When I visited my in-laws in Louisiana for the Christmas-New Year’s stretch in 2010, I wound up stranded by a blizzard in the northeast and compelled to drive 700 miles home, when the closest my wife and I could get to NJ was Cincinnati. There were no such adventures on this year’s visit.

On Christmas afternoon, several of my in-laws were talking about their jobs at the local refinery, and how the various blends of gasoline they make are apparently being produced at or near a loss. Only diesel, they said, actually made a profit for the company.

I mentioned that several refineries in the northeast are going to be shut down because of unprofitable operations, and these (more distant) relations by marriage looked across the table at a sport-coated, pocket-square-brandishing yankee and asked, “You work in a refinery?”

My wife almost choked on her boudin.

“No, I read about it in the Wall Street Journal . . .” I said, extending my pinkie while drinking a Dr. Pepper. They eyed me suspiciously, then talked about the formulation regs and quality costs that drove up costs and reduced profits, which was a more in-depth conversation than I expected.

The whole scenario got me thinking about government involvement in “picking winners” and the unintended consequences that ensue. There are a couple of pieces in this issue that touch on that topic: Ed Silverman’s column on the fracas around Plan B and my article on the Generic Drug User Fee Act, which may wind up driving smaller drugmakers and CMOs out of the generics field.

The law of unintended consequences tends to dictate that any policy intended to “fix something” will create major problems. For instance: Gas prices are too high -> Institute various fixes, like higher MPG for cars so we need less gas -> Watch reduced demand make gas less profitable, drive competitors out of business and result in . . . high gas prices.

In our industry, we can look at the shortage/non-shortage of Adderall and associated ADHD treatments. In this case, consumers have complained that the generic version of Adderall is unavailable. The FDA investigated the issue and was told by the Drug Enforcement Administration (DEA) that there is no shortage. Why the DEA? Because the API — mixed amphetamine salt — is a “drug of abuse” and the DEA  dictates how much of it is permitted to be manufactured each year.

Given an artificially limited quantity of an API determined by government fiat, are drugmakers likely to make a low-margin generic version of the drug, or are they more likely to make their branded extended-release variety? Thanks to DEA’s quota system, there’s no opportunity to build inventory of either form, and a mis-estimate of market demand can lead to regional shortages or overall scarcity, even if the initial quota is historically large enough.

Since many prescription plans have heavily tiered payment plans for generic and branded drugs, some patients face a jump from $10 for (non-existent) generic Adderall to $200 for the branded XR version.

Keep in mind: the DEA’s quota system for the API is in place to prevent people from abusing the drug. And the unintended consequence of this is to make it difficult to find and increasingly expensive, which could lead to people committing fraud, theft or other crimes to get hold of a drug that they actually have a legit need for, although the chances of them pulling off such actions effectively would be pretty slim if they weren’t able to focus the way they can when they have their Adderall, which could lead to —

— Um, where was I? My mind must’ve been wandering . . .

What I’m Reading

Pharma

Bashing Big Pharma in China

Bruce Einhorn, Daryl Loo and Natasha Khan, BusinessWeek – buswk.co/y3E3Qx

Comment: What could go wrong with trying to build a new market in an authoritarian, formerly communist mega-state?

Non-Pharma

Hitch-22

Christopher Hitchens – amzn.to/eNfdKF

Comment: I took up Mr. Hitchens’ 2010 memoir shortly after his death last December. I was always partial to his literary criticism over his political polemics, and this book has some great literary reminiscences. Remind me to tell you about the time I bumped into him on a train on the way home from BIO.

What are you reading?
 

Let me know — at [email protected], www.goodreads.com/groth, www.linkedin.com/groups?gid=1775433 or www.facebook.com/contractpharma — and the first respondent wins a prize!