Pharmaceutical Corruption

[Uechij]

The way the pharmaceutical companies really work!

http://www.pnhp.org/news/2001/july/new_ ... unks_d.php

New Report Debunks Drug Industry Claims About the Cost of New Drug Research and Development

Second Report Documents Industry's Intense Lobby and Political Contribution Campaign to Keep Prices and Profits High

WASHINGTON, D.C. - The pharmaceutical industry spends about one-fifth of what it says it spends on the research and development (R&D) of new drugs, destroying the chief argument it uses against making prescription drugs affordable to middle and low-income seniors, a Public Citizen investigation has found.

The findings are contained in a Public Citizen report, Rx R&D Myths: The Case Against the Drug Industry's R&D Scare Card.

The report reveals how major U.S. drug companies and their Washington lobby group, the Pharmaceutical Research and Manufacturers of America (PhRMA), have carried out a misleading campaign to scare policymakers and the public. PhRMA's central claim is that the industry needs extraordinary profits to fund "risky" and innovative research and development to discover new drugs. In fact, taxpayers are footing a significant portion of the R&D bill, which is much lower than the companies claim.

"This R&D scare card is built on myths and falsehoods that are maintained by the drug industry to block Medicare drug coverage and measures that would rein in skyrocketing drug costs," said Frank Clemente, director of Public Citizen's Congress Watch.

Public Citizen based the study on an extensive review of government and industry data and a report obtained through the Freedom of Information Act from the National Institutes of Health (NIH). Among the report's key findings:

¤ The actual after-tax cash outlay - what drug companies really spend on R&D for each new drug (including failures) - is approximately $110 million (in year 2000 dollars.) This is in marked contrast with the $500 million figure PhRMA frequently touts.

¤ The NIH document shows how crucial taxpayer-funded research is to the development of top-selling drugs. According to the NIH, U.S. taxpayer-funded scientists conducted at least 55 percent of the research projects that led to the discovery and development of the five top-selling drugs in 1995.

¤ Public Citizen found that, at most, about 22 percent of the new drugs brought to market in the past two decades were innovative drugs that represented important therapeutic advances. Most new drugs were "me-too" or copycat drugs that have little or no therapeutic gain over existing drugs, undercutting the industry's claim that R&D expenses are used to discover new treatments for serious and life-threatening illnesses.

A second report issued today by Public Citizen, The Other Drug War: Big Pharma's 625 Washington Lobbyists, examines how the U.S. drug industry spent an unprecedented $262 million on political influence in the 1999-2000 election cycle. That includes $177 million on lobbying, $65 million on issue ads and $20 million on campaign contributions. The report shows that:

á The drug industry hired 625 different lobbyists last year - or more than one lobbyist for every member of Congress - to coax, cajole and coerce lawmakers. The one-year bill for this team of lobbyists was $92.3 million, a $7.2 million increase over what the industry spent for lobbyists in 1999.

á Drug companies took advantage of the revolving door between Congress, the executive branch and the industry itself. Of the 625 lobbyists employed in 2000, more than half were either former members of Congress (21) or worked in Congress or other federal agencies (295).

á The industry's $20 million in campaign contributions and millions more in issue ads attacking candidates opposed by the industry aided its army of lobbyists in gaining access to congressional representatives.

"The drug industry is stealing from us twice," Clemente said. "First it claims that it needs huge profits to develop new drugs, even while drug companies get hefty taxpayer subsidies. Second, the companies gouge taxpayers while spending millions from their profits to buy access to lawmakers and defeat pro-consumer prescription drug legislation."

Rep. Pete Stark (D-Calif.), the ranking Democrat on the House Ways and Means Health Subcommittee, added, "Not surprisingly, pharmaceutical companies have been deceiving Congress and the American public for years. I commend Public Citizen for exposing the industry's long-standing attempt to hide the truth about R&D spending."

Sen. Paul Wellstone (D-Minn.), said, "This well-documented Public Citizen report shows just how much the pharmaceutical industry exaggerates its commitment to research and development and focuses instead on the bottom line."

Added Rep. Tom Allen (D-Maine), "Millions of our seniors have paid taxes for decades and contributed to the development of new drugs. Now in their retirement, they pay the highest prices in the world for these drugs. . . . The public deserves better."

Local healthcare, labor and senior citizen groups released both of these reports today in 15 states. Many thanks to those coalition partners in: CA, CT, MA, MN, NJ, NM, NY, NC, ND, RI, SD, TX, UT, VT and WA.

