Soaring Drug Prices
Robert B. Jordan
My May 2017 AARP Bulletin VOL. 58 has the front page story – “Why Our Drug Prices Are So High.” During the course of this blog I am going to take the liberty of using some of the material from the AARP Bulletin.
Have you seen all the news items of late telling of elderly people having to make decisions on whether to buy food, pay the rent or buy their prescribed medicines? That, in my view is criminal.
Let’s start with the operating profit margins for the eleven top companies in 2016 taken from AARP Bulletin VOL.58:
> AMGEN Drug Manufacturer (CEO and 29 vice presidents) 42.6%
> ABBVIE Drug Manufacturer (29,000 employees) 30.6%
> JOHNSON & JOHNSON Drug Manufacturer (founded in 1886) 29.4%
> ROCHE HOLDING Drug Manufacturer (Swiss company) 27.8%
> Alphabet (parent of Google) 26.3%
> PFIZER Drug Manufacturer (founded 1849) 26.0%
> Walt Disney 25.8%
> Verizon 21.5%
> ASTRAZENECA Drug Manufacturer (Swedish company) 21.3%
> Coca Cola 20.6%
> MERCK Drug Manufacturer (German company) 15.1%
Seven of the top eleven are drug manufacturers. Filling out the list, the 5 companies trailing are:
> General Electric 14.4%
> American Airlines 13.2%
> General Motors 5.7%
> Exxon 3.7%
> Ford 2.7%
The average for S&P 500 companies in 2016 was 10.4%.
The drug manufacturers must be very profitable based on the number of TV ads they run. It seems that 90% of all TV ads are either automobiles or drugs. The commercials for drug companies contain long and complicated disclaimers.
“Every night I watch the nightly news. It’s funded by the pharmaceutical companies. Virtually every ad is a drug ad. They get their say every night on the nightly news through advertising.” Michael Moore
The US of A has the most expensive drugs in the world. Xarelto, from Johnson & Johnson, is a drug to thin blood to prevent blood clots, for each prescription it costs:
* $48.00 in South Africa
* $101.00 in Spain
* $102.00 in Switzerland
* $126.00 in the UK
* $292.00 in the US
“There is no disputing the fact that American consumers pay 30 to 300 percent more for the same prescription drugs as our counterparts in Canada, Europe, and in the rest of the world.” Michael K. Simpson
One month supply of Lipitor (from Pifzer) in the US costs $100.00, and in New Zealand $6.00. Twelve weeks supply of Sovaldi (from Gilead) in the us $84,000.00, and in Egypt $900.00. The cost of new drugs continues to skyrocket:
* The new cancer drug Bavencio (Pfizer) – $156,000.00 per year per patient
* A new muscular dystrophy drug – $300,000.00 annually
* Tecentrig (Roche) a new bladder cancer drug – $12,500.00 a month
Even older drugs are not immune:
* Between 2002 and 2013 the cost of Insulin tripled
* EpiPen (by Mylan) increased 500% since 2007
Leigh Purvis, the Director of Health Services Research for the AARP Public Policy Institute was asked how drug makers can charge so much. His answer was “Because there’s nothing stopping them.”
The supply of a new drug is controlled exclusively by the manufacturer, who owns the patent rights, which gives them a monopoly on the drug for the 20 year life of the patent. They are free to raise the prices to whatever the market can bear. An example – Evzio, (by Kaleo, Inc.) an auto-injected drug that is used for opioid overdose jumped to over $4,000.00 from $690.00 because the demand increased. And, these companies have become clever at strategies to extend their monopolies beyond the original expiration of its original patent.
Medicare, which is one of the largest purchasers of prescription drugs, is
blocked by law from negotiating prices. In 2006 with the advent of Part D, the pharmaceutical lobbyists convinced legislators that it would amount to price control if Medicare were able to negotiate prices.
The pharmaceutical industry says a major reason for high prices is the Research and Development process of bringing a new drug to market.
R&D is expensive in any market, but these guys claim it takes 10 years and $2.6 billion to bring just one new drug to market. However, the Journal of Health Economics reveals that only $1.4 billion is actual costs while the other $1.2 billion goes to capital costs, which smacks of bogus write offs. The research company Global Data says 8 out of the 10 big pharmaceutical companies spend more on marketing than they do on research – all those TV ads.
Are there remedies? Yes says the AARP May Bulletin VOL. 58:
1 – Let Medicare negotiate prices. According to Carleton University of Ottawa, Canada, and Public Citizen, a public advocacy located in Washington, D.C., claim that letting Medicare negotiate prices would produce as much as $16 billion in savings.
2 – Remove the restrictions on importing drugs, which would put pressure on the drug companies to reduce prices.
3 – Create pricing transparency. The public has no idea how these companies price their products.
At a nighttime rally in Louisville in late March, President Trump revisited a favorite campaign topic: the high cost of drugs. “Medicine prices will be coming down, way down.” The new congress appeared to match the president’s fervor for taking on high drug prices, introducing several bills aimed at cutting the costs of prescription pharmaceuticals. But no clear path to reduced costs has yet emerged. “
Congress at Rest
This past Sunday night, June 4, 2017, MKelly’s “Sunday Night” show featured a story about Insys Therapeutics based in Chandler, ArizonInsys produces a drug called Subsys which was developed solely for cancer patients that experience severe pain. A month’s supply can cost anywhere from $3,000.00 to $30,000.00. In the past year Insys has sold $240 million dollars worth of Subsys. In December of 2016 seven former executives and managers from Insys were taken into custody on charges of bribing medical staffs in several states to prescribe their product – for all kinds of pain. The marketing was aggressive and illegal. In at least one instance Subsys was determined to be the cause of death. Employees of Insys gained bonuses for selling Subsys.
So, does any of this fit your idea of “The Greatest Country in the World,” ? No, then how about “The Greediest County in the World?”
“There is sufficiency in the world for man’s need but not for man’s greed.” Mahatma Gandhi