Pharmaceutical future

Prescription drug companies may have won recently in Congress when the House narrowly passed a drug-benefit plan that will do more to benefit the drug companies than drug users, but three articles in recent weeks suggest a major shift in the way Americans are coming to view this industry.

The first article comes from the June 22 edition of the New England Journal of Medicine. It is an editorial with the title “The Pharmaceutical Industry – To Whom Is It Accountable?” Written by Marcia Angell, editor of the journal, the editorial’s answer is, if anyone needed help, to stockholders. Dr. Angell reviews and rebuts some of the major arguments the industry has used to protect its record-setting rates of return — the cost of research, the necessary risk of investing in what turn out to be failures, the need to recover costs lost in other nations with price controls.

She points out that the industry not only gets its basic research done courtesy of taxpayers through the National Institutes of Health, but also holds onto large tax exemptions, including for marketing expenses. And far from being the only nation that does pharmaceutical R&D, the United States accounts for 36 percent of it; Europe accounts for 37 percent and Japan, 19 percent. She advocates changes in the requirements of the Food and Drug Administration pre-marketing trials to reduce the incentive for “me-too” drugs and to form a national advisory panel to lead the public in a debate on possible reforms.

A report from the General Accounting Office shows why reforms are badly needed. Currently, the people with who pay the highest prices for drugs usually are the working poor — people who make too much to get government help but not enough to buy health insurance, or at least the sort of insurance that would include a drug benefit. The pharmaceutical industry says that to tamper with its pricing system is tantamount to price controls, which would have terrible consequences, but the GAO study shows just how often and over how wide a range drug prices can wander without sending the industry into bankruptcy.

The study looked at the possibility of expanding the number of contracts the Department of Defense and the Department of Veterans Affairs had with pharmaceutical companies. It noted, for instance, where the VA and DoD had a contract for Albuterol, instead of paying the wholesale price of $21.50 per unit, they paid $1.66, a 92 percent reduction. Ranitidine, an ulcer medication, is priced at $740 wholesale. The VA/DoD contract buys it for $13.57, a reduction of 98 percent. The departments were able to negotiate such steep discounts because of the volume of medication they use, even though they represent only 2 percent of the total sales of prescription drugs. The GAO recognized that the two departments could not always contract for drugs together, but where they could the savings would amount to hundreds of millions of dollars annually.

Most Medicare proposals in Congress avoid the pressure of the pharmaceutical lobby by expanding coverage rather than demanding a negotiation to lower prices. One notable exception is a bill by Rep. Tom Allen, which does exactly that and which majority Republicans are loath to touch. They may soon change their minds as the public sees articles like the one in last Thursday’s Wall Street Journal, which highlighted the shift within the industry from producing breakthrough drugs to heavily marketing drugs that are similar to those already for sale.

The WSJ story notes that Schering-Plough Corp. spent $136 million advertising its new allergy drug Claritin, which is more than Coca-Cola spent advertising Coke or Anheuser-Busch spent advertising Budweiser. This advertising push no doubt sells drugs, but it also gives away good will as the public comes to look upon drug makers not as researchers saving lives but salesmen with just another commodity.

And that’s no place for such an important industry to be.