You Are Being Lied to Again
The current proposal to limit drug
prices, which is a part of major pending legislation has, as one might well
expect, brought forth the wrath of the richest single industry sector in the
US. Of course, I’m referring to the pharmaceutical industry. First some
history, though, because Big Pharma wants you in the dark except for the barrage
of their grossly slanted op-eds and media ads you’re about to see. The
misalignment of US drug pricing with that of most of the rest of the developed
world is a multi- faceted issue.
Right off the top, The US, began allowing DTC
(direct to consumer) drug advertising in the early 1990s and some drug
manufacturers immediately began targeting consumers, due in part to a flood of aging
baby boomers and to an increase in the number of patients participating in
their own health care decisions, in more than a few cases, demanding drugs they
now saw advertised. Create the demand, increase the price and they will come
(and pay)! Since then, DTC advertising has become a ubiquitous popular promotional
tool. More importantly, as advertising is designed to do, it has helped create
a sense of need and market pressure that has also fueled the unreasonable surge
in US drug pricing.
Drug
companies are granted patent protection for drugs they develop and market. No
one would argue that this is unreasonable. Patent terms are set by statute. Brand-name
pharmaceutical companies are rewarded for inventing and developing new
treatments and cures that improve the quality of life for everyone. In return
for the innovation, current law provides brand pharmaceutical companies with 20
years for each patent. During the period of patent and marketing exclusivity,
brand name drugs are priced and sold free from competition and, in too many
cases, free from restriction of a reasonable or affordable cost structure. Drug companies are well aware that, within
that 20-year period, other companies will likely develop clones of their brand-named
drug and since manufacturing is far, far, cheaper than initial development, will
be able to sell that generic cheaply once the original’s patent protection has lapsed.
Hence, they do several things which increase drug costs unreasonably.
One long standing practice which
reeks of pure greed is the frequent action of some major drug companies of markedly
increasing retail prices on a medication as the end of patent coverage
approaches. This is simply wringing the last drop of blood from the stone
before generics hit the market. When Harvoni, a Hepatitis C cure, goes
off-patent, then the $60,000 price might well be supplanted by the generic, now
sold in India for $127. (No that is not a typo!) More on Harvoni later.
Another common practice is known to
regulators as “evergreening.” In simplest terms this can be modifying a drug
very slightly and filing for a new patent even though the drug is
therapeutically very much the same. Another form is more subtle. Say you bring
a drug online (FDA approved and patent granted) for one specific clinically
verified application, such as was the case with Enbrel. Originally developed to
treat Psoriatic arthritis and FDA approved for that application, patients with
both arthritic and visible “plaque” Psoriasis began reporting excellent and unexpected
clearing of the visible disease as well. So, the manufacturer of Enbrel went back
the FDA seeking approval for treating plaque Psoriasis as well. New patent,
start the clock again. Pharma loudly proclaims R & D as the reason prices
are so high, but a secondary application patent requires only test results, not
R&D.
One final Evergreening example: rheumatoid arthritis drug HUMIRA (aka “adalimumab” which doesn’t have that brand name "pizazz")) is the best-selling prescription drug in the world, with over $12 billion in U.S. sales per year. Humira was approved in 2002, and it now makes more money annually than all of the NFL teams, combined. The initial patent on the product expired in 2016, but within the three years before expiration, the company applied for and obtained over 75 patents that would extend its monopoly to 2034 – and keep this enormously expensive treatment inaccessible to many patients. Note: at recommended adult dosage for an adult treating Arthritis, and even with a coupon at your pharmacy, you’re looking at over $70,000 retail annually.
Here’s an excerpt from a JAMA (Journal of the
American Medical Association) article. “Humira is now priced at $2,984 per
syringe, or $77,586 annually — a 470% increase from when the drug entered
the market,” and those consistent price hikes were driven by executive
bonuses from 2015 to 2018, which were directly linked to Humira's financial
performance.”
By now the reader will have
thought, “Yeah, but insurance covers some of that, right? Well, that depends on
the insurance. At best (other than Military retiree plans) Humira can still
cost $400-$500 monthly on copays. These are not “optional medications for those
who need them. For the uninsured, Humira is just a word.
Now to “who pays?” In the debris of his Iraq debacle and prior to dumping the housing bubble collapse in Barack Obama’s lap, Bush 43 was anxious to create a legacy of some sort, and Medicare part D was it. Sadly, the powerful Pharma lobby leaned on “their” members of Congress to insist that to pass Part D, Medicare and Medicaid would not be allowed to negotiate drug costs but would be forced to pay retail.
Medicare Part B, Part D, and beneficiaries spent $560 billion on
drugs from 2016 through 2018, $324 billion of which was spent on drugs with
direct-to-consumer advertising. And so it goes. They price it, Medicare pays
it! Guaranteed income, no quibbling. As just one example: The Veterans Administration
is not part of the deal and pays less than half as much for potentially life-saving
Epi-pens as Medicare and Medicaid. Fun fact: Heather Bresch, former CEO of Mylan
Pharmaceuticals, the company which jacked up the price of Epi-pens in 2016, is
Senator Joe Manchin’s daughter.
Philosophically, bashing Jeff Bezos
for making a great deal of money while supplying customers with things they can
either buy or not buy at fair prices with disposable income, is a favorite Far
Right parlor game (called envy). Where
is the outrage directed at the CEOs of the Big Pharma corporate entities which
are the most profitable businesses in any sector of the US economy, when they
price life essential medications out of reach of many Americans?
Now let’s discuss those R&D claims which Big Pharma always leads with. Over the last fifty years, research funded by the National Institutes of Health (NIH) and National Cancer Institute (NCI) has played a role in every major advancement related to cancer prevention, detection, and treatment, and contributed to breakthroughs for many other diseases.
So, what does
the NIH do? In 2019 NIH (Federal) funding for R & D was $138.9 billion. The
entire US Pharmaceutical industry spent just $83 billion. In other words,
Pharma itself funds about 40% less than the Federal Government on cutting edge
drug research yet reaps all the profits! The NIH shares the results of their research; Big Pharma doesn't, without cost. Hell, one might even make the case
that if the basic research and initial trials on a specific drug (like Harvoni
developed by Emory University researchers with NIH grants) are done with “our
dollars”, then perhaps “we” should own the patent. Alas, not so. The Emory Professor
who ran the development was allowed, by law, to sell the patent to Gilead Pharmaceuticals
for $4 million. In just the first full fiscal quarter after FDA approval,
Gilead reported Harvoni sales of $7.3 billion, with a net profit of $3.5
billion. In one quarter they recouped 875 times in profit what they
paid for the drug on which they did zero R&D.
Betsy McCaughey, Star Parker, John Stossel,
and others will complain that the proposed limits on drug costs will somehow
negatively affect Pharma R & D efforts, costing us, “Much needed, life-saving,
drugs.” What they, especially Stossel,
who detests anything government, will never admit is that the vast majority of
the lifesaving drugs on the market are there at least partially, if not
primarily, because of NIH efforts and funding.
Of course, Pharma CEOs don’t have
to worry about drug costs since many are compensated more than $20 million
annually.
I’ll close with this since it’s a
special case and exemplifies Pharma greed better than all other examples. The largely faux reasons cited by pharmaceutical companies for the high cost of new prescription
drugs do not apply to insulin.
First: the “high
cost of development” is not relevant for a drug that is more than 100 years
old; even the latest and most commonly used analog insulin products are all
over 20 years old. The original developers, Canadians, sold the patent to Toronto
University for $1!
Second, the
pricing is not even the product of a free market economy. The person who needs the
product is not in a position to negotiate the price, and there is no
relationship of price increases over time compared with overall market
inflation. The price of insulin has risen inexplicably over the past 20 years
at a rate far higher than the rate of inflation. One vial of Humalog insulin,
which used to cost $21 in 1999, cost $332 in 2019, reflecting a price increase
of more than 1000% or in other words 15 times the cost-of-living increase
over the same period. The number one reason for the high cost of
insulin is the presence of a vulnerable population that needs insulin to
survive. Period.
By contrast, insulin
prices in other developed countries, including Canada, have stayed
the same. Insulin pricing in the United States is the consequence of
the exact opposite of a free market: extended monopoly (and Evergreening,
remember?) on a lifesaving product in which prices can be increased at will.
Third, and last, spare
me the invalid R &D bullshit argument. There is limited innovation when it comes to
insulin; the far more pressing need is affordability. The next time you read of
or hear some talking head complaining about “excessive government regulation”.
Think about those negatively affected by lack of it in cases where it really
matters.
It’s not just me either, “The pharmaceutical industry has tried to instill fear in the American public that federal legislative proposals to reduce drug spending would threaten access to innovative life-saving drugs,” said Timothy A. Lash, president of the West Health Policy Center. “West Health and John Hopkins’ findings clearly refute that claim. Large drugmakers are so profitable they could maintain their current investment in R&D – and their standing as the most profitable industry – even if they lose significant revenue.” Johns Hopkins Bloomberg School of Public Health finds that large, brand-name drug manufacturers would still be the most profitable industry sector even with $1 trillion in lower sales, all while maintaining current research investments. Wow!
