Here we have a promoted story from The Washington Post highlighting a recent “scandal,” whereby some douchebro Martin Shkreli, CEO of Turing Pharmaceuticals, raised the price of an off-patent AIDS drug by like 5,000 percent or something, and now the entire Internet hates him. Even all the other drug companies hate him! The Post reports:
The major pharmaceutical and biotech industry groups have portrayed Shkreli’s actions as totally repugnant and the work of just one company, acting alone, with a flippant young chief executive who doesn’t reflect the broader values, practices, or trends of other companies.
Hahaha. Sure. The Post article proceeds to demonstrate that this is rank bullshit:
For example, tetracycline, an antibiotic discovered in 1948, cost 5 cents for a 500 milligram capsule back in November of 2013…Nearly two years later, it’s coming in at $11 a pill — a nearly 2,200 percent increase. Clomipramine, an antidepressant developed in the 1960s used to treat obsessive-compulsive disorder, cost 22 cents per pill in November 2012. Now, it’s $8.17 — a 3,600 percent increase.
In 2010, Amedra Pharmaceuticals bought the rights to abendazole, an off-patent drug used to treat intestinal parasites. At the time, the average wholesale price of the drug was $6 a day. By 2013, it was $120 — a nearly 2,000 percent increase.
These are hardly the only egregious examples the Post could have mentioned: this nifty interactive infographic from Bloomberg charts 74 top-selling drugs for which the cost increased in the US between 2007 and 2014 by at least 75 percent, and sometimes many multiples of that. Why, one might be inclined to wonder what’s going on here with all these skyrocketing drug prices. Alas, the Post only offers: “The trouble is this: right now, we can’t tell why prices are high, or even if they are high.”
IT’S TRULY MYSTIFYING. *shrug*
Oh wait, no. No, it’s not. See, drug prices are not this high everywhere else, or even anywhere else: USians pay from two to six times more than the rest of the world for pharmaceuticals. Why?
Well, the short answer is that US taxpayers and consumers massively subsidize the world’s pharmaceutical research costs. For a more comprehensive answer, anyone (presumably including the bewildered author of the Post piece) can read an in-depth article at Medscape Medical News entitled, appropriately enough, Why Are Drug Costs So High in the United States?
But that is not our forte at the Palace. Here, we will just want to highlight a few perverse and corrupt policies that impact US drug pricing, and what is responsible for them. SPOILER ALERT: it’s conservatism.
Econ 101: desperation vs. demand.
In the mythical world of the Free Market™, buyers and sellers will come to a compromise on the price for goods and services: too high, no one will buy; too low, and sellers will not have viable businesses. This is the storied principle of supply and demand, blah blah blah. But when it comes to health care, the “demand” side of the equation is driven by factors very different from those that drive demand for ordinary consumer goods. We are talking about human suffering, often profound, and sometimes the kind where life and death hangs in the balance. When that suffering human is you—or your child, or indeed anyone you love—you will pay anything for medicine and appropriate care, even if it means you lose everything.
Even post-ACA, health care is still the number one cause of personal bankruptcy in the US:
A recent Harvard University study showed that medical expenses account for approximately 62 percent of personal bankruptcies in the US. Interestingly, the study also showed that 72 percent of those who filed for bankruptcy due to medical expenses had some type of health insurance.
That said, the ACA is having a positive effect on some cost-related trends. For example, in 2012, 80 million people “didn’t visit a doctor or clinic for a medical problem, didn’t fill a prescription, skipped a follow-up, treatment or test, or did not get needed specialist care” because of the cost. Two years later, only 66 million people reported the same. That trend is encouraging, and so is the fact that in 2014 almost 9 million more people had health insurance coverage than in 2013, bringing the total share of uninsured down to 10.4 percent.
Now I really hate to be a Debbie Downer here, but I would be remiss if I did not point out that (a) bankruptcy and poverty are terrible fucking outcomes, (b) 33 million of us still remain uninsured, and (c) the 66 million of us who delayed or denied ourselves health care because we could not afford it is greater than the total population of the UK, where no citizen faces any of these problems for accessing health care. Ever. Nor do all 35,749,600 Canadians.
The ACA is based on a for-profit (read: conservative) health care reform model, one that Mitt Romney rolled out statewide as governor of Massachusetts. It did not slow medical bankruptcies there.
Elsewhere, single-payer and nationalized systems like the UK’s National Health Service (NHS) negotiate a single price with drug manufacturers for the entire country’s supply. By contrast, the US “system,” if one can even call it that, is mainly comprised of multiple for-profit insurance companies and hospital systems, all running countless different programs and plans, each of which negotiates pricing separately. In this scenario the sole supplier of any drug, patented or generic, has the upper hand. But where there are only a few large payers—or only one—drug companies are forced to come to the table and offer a reasonable price if they want access to that market.
And here’s the kicker: government-run Medicare, one of the largest payers for prescription drugs, is prohibited by law from negotiating drug pricing. You read that right. This was already true before the ACA, which only cemented it. That is because pharmaceutical companies got what they wanted with the ACA: “We got a good deal,” wrote Bryant Hall of the Pharmaceutical Research and Manufacturers of America (PhRMA), one of the largest, most influential lobbying groups in Washington.
One need look no further for proof of the power of negotiation than the government-run Veterans Administration, which is not barred from negotiating drug prices: costs run 25% to 50% lower than Medicare.
In 1992, federal Medicare spending on drugs was $400 million. By 1999 it was $7 billion. By 2013, $50 billion. Gosh, I wonder what it’ll be in a decade? EXCITING.
The ACA also banned reimportation: US patients cannot legally purchase less expensive drugs from another country like Canada. While the ACA was being cooked up by lobbyists and the Democratic president behind closed doors, PhRMA lobbyist Bryant Hall wrote that “WH [the White House] is working on some very explicit language on importation to kill it in health care reform.” Neat, huh?
But don’t you feel left out, my Canadian friends! PhRMA is coming for you, too:
“America’s big drug companies are intensifying their lobbying efforts to ‘change the Canadian health-care system’ and eliminate subsidized prescription drug prices enjoyed by Canadians” … “A prescription drug industry spokesman in Washington confirmed to CanWest News Service that information contained in confidential industry documents is accurate and that $1 million US is being added to the already heavily funded drug lobby against the Canadian system.” PhRMA was the leading drug industry trade group behind the increased lobbying and PR campaign. PhRMA was also independently spending $450,000 to target the booming Canadian Internet pharmacy industry, which has been providing Americans with prescription drugs at lower prices than in the United States.
And the UK’s NHS is barreling down the same road.
But fret not. This is only happening because Free Market™ health care is SUPER AWESOME! Once people wake up and smell the freedom, they will never want to pay reasonable prices for drugs again.
Comparative drug review.
Other countries compare drugs to determine whether a new, higher-cost treatment is any more effective than existing alternatives. These investigations can inform price negotiation, or determine whether a drug gets approval at all. In the US, our FDA has no legal authority to consider pricing, or to compare medications to one another. Even if it did have the authority, FDA does not even have the resources to confirm that data supplied by drug companies is accurate and complete—or, you know, not. Conservatives, chronically infected with deregulatory fever, will never task a federal agency with assessing the value of a new drug. After all, that might interfere with the Free Market™ gouging US patients on drug pricing. NO ONE WANTS THAT.
But what about research and development huh what about R&D?
The pharmaceutical industry defends its US pricing more or less thusly: it costs over a billion dollars to bring a new drug to market, and furthermore, more drugs fail to make it than succeed. We want to incentivize new and better drugs, don’t we?
YES! And that is why US taxpayers fund 85% of the basic research. No wonder US companies generate most new drug discoveries! GO USA! We also helpfully elect corrupt politicians who let the industry’s lobbyists write our nation’s health care laws. Yet strangely, we get nothing in return for any of this, while other countries reap the benefits. Consider the new hepatitis C drug, sofosbuvir. US patients will pay $80,000 to $160,000 for a course of treatment, while in Egypt and India the manufacturer has agreed to charge $900 per patient. And it’s still enormously profitable: a course of sofosbuvir costs only $138 to produce.
Nobody disputes that it’s a risky and expensive proposition to develop a new drug. But they do dispute the numbers. An oft-cited analysis by the Tufts Center pegs the development cost for a new drug at about $1.3 billion. Hagop M. Kantarjian, MD, professor and chair at the University of Texas M.D. Anderson Cancer Center, begs to differ. In a 2013 paper he co-authored on cancer drug costs, Dr. Kantarjian and his colleagues suggest the actual figure might be as low as 10% of that:
“The figure may be inflated, because it includes ancillary expenses, salaries, bonuses, and other indirect costs not related to research or development, as well as an 11% compounded discount rate over 10 years based on stock market returns on capital investment,” they write. “Other independent estimates of cost of drug development put the figure as low as 4% to 25% of this estimate.”
Moreover, “R&D” for some new drugs apparently means “buying a smaller company that already did the R&D.” Gilead’s sofosbuvir, the hepatitis C wonder drug, is once again illustrative. When Gilead bought Pharmasset, Inc. in 2012 for $11.2 billion, Pharmasset reported $62 million in R&D costs over the three years to develop sofosbuvir (out of $177 million spent on R&D company wide over the same period). Before the Gilead buyout, Pharmasset was planning to make a reasonable profit selling sofosbuvir at $36,000 for a course of treatment; Gilead is now charging $80,000 to $160,000. Unless you live in Egypt or India, of course—then it’s only 900 bucks. FREE MARKET™ HEALTH CARE, everyone.
Another analysis published in the BMJ estimates the typical R&D cost at between $60 million and $90 million. But even if the $1.2 billion figure is accurate, there is no justification for US taxpayers and patients disproportionately footing the bill. Especially when we pay dearly in other ways, too: with people bankrupted for accessing life-saving medication, or going without it altogether.
There is a solution: Medicare For All, where “all” includes congresscritters. Just for starters, you would see drug prices negotiated so fast it would make your head spin, and we’d all find just how far they can fall. We really could have a less corrupt and more equitable system, in which corporate greed is not the driver of pharmaceutical innovation or pricing—human health is. But it’s just not going to happen unless and until we find the cure for conservatism. And it sure as shit isn’t in the interests of the pharmaceutical industry to cure that.
And listen. Lest you think I’m just a lefty kook talking out of my ass with no skin in this game: I am alive today only because of pharmaceutical innovations and the privilege to access them affordably. I’m a Type 1 diabetic, and I inject two different bio-engineered insulin analogs daily. I also take several oral medications to mitigate or prevent complications of the disease. I am grateful for this every fucking day. My grandmother’s generation had few alternatives to pig-derived insulin, which could be suddenly and violently rejected at any time by the body’s immune system (sometimes causing premature death), and rendering it useless as an intervention such that the disease would take its natural course (always causing premature death). In fact, as a young adult my grandmother’s sister died from complications of Type 1 diabetes.
I am not arguing for abolishing profits and nationalizing the drug companies. (Not yet, anyway. But if they keep this shit up I just might.) Again, I am arguing for a less corrupt and more equitable paradigm, wherein corporate greed is not the primary driver of pharmaceutical innovation or pricing—human health is.