A Second Look at the CREATES Act: What’s Not Being Said

The CREATES Act has gained traction this year in part because some supporters have linked it to the pricing controversy associated with Martin Shkreli and his company, Turing Pharmaceuticals. In August 2015, Turing acquired the rights to a decades–old, off–patent drug for toxoplasmosis, Daraprim® (pyrimethamine). Turing maintained a closed distribution system that had been established in June 2015, and it increased the price from $13.50 per tablet to $750 per tablet.[101] The distribution program was not linked to any particular safety issue, however, and company documents suggested it was intended specifically to “create a barrier and pricing power.”[102] Outrage over the price increase, and Shkreli’s seeming indifference to criticism, took over mainstream media and social media for months. Although earlier bills addressing REMS predated the Daraprim controversy, the incident now features prominently in discussion of the legislation.

The problem is that it is analytically unsound to equate Daraprim—a drug without significant safety concerns—with drugs like Thalomid and Adempas, which present serious risks of embryo–fetal toxicity, which are subject to FDA–mandated distribution restrictions because of (and tailored to reduce) those risks, and which are associated with intellectual property.[103] While the legislation would have forced Shkreli to sell his product to aspiring generic applicants, the drug had been marketed since the 1950s, and there had not previously been significant interest in generic applications. Had Shkreli not also increased the price, it is unlikely there would have been any meaningful interest in generic applications in 2015. The real issue with Daraprim was the sudden and dramatic price hike, coupled with Shkreli’s combativeness. Deep frustration with the cost of medicine in this country cannot, however, justify a failure to differentiate analytically between Turing Pharmaceuticals and the research–based, innovating biopharmaceutical industry. The cost of innovation is a period of high prices without competition; that is the nature of intellectual property. The intellectual property clause of the original U.S. Constitution of 1788 enshrines the bargain that we make as a society: protection of exclusive rights for limited times, with all this entails, in order to ensure continuing progress and innovation.[104] While the cost of innovation may be frustrating at times, it is exceptionally short sighted to direct this frustration towards companies that are developing new medicines, own intellectual property, and have a right to choose with whom they will do business.

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