By Michael Bedford
Cost decisions on our nation’s medical industry are made by the major pharmaceutical corporations, with little or no regulation by the U.S. government. In contrast, across Europe and Canada, medicine prices are controlled by government oversight, limiting what companies can charge. This lack of U.S. government oversight allows the medical industry to place many millions of citizen’s health at risk by charging prices that can bankrupt those in need.
By now we know the story of the rights of the drug Daraprim were purchased in August, 2015 by a new company, Turing Pharmaceuticals, which promptly increased the price from $13.50 per tablet to $750 per tablet — a 5,000 percent jump. The Turing Pharmaceuticals CEO Martin Shkreli told “CBS This Morning” the drug is not overpriced compared to its peers. The drug was unprofitable at the former price… at this price it’s a reasonable profit, not excessive at all,” Shkreli said. He claimed the money would allow the company to develop newer, better drugs.
Advocate activists wrote a letter to the company urging them to reconsider the price increase. “Under the