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watching the news these days makes me really wish i wasn't so ridiculously knowledgeable about public policy and economics. that way, it wouldn't be so frustrating seeing everybody missing the point or being stupid. let's see what i'm talking about by looking at three stories getting a lot of play these days.
1. the flu vaccine. this is always ( Read more... )
1. the flu vaccine. this is always ( Read more... )
First of all, the myth that higher prices in the US subsidize lower prices in other parts of the world is bullshit. Sure, that might be the case with countries like South Africa where we're sending AIDS drugs over to deal with epidemics of disastrous proportions (not to say that the drug companies aren't making bank on those deals, either . . .) but when you're talking about the savings people get by buying their drugs in Canada you're talking about price caps set by negotiations between the government and the drug makers. These are prices that are more than within an acceptable profit margin for drug makers or else they wouldn't exist. We can't have these lower prices simply because the pharmaceutical industry gives millions of dollars in contributions to US politicians (69% of that went to Republicans in 2000), and they actually employ more lobbyists than there are members of congress.
Second, the idea that the higher costs are needed to cover R&D for new drugs is blatantly false. Actually, since the new laws went into effect allowing drug makers to advertise prescription medications (to which I also take exception, of course) the largest expense to pharmaceutical companies actually comes from marketing and admin, i.e. over 30% of the budget. Chew on that for a while. Even with the mind-bogglingly huge costs of R&D that still only makes up about 22% (these stats might be a couple years old) of the average company's budget. The pharmaceutical industry is the most profitable industry in this country. They beat out crude oil, banks, commercial products, etc. Why? Because our government has allowed the industry to raise prices at astronomical rates completely unchecked even though it constantly subsidizes research and buys meds from them in huge quantities to provide for people on Medicaid. How is it possible that the most popular drugs have risen in price at 7 times the rate of inflation in the past year? Why is it that they're bothering to market new versions of drugs when older, less expensive drugs have often been found to be more effective?
Third, the senior population is extremely economically stratified, meaning that while there are a lot of very rich oldies, there are also a ton that are living solely off social security (in other words, below the poverty level). In 2001 the average cost of a year's supply of the most popular senior drugs was a little over $1000. For people making a whopping $20,000/year this is an extreme amount of their income, not even taking into account that in general the poorer you are, the poorer your health is (thanks to our lovely non-existant national health care system). Most seniors I talked to on a daily basis were taking 4-8 different maintenance drugs. Most of them had to beg samples from their doctors every month or cut their pills in half in some sort of half-cocked attempt to stay sort of healthy. I shouldn't even have to mention the obvious costs this places on the rest of us when seniors wait until they're really sick to go to the doctor, which they have to do if they're only covered by Medicare, because it was designed (before pharmaceuticals were a major part of health care) to only cover illness and injury. So, even from an economic standpoint, it's in our best interest to make sure these people stay healthy as long as possible instead of turning to the emergency room and other costly methods of treatment that are always less effective in the long run.
Finally, about the wonders of free trade. In a perfect world Adam Smith might have a leg to stand on, however, in this piss-and-vinegar world we've inherited, alluding to the wonders of the market is ludicrous. The market is still driven by people, and people (especially in corporate America) are still driven by selfishness, so if the only way to raise their profit margins is by collusion, bribery, and outright cheating then you can be damn sure it's going to happen.
There's a reason I wear a pin that says, "Remember Enron".
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At this level of investment, PhRMA member companies spend more on R&D than the National Institutes of Health and the international pharmaceutical industry."
The only thing keeping them so profitable is their ever-growing market, since, thanks to their drugs, people are getting old faster than old people are dying. But a start-up pharmaceutical company would be in excruciating debt by the time their drug reached the market, thus, another huge chunk of negative dollars is put towards marketing. And if it weren't for the necessity of marketing, maybe the average senior wouldn't be taking a kajillion prescription meds everyday. I can just see my father watching The Price is Right and saying, "wow, I should talk to my doctor. I no longer have to spend two cents a day on over-the-counter antacids, they've got a prescription. Oh, what's this...and I can fuck your mother?!" I'm certain that the high cost of research and development has led to both the high cost of resulting medications and the competitive, marketing-based drug epedemic you're referring to. I don' t mean to condescend your point with that example; I realize that you don't mean cosmetic or luxury medications when you refer to "4-8 different maintenance drugs." But four drugs isn't such a hard financial pill to swallow; and if the average is eight, I don't trust your population sample.
I think you did your year of research with your opinion already in mind.
-Terrance Walker, PhRMA
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1) The stat you quote ("18.2% of domestic sales [spent] on R&D" only supports my argument. I had said 22%. Plus, I never said that costs of R&D weren't large, in fact I said they were "mind-bogglingly huge", still, what are they doing with the other 81.2% of the pie? Buying off politicians. Swamping us with ads for Clarinex. Ads that are being challenged for being fraudulent and misleading, mind you. My argument rested on the fact that the industry is also the most profitable, and you've written nothing to challenge this.
2) A senior making $20,000/year makes too much money to qualify for any government programs to help cover the cost of their meds, yet somehow you think it's perfectly feasible for this person to pay $4000/year for 4 maintenance drugs. That's TWENTY PERCENT of his/her yearly income! Even the most right-wing of Republicans is willing to say that it's a problem. And yes, by maintenance I mean drugs that treat chronic conditions like high blood pressure, high cholesterol, diabetes, arthritis, asthma, etc. not Viagra. How do you expect this person to pay for rent, utilities, food, transportation, and other medical expenses (Medicare ain't cheap, y'know)?
3) About prohibitive start-up costs. Aside from the huge R&D costs, try blaming the industry itself for its anti-competitive practices. Maybe you've heard about the Prescription Access Litigation project, since they're winning cases against drug companies that are trying to stall other companies from marketing their generic versions by submitting false patents. It's called fraud. They know that what they're doing is illegal, they're simply willing to do anything it takes to extend their monopoly. PAL is also taking 28 top pharma companies to court for price-fixing. How's that for anti-competitive?
4) You're right on your last point. My research was definitely done with an opinion already in mind. I worked for a small non-profit dedicated to educating consumers about the health care system and what they can do to change it. Loosening the death-grip the pharmaceutical industry has on Washington would be a good place to start.
-Andrea Pastor
(formerly of the) Illinois Campaign for Better Health Care
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