Drug prices and profits

Political watchdog Common Cause not long ago released a study detailing the $360 million in contributions made by the pharmaceutical industry to politicians over the past five election cycles. It arrived at about the same time Rep. Tom Allen held a press conference showing that Maine seniors could save about 40 percent on their prescription drugs if the drugs were priced in the United States as they are in other industrialized nations. But it was Marcia Angell and Arnold S. Relman, writing a few days later in The Washington Post, who wove the threads of drug prices, politics and profits together in a commentary that every member of Congress should read.

Drs. Angell and Relman, both of Harvard and both former editors of the New England Journal of Medicine, sketch out some of the reasons the pharmaceutical industry is increasing prices at an average of 19 percent a year and how taxpayers help subsidize it. If the commentary isn’t a strong argument for Rep. Allen’s proposal to start negotiating Medicare drug prices with these companies, nothing is.

Start with some of the costs. The doctors begin by acknowledging that “the industry has brought important new drugs to market over the past few decades,” but point out too that it spends two or three times as much on marketing and administration as on re-search and development. The marketing component includes spending more than $8 billion annually and employing 83,000 sales reps to offer trips, meals, honoraria, gifts to doctors and another $8 billion in free drug samples. Its advocacy in Washington now includes the largest lobby in the Capitol. Drs. Angell and Relman point out that GlaxoSmithKline spent 37 percent of its revenues on marketing and administration compared with 14 percent for R&D, which may have been financially smart because it resulted in a 28 percent profit.

And as grateful as patients are for new, innovative drugs, many of those drugs began as basic research at the National Institutes of Health or at other tax-supported institutions. That means the high prices patients are paying for drugs actually are higher, if the tax dollars are included. And the prices stay high because of the lengthy patent protections, of 17 years or more, given even to those drugs that include only slight practical modifications to drugs with patents that are near expiration. The doctors’ conclusion to all this is to hold the companies accountable, particularly if a new drug benefit is added to Medicare. “The industry would like to see such a benefit without any new regulation, but that would cause drug prices to rise even faster and hand the companies yet another windfall,” they write.

The new regulation that should be considered is the bill Rep. Allen has been promoting for years: Have the United States act like every other developed nation, recognize that drugs are not a discretionary consumer product and negotiate drug prices with the industry. Many members of Congress say they could never support what they believe amounts to price controls, but having just supported price caps for energy in the West, they will have a hard time showing that their aversion to the price caps for drugs is philosophical and not merely political.

Drug prices are going to keep going up and seniors are going to find it increasingly hard to afford medicine so long as Congress allows the condition described by Drs. Angell and Relman to continue. The solution, better sooner than later, is in passing Rep. Allen’s bill.