Found a work-around (https://github.com/pypa/setuptools/issues/937)

Reinstall pip and setuptools:

python -m pip install -U pip
pip install -U pip setuptools

You can then do pip install packages.

** Bug watch added: github.com/pypa/setuptools/issues #937
   https://github.com/pypa/setuptools/issues/937

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https://bugs.launchpad.net/bugs/1658844

Title:
  most recent version does not install /usr/local/lib/python2.7/dist-
  packages/pkg_resources/extern and /_vendor

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