Poor Pharma!

"Speaker Pelosi's drug pricing plan would siphon $1 trillion or more from biopharmaceutical innovators over the next 10 years. CBO's preliminary estimate found this bill ‘would result in lower spending on research and development and thus reduce the introduction of new drugs.’"

— Pharmaceutical Research and Manufacturers of America on Wednesday, November 27th, 2019 in an ad in the “Politico Playbook PM” newsletter.

 The above statement was issued of course, by the drug companies’ lobbying arm and awarded a “Mostly False” rating by PolitiFact, the closest to a neutral observer I’ve found. The PolitiFact article dealt with, to a large extent, the uncertainties related to estimating  the real numbers of potentially undeveloped drugs as well as the $1 trillion estimated ten year cost of doing the most common sense thing imaginable, currently prohibited by Medicare part D plan, which has been flawed from inception.

         What, you ask, is this drug cost panacea? It’s actually elegant in its simplicity. Allow Medicare to bargain drug prices. What? You mean like every other single health care provider in the nation?  Yep. That’s all. Just allow Medicare to compete with every other insurer and negotiate drug pricing. Banning this was a Bush 43 concession to Big Pharma which was lobbying against any Drug plan. I’ve written numerous times on this topic, so in a very brief synopsis: While private insurers and even the VA dicker with drug manufacturers for lower than “sticker” price on drugs, Medicare is prohibited from doing so.

       One quick and relatively current example: Epi-Pen. Mylan Pharmaceuticals jacked the price by about 100% not so long ago. Let’s take a round number price for a 2 pack.  An Epi-pen list price for a two-injector package is about $700 today. If an individual on Medicare with part D drug coverage is prescribed Epi-Pen (a lifesaving remedy for some), between the plan and the copay, Mylan will make $700. If the patient sees a coupon (many of which are issued by Mylan, whose actual cost per injector is well under $15) they cannot use it. Medicare must be paid full price. On the other hand, the veteran’s Administration pays well under $200 per 2 pack. Meanwhile at CVS, with a free coupon (not available to Medicare users!) on the GOOD Rx website, I can get the same Epi-pen 2 pack for $141! Even without a coupon, Mylan also sells a generic epi-pen for a mere $400 per two pack. But wait, as they say, there is another brand, just as effective, Adrenaclick, whose manufacturer makes a generic version which sells at CVS for $110 per 2 pack. Of course, most doctors prescribe Epi-pen and so Medicare pays the full price minus co-pay, which the Medicare “beneficiary” must cover.

        Understand this: In just this one instance for the Epi-pen generic which now combined with its name brand partner, has 80% of the auto injectable epinephrine market, The Government pays well over 100% more than most non-Medicare patients pay!    

How does this relate to total US drug expenditures?  With 15% of Americans on Medicare, Medicare drug spending is grossly disproportional to that population share. Part of this is related to the older population segment in question, but here’s the rest of the story. More than 155 million American industrial workers currently avail themselves of employer provided health care plans. They (in conjunction with their insurers, who strenuously bargain drug costs!) pay 40% of all US Drug spending (2016 data). With about 50 million currently enrolled on Medicare, Medicare paid 39% of that same spending. Understand this: about 44 million Americans, those under Medicare’s bargaining restrictions, paid the same total amount for drugs as 155 million Industrial workers under employer insurance.

        The above is significantly impactful in several other areas as well: Those opposing “Medicare for all” (I prefer National Health Care) cite the current overall cost as a major deterrent, However, they fail to consider the effects of a 50% reduction in drug spending which eliminating part D restriction would accomplish.  In 2016, Medicare drug spending was $128 billion. Reducing that cost by half, would generate, over ten years, $648 billion, or 2/3 of the trillion cited in the Big Pharma sponsored article. That figure is not unrealistic, considering how much lower insurers bargain prices.

        How to save, for the poor pharma industry? Here’s an idea. As of this year, only one other nation, New Zealand, allows prescription drugs to be advertised DTC (Direct to Consumer). US Pharmaceutical companies spend $6 billion annually doing so, even though 79% of senior US medical doctors call it “Not helpful.”   Eliminating this “not useful” advertising would save $60 billion over ten years, which gets us to $700 billion plus. As a point of interest, the two leading single expenditures per drug are Cialis and Viagra.  But the $6 billion DTC dollars is peanuts compared to Pharma’s “treats” to the medical community.

        Overall Big Pharma, between cute drug reps and freebies of all sorts including drug samples, spends another $20 billion annually. This is another $200 billion over ten years. We’re close to the dreaded $1 trillion mark, and haven’t even dealt with what may be the most mendacious of this whole series of Pharma misstatements, which is that, while they are fond of citing R & D expenditures, thy omit the fact that many new drugs  are actually developed by university researchers with NIH grants (yep, our money!)  In many cases the Pharma company buys the patent from the school or the researcher depending on various criteria, and then simply markets it after secondary testing and FDA approval. Gilead’s Harvoni ($84,000 if Medicare pays for it, much less with good private insurance) is a case in point. The developer at Emory University, who worked with an NIH grant was paid $4 million for his efforts by Gilead. We (the citizenry) should “own” that patent. By the way, the generic of Harvoni ($84,000 for twelve pill Hep C cure) sells for $127 for the same cure in India!

       Another Pharma money saver? Stop leading the nation in Congressional lobbying giveaways. It isn’t close for second place either. Or, realize that a 25-30% net profit (they guys at the top make that) at the expense of the rest of us is abusive. It’s almost corporate loansharking. As it currently stands, Big Pharma is fleecing the nation via Medicare drug pricing and a host of lesser but significant evils. Now they’re whining for their right to keep doing it.