Median Income Falls; Drug Profiteering Soars

The latest data from the census bureau:

The median American household in 2014 had a lower income, in inflation-adjusted terms, than it did in 2013. The $53,657 the household in the middle of the income distribution earned last year was down 1.5 percent from the year before, though the census said that shift was not statistically significant.

But even if that drop is a statistical blip and you assume that middle-class incomes were really flat, flat isn’t anything to celebrate in the current environment. The 2014 real median income number is 6.5 percent below its 2007, pre-crisis level. It is 7.2 percent below the number in 1999.

Meanwhile, certain investors are doing very well for themselves by buying up old drugs with only one manufacturer and obscenely jacking up the prices:

Specialists in infectious disease are protesting a gigantic overnight increase in the price of a 62-year-old drug that is the standard of care for treating a life-threatening parasitic infection.

The drug, called Daraprim, was acquired in August by Turing Pharmaceuticals, a start-up run by a former hedge fund manager. Turing immediately raised the price to $750 a tablet from $13.50, bringing the annual cost of treatment for some patients to hundreds of thousands of dollars. . . .

Although some price increases have been caused by shortages, others have resulted from a business strategy of buying old neglected drugs and turning them into high-priced “specialty drugs.”

Cycloserine, a drug used to treat dangerous multidrug-resistant tuberculosis, was just increased in price to $10,800 for 30 pills from $500 after its acquisition by Rodelis Therapeutics. . . .

In August, two members of Congress investigating generic drug price increases wrote to Valeant Pharmaceuticals after that company acquired two heart drugs, Isuprel and Nitropress, from Marathon Pharmaceuticals and promptly raised their prices by 525 percent and 212 percent respectively. Marathon had acquired the drugs from another company in 2013 and had quintupled their prices. . . .

Doxycycline, an antibiotic, went from $20 a bottle in October 2013 to $1,849 by April 2014.

Why are they doing this? Because they can. They know that it would take many months for another firm to gear up to make a competing product, and that other firms are unlikely to do this for two reasons: because the markets for these drugs are comparatively small, and because if they entered the market with a lower-priced product, the price-gouging firm would just cut their prices. Consumers would benefit, but not investors. So, in our system, it does not happen.

These companies are simply exploiting the weaknesses of our bizarre, half public/half private health care system. Demand for many drugs is not very dependent on price, because neither the patient nor the doctor pays the price, which is born by the insurance company, which is barred by many laws and rules from actively intervening in the choices of the doctor and patient. And unlike just about every other country in the world, the U.S. government does not set prices for drugs, on the theory that this will be done by "the market." It's simply insane. And it is just another example of how our system is set up to reward wealthy investors by screwing everyone else, which explains why they keep getting richer as the rest of the population lags farther behind.

UPDATE

Sometimes public pressure works:

A huge overnight price increase for an important tuberculosis drug has been rescinded after the company that acquired the drug gave it back to its previous owner under pressure, it was announced on Monday.

Score one for the Times, Bernie Sanders, Hillary Clinton, and the rest of us outrage warriors.