Public Citizen calls on Congress to pass a Medicare-run prescription drug benefit program with strong cost containment that guarantees affordable prices for middle and low-income seniors. Copies of the reports can be found at http://www.citizen.org/congress/drugs/R&Dscarecard.html and http://www.citizen.org/congress/drugs/p ... ugwar.html

Public Citizen is a nonprofit consumer advocacy organization based in Washington, D.C. For more information, visit www.citizen.org

Guillermo Nicacio, Field Organizer Public Citizen's Congress Watch (202) 454-5136 (202) 547-7392 Fax www.citizen.org/congress

rest here:

http://www.pnhp.org/news/2001/july/new_ ... unks_d.php

[Valkenar]

Dismayed, but not shocked. As far as I can tell this is just SOP for basically every industry large enough to play it that way.

[Bill Glasheen]

I guess I'm neither shocked nor dismayed. I think the truth is quite a bit more nuanced than what is presented here.

There are several critical points left out in this kind of analysis.

• The time value of money. From soup to nuts, it takes many dollars of investment over many years to produce one new molecular entity that can make it to market as a prescription drug. It starts with the basic research. That leads to the development of many chemical entities. Those entities then must be tested in many rounds of animal testing to demonstrate first safety (in the animal model) and then some utility (it must relieve symptoms or cure a disease better than something else out there). That then leads to several rounds of human testing which must follow the FDA approval process. And of those approved, some immediately are pulled from the market when undiscovered adverse outcomes arise. Many, many entities are tested and fail, before one new substance is brought to and stays on the market.
  
  Consider the enormous sum spent OVER TIME to get this one useful new drug. A consideration that must be accounted for is what that early money could earn if invested in something else. If you don't take the time value of that money into account, then you aren't doing proper accounting.
• Cost shifting Some countries are now bargaining hard - as whole country health system entities - to get drugs on the cheap. That's good for them. But in getting these contracts, some of which may be break-even or for a loss, pharmaceutical companies must sell medications to many smaller players at higher prices to make a profit. Unfortunately that means that the U.S. subsidizes the healthcare of other countries. That ain't right, but it is what it is.
• Limited time on patent. The quicker a drug is forced to go generic, the higher the price must be to recoup R&D costs. Generic drug makers get to take something already discovered and so can operate at smaller margins. The company that did all the original research must make up the original R&D costs - complete with that time value thing.
• Liability One doesn't have to look far to see the ambulance chasers trolling for victims on TV to know how lucrative the whole litigation industry is in medicine. The same product or pharmaceutical made for humans costs much, much more than a similar product to be used on animals. And the company that does the original research must saddle most of the burden of finding these potential side effects and bad outcomes.
  
  Interestingly enough, many drug trials now are much more cheaply done outside the U.S. where there isn't the same level of trail attorney activity. Even many action movies are done outside the U.S. now - for the same reason. It's just too expensive trying to cover all those potential liability costs.

Certainly the U.S. is guilty of a lack of innovation in industries like the automobile in Detroit, and now they are paying for it. Too much time spent trying to reap a short-term profit eventually will doom any industry. But the real picture is complex. And until there is a re-making of the healthcare system in this country from top to bottom, we're going to see the same healthcare inflation year after year.

Too much finger pointing, and not enough ownership, sacrifice, and innovation. We have a failure of vision and leadership from bottom to top.

However... It shouldn't be a sin to make a profit. Profit drives labor and innovation. Large profits in a functional free market spur competition. Capitalism may have its quirks, such as a baseball team (Yankees) spending half a trillion dollars to pay for 3 top-notch players. But if we can put the class warfare thing aside, a properly governed free market generally creates the best products and services.

We aren't "there" now in healthcare. But there are many good things about what we have that can be made better if the incentives in healthcare are properly aligned.

- Bill


P.S. Undoubtedly many of us (knowingly or not) have pharmaceutical industry stocks in our 401K portfolios. Be careful what you wish for. As they say, the road to hell is paved with the best of intentions. It won't do any good to have cheaper drugs for the retired if your retirement accounts go bust. Wealth redistribution politics may end up robbing your own left hand to pay to the right. If the net is zero or negative, then you've accomplished nothing but making yourself feel better by punishing the best and the brightest - and sometimes even yourself.

[Bill Glasheen]

I find this kind of deal making much more productive than the shrill diatribes coming from the anti-Big-Pharma crowd.

Note that the pharmaceutical industry will PAY FOR (subsidize) the drug costs in a certain range for a certain sector of the population. Nothing here says anything about cutting back on excessive profits.

Robbing Peter to pay Paul. But if it helps society and it's offered rather than required, then I'm all for it.

- Bill

JUNE 22, 2009, 4:33 P.M. ET

Obama Hails Pact With Drug Sector as 'Significant Breakthrough'

By HENRY J. PULIZZI

WASHINGTON -- President Barack Obama trumpeted on Monday the pharmaceutical sector's pledge to cut the cost of prescriptions under Medicare Part D as a "significant breakthrough" toward the health-care overhaul he wants to sign into law this year.

The pharmaceutical industry offered to slash $80 billion in drug costs for people receiving Medicare benefits, thus kicking off another intense week of health-reform talks in Washington. MarketWatch's Kristen Gerencher reports.

Under the deal, which emerged over the weekend, pharmaceutical companies will pay for half of the cost of drugs for people who are in the so-called doughnut hole in the Medicare Part D prescription benefit. That's the gap in coverage under which beneficiaries have to pay for drugs between the cost of $2,700 and $6,154 per year.

It's unclear, however, how much of the expected $80 billion in savings over 10 years will go toward paying for the proposed health-care overhaul. Lawmakers in both parties have balked at the price tag, which the nonpartisan Congressional Budget Office said last week could run as high as $1.6 trillion over 10 years.

Mr. Obama said the deal will make drugs more affordable and restore "a measure of fairness' to Medicare.

"Too many Americans fall into the coverage gap and they stop taking their medications because they really simply cannot afford it," said AARP CEO A. Barry Rand, who introduced Mr. Obama. "They will now have a new opportunity to lead a healthier life."

Mr. Obama, who has proposed savings the White House says will cover nearly $950 billion of the overhaul, expressed confidence that lawmakers can complete health-care legislation, despite increasing skepticism.

"To those who, here in Washington, who've grown accustomed to "sky is falling" prognoses, the certainties that we cannot get this done, I have to repeat and revive an old saying that we have from the campaign: yes, we can. We are going to get this done," he said.

Mr. Rand called the drug-cost deal a "major step forward" for health-care reform, and said AARP will continue to work with the administration and lawmakers to lower drug prices.

[Uechij]

Hey Bill,

Can you explain kinda in a nutshell what Obama's health care plan is and how it is supposed to work? I haven't seen much detailed information on it in the news and am having a hard time piecing it all together. Just curious about what exactly he wants to do.

"Obama Hails Pact With Drug Sector as 'Significant Breakthrough' "

yeah, I saw this in the news today and was reading responses to it when I found the link to what I posted above...I hope this will really help people out. We really need to do somthing about the health care situation.

[Bill Glasheen]

Hey Bill,

Can you explain kinda in a nutshell what Obama's health care plan is and how it is supposed to work?

Umm... No and no.

I can tell you several things he says he wants to do to "save money" that won't.

• Prevention An ounce of prevention is worth a pound of cure, right? Well... usually not in medicine. If you're talking immunizations, then you have a chance of saving money. Otherwise prevention costs. For example it costs $150,000 of giving statins to a population of people with high cholesterol to save one year of life. It's good that you lowered the risk for heart attack and stroke, but it'll costs us. Most preventive treatments that don't have an immediate consequence (like proper asthma care) cost more to prevent than if you just let "it" happen and deal with the morbidity/mortality later on.
• Smoking cessation Well... no. People who smoke die on average 7 years earlier, saving society a good deal of money in social security and Medicare. Mind you it's good not to smoke. But death can be cheap for the federal government.
• Electronic Medical Records It's good to reduce medical errors by having EMRs, and a data person like me loves near-real-time data. But that won't save money. It'll just make medicine better. That's good, but...

Both the Clinton adminstration in the 1990s and now Obama want universal health care. In other words one way or another, everyone gets some kind of coverage whether mandated by employer to pay or mandated for the individual to pay (even if at a reduced rate). It would be like requiring auto insurance to drive. But that's going to cost, and we're competing in a global economy against countries that accept a lower standard of living. It'll be difficult to compete against goods made in China, India, etc.

One thing that the Democrats want to do is to have a federal government alternative (like Medicare/Medicaid) competing on the open market with health insurance companies. The theory is that the government may be able to do it cheaply (being the 800-pound bargaining gorilla), and the competition would drive prices down. Problem is, the government won't let the government fail, whereas private insurance companies fail all the time. A private insurance company cannot force higher rates in a competitive environment, whereas the government may very well raise taxes (or increase the national debt) to keep a government health plan afloat. That's not a level playing field, and ultimately could lead to a single payer system and all the bad things that can come with it (like waiting time for elective procedures, lack of choice, very high taxes, etc.). Now the Democrats have a majority and they MAY be able to force this through. But it won't be easy.

Ultimately to get universal healthcare, there needs to be some kind of rationing. The "r" word is considered evil by most. But the problem is that we have more healthcare delivered in this country vis-a-vis other parts of the industrial world, and there's no evidence on average that Americans are healthier. In some cases, more healthcare has been shown to produce worse overall health. Some like Wennberg (from Dartmouth) make a career out of proving this.

Stay tuned!

- Bill