The (prescription) drug cartel in the US

It is no secret that many prescription drugs are extremely expensive. Much of the price is not due to the actual cost of manufacture but due to the companies that produced them seeking to recoup the costs of their research and development and marketing investment plus their profit margin. The difficult question is how to balance the legitimate needs of the drug companies to stay in business while preventing them from simply gouging sick people for profit. What seems to be the case, at least in the US, is that the insatiable desire for profits by the drug companies are the main driver of the rapidly increasing prices. Timothy Noah says that drug companies make huge profits while artificially inflating the cost of bringing new drugs to market.

Some countries with a national health service use the fact that they have a central purchasing system as leverage to force the drug companies to reduce prices which is why the identical drug can sell for quite different prices in other countries when compared to the US. Leukemia drugs sell in the US for twice what they cost in other countries. The powerful pharmaceutical lobby exerts great pressure on the White House and Congress to tilt the balance towards profits by preventing such a system from being created here. Here the companies decide what profits they want to make and price the drug accordingly.

“The bottom line is what drives the drug price is the corporate profit,” [Dr. Hagop] Kantajarian said. “The [corporations] decide what the size of the market is and how much they want to make profit. And they price the drug accordingly.”

Asthma is an ailment that affects large numbers of people and can be life-threatening. It is also a huge source of profits for drug companies in the US.

Pulmicort, a steroid inhaler, generally retails for over $175 in the United States, while pharmacists in Britain buy the identical product for about $20 and dispense it free of charge to asthma patients. Albuterol, one of the oldest asthma medicines, typically costs $50 to $100 per inhaler in the United States, but it was less than $15 a decade ago, before it was repatented.

“The one that really blew my mind was the nasal spray,” said Robin Levi, Hannah and Abby’s mother, referring to her $80 co-payment for Rhinocort Aqua, a prescription drug that was selling for more than $250 a month in Oakland pharmacies last year but costs under $7 in Europe, where it is available over the counter.

Of the 3,300 deaths due to asthma each year, some are because people skipped their medication because of the cost.

We also know that generic drugs are often cheaper and India is one country that manufactures and markets them at prices that are well below what the brand names cost. Jonathan Turley writes about how president Obama is seeking to pressure the government of India to change its intellectual property laws so that they cannot make those drugs. He says that this is the latest example of Obama caving in to the pharmaceutical lobby.

Public interest groups object that Obama is threatening retaliation against India in the hopes of blocking one of the major alternatives for families in acquiring affordable medicine. Congress has also again responded to industry demands for pressure in India to change its laws and, as a result, raise the cost of medicine. Doctors Without Borders, a highly respected medical group, has denounced the effort of the Obama Administration as threatening basic health care for its own citizens and those around the world.

Obama will meet with Indian prime minister Manmohan Singh this week at the White House to demand a change to its intellectual property laws. In addition to a long record of yielding to the demands of the pharmaceutical industry, Obama has also yielded to copyright and trademark hawks who has secured ever increasing criminal and civil penalties in the field. Here, the industry wants to cut off the supply of affordable medicine coming out of India due to its large generic drug industry. The industry is alarmed by the fact that India’s market is forcing the cost of drugs down for HIV, TB, and cancer by more than 90 percent.

The problem is that Indian courts have already supported the claims of Indian companies to produce such generics. For example, Novartis tried for seven years to block a low-cost generic salt form of the cancer drug imatinib, marketed as Gleevec. The Indian Supreme Court ruled that the company had every right to produce the drug and that the company, and by extension the U.S., was trying to impose effective monopoly pricing on consumers.

Likewise, a case involving Bayer shows how such inflated pricing works. Bayer lost an effort to block an Indian drug that slashed the cost of a kidney cancer drug by 97 percent. That’s right, 97 percent. Bayer wants to sell it as a cost of $4,500 per month.

Much basic research in medicine and on drugs is done at universities and at the National Institutes of Health with taxpayer funding and is published openly. But this basic research can then be taken by a drug company, build on it, then patent and market a drug as if it were developed purely privately.

Finding a fair way to price drugs so that drug companies can make decent profits while not gouging sick people is an urgent need and should be a soluble problem. But the drug companies don’t want that. They want to be able to set whatever prices they think the market will bear so that they can make huge profits.


  1. colnago80 says

    The purchase of drugs in Canada which are then smuggled into the US is a source of ongoing lobbying by the pharmaceutical companies. As I understand it, a prescription written by a US physician will be honored by a Canadian pharmacy which sells the drug at a much lower price then the same drug purchased from a US pharmacy. Apparently, it is possible to order the drugs on-line and have them shipped to the purchaser in the US.

    I don’t see how the pharmaceutical companies can prevent this by lobbying the Congress. As long as the Canadian Government and the governments of the provinces allow it to go on, it would appear to be impossible to prevent it, unless the US postal service and, say, Fedex agree to allow the US custom services to open every package shipped from Canada to the US.

  2. markdowd says

    I am currently prescribed two medicines for depression. One is generic, the other doesn’t have a generic out yet.

    My pharmacy prints both what I pay (co-pay) and what insurance pays. For the generic, it’s something simple like Insurance paid $8, I paid $10.

    The non-generic though, was absurd. I paid $30 co-pay, while my insurance was being hit for over $600! For a bottle of 30 pills!

  3. trucreep says

    I think another problem comes from the lack of funding for research from our government as well. I’ve spoken with a few people in the industry, and they agree that profit is definitely a huge factor, as it should be with a private company. The cost of researching a new drug are astronomical, and part of that is also the lack of guarantee that the research pays off.

    A good example is Novartis with their Alzheimer’s drug trials. It ended up being a failure, and they shut down further research because the costs were getting to be too great. This is where government can step in to help advance this research, as I think we can all agree that this is a disease that needs to be combated.

    I was also told that you see a lot of research into heart, respiratory (this was pointed out by Dr. Singham with Asthma), and diabetes medications, because that’s where the money is right now. And what is scary is that there are less and less mental health medications being researched, and even less research into antibiotics, an area that desperately needs new drugs right now.

    This of course is just one part out of many that is contributing to the problem with prescription drugs, but one that is overlooked I think.

  4. Jared A says

    I don’t know about all of that. Putting aside the corpulent defense budget, Health and Human services gets about the same as all of the other such agencies put together.

    Last time I checked–which admittedly was probably 2006 or so–Alzheimer’s was getting a disproportionately large amount of money. It always seems that for government research money it is the things that affect the elderly that get the money–cancer, heart disease, alzheimer’s, etc. Other diseases, let alone other fields like basic energy research, seem well down the list of priorities.

    No doubt final stage drug trials are prohibitively expensive, but a lot of research costs are more elastic. I recall that pharmaceutical research staff are compensated considerably more than the usual difference you see between similar jobs in academia and industry. Then there is the ridiculous amount of money spent on advertising, marketing, sales reps, etc.

  5. trucreep says

    Oh yeah, no doubt they are one of the better funded areas in scientific research. I guess I was just speaking to the model we have had for awhile now. I’m sure there are much better ways to utilize that money and spend it more effectively while maintaining the same quality of research.

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