[blucoat]

This is what confuses me, so maybe someone with a better understanding of this market works can elaborate. How is it that the drug is not patented but the manufacturer has the exclusive right to sell it? It blows my mind that one company can overnight make such a huge change and there is no competitor to turn to.

[pja]

In the US, you still have to get FDA approval to sell drugs that claim to be reformulations of another manufacturer’s product. This isn’t entirely baseless - demonstrating your version’s bioequivalency to the original is part of the process, which doesn’t seem like an unreasonable thing to require.

Unfortunately, the whole approval process still costs in the low $millions at a minimum & so for out of patent drugs that are a pain to manufacture, and/or have small numbers of patients, they just aren’t financially viable once you factor in the approval costs.

Part of what you see when a drug company steps in and jacks up the prices like this is that the new owners know that the FDA approval process combined with their pre-existing manufacturing capability gives them an expensive moat to bridge for other companies that isn’t justified by the size of the market, so if they’re willing to take the reputational hit that the previous owners weren’t then they can jack up the prices enormously since the patients have no-where else to go.

[danielahn]

I am several steps removed from the industry but to my knowledge -

There is still a regulatory approval process to be able to manufacture the drug - so the cost and time required to receive this approval, then to market the drug as a generic alternative to the existing drug to a market that often doesn't see itself as the ultimate payor (ie. the consumer thinks the insurance companies / government are paying) and may prefer known names, and the original manufacturer's ability to then lower the price of the drug all combine to push away competition on low volume drugs like this one.

[mrep]

I'm not very familiar with the drug market myself, but game theory can theorize why they can do it. From what I have read, drugs cost a lot of money and a few years to get to market even when they are not patent protected. This means that when a competitor starts investing money in a competing product, the main company can simply reduce the price to a point where that investment is no longer profitable. Potential competitors know this and that’s why they wont enter the market.

[dzeanah]

According to a CNBC interview last week the product is protected via trade secrets. People know what's in it, but not how to make it. And it's some weird stuff (I think pituitary glands from pigs or something equally weird are key components - not sure there's a lot of open-source knowledge on how to deal with that ingredient pipeline.)

The CEO's pitch was that they believe the drug is useful in more roles than it's currently used for, so they're taking the increased money to perform the studies required to allow the drug to be used to treat more diseases for which there is no alternative.

And right now this is a last-ditch drug - it's used once all other therapies have failed.

So they're trying to increase marketshare by doing expensive studies, which is why this drug is still produced and where the money is going.

At least according to the CEO, and my memory.