony capitalists do — they applied for the regulator to give them a special monopoly. They claimed the drug was an “orphan drug,” which “qualifies the sponsor of the drug for various development incentives of the ODA, including tax credits for qualified clinical testing.” They get various processes for approval subsidized and, most importantly, as NPR notes, the orphan drug category “would give the company exclusive rights to market the drug for seven years.”

Jacobus Pharmaceuticals was happy to produce the drug for patients and did so at no cost. Physicians treating patients for LEMS would get an Investigation New Drug permit from the FDA to prescribe the drug. But they couldn’t leap through all the regulatory hoops the FDA wanted for formal approval.

Jacobus is a small, family-owned company so lacks the deep pockets that shareholders bring. Laura Jacobus says getting FDA approval to sell 3,4-DAP is an expensive process and wasn’t a priority.

“We could have pursued marketing authority many years ago. But we felt that there wasn’t an unmet need,” she says.

“First and foremost we wanted to make the drug available to the patients and the physicians,” Jacobus says. “That was our №1 priority, so that was what we did.”

Now that the FDA has formally approved the drug Catalyst can sell it and no one is allowed to compete with them — not even Jacobus, which was producing the drug long before Catalyst ever heard of it. Catalyst didn’t do anything to produce a new drug, they took an existing drug and were handed regulatory monopoly status because they could afford the process for formal approval.

Four years ago NPR warned this would happen:

Doctors who treat LEMS patients worry that if Catalyst, a small pharmaceutical company based in Coral Gables, Fla., gets approval to market its brand of the drug, the price will skyrocket, making it harder or even impossible for some patients to get any version.

A couple hundred physicians and researchers signed an editorial warning that FDA designation had the potential of a “harmful price increase.” That noted, “The cornerstone of the ODA is years of market exclusivity” which has “allowed exorbitant prices for some FDA-approved orphan drugs. The intemperate prices of many orphan drugs is also facilitated by US law that prevents the FDA from considering cost in making decisions about regulatory approval of drugs. What is particularly troublesome to us is a ‘loophole’ in the ODA that allows companies to received FDA market exclusivity under the ODA for older, existing drugs, such as 3,4-DAP.”

Catalyst CEO Patrick McEnany paints himself as a savior to LEMS patients, “patients come to us and say ‘I have LEMS and I can’t get the drug.’ Patients don’t have access. It’s very important that this drug get approved.”

Well, that’s what he said before the FDA handed him a monopoly for a drug he didn’t create. Now he’s laughing all the way to the bank figuring on the $375,000 per year, per patient that is being handed to him on a silver platter by the FDA. What doctors said would happen in 2015 has happened, and it was the FDA that did it.

For several years now physicians and researchers were warning that FDA would regulate treatments for LEMS in a way that would hand windfall profits to one company, for a drug they didn’t created. Catalyst basically paid to jump through the hoops the FDA concocted to “protect” consumers. They got special considerations in doing so and were handed the monopoly.

We have seen the FDA attacking patients this way for years — for instance recently we discussed how FDA regulations on Epipens pushed up the price and handed the company with exclusive production rights higher profits.

Bernie, the bloviating buffoon from Vermont, is in love with the regulatory state. He claims regulatory agencies protect us from the unscrupulous greed of capitalists. The problem with markets, according to Senator Sanders, is the lack of regulation. We need more of it.

Crony capitalists at Catalyst used the regulatory system to transfer windfall profits to themselves — somewhere north of $300 million per year. It was handed to them by politicians and bureaucrats who think exactly like Bernie Sanders. The socialist Senator may try to milk this disaster for his own political gain, but the disaster was created by people exactly like himself. If he wants to know who’s responsible I suggest he look in the mirror.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
James Peron

James Peron

James Peron is the president of the Moorfield Storey Institute, was the founding editor of Esteem a LGBT publication in South Africa under apartheid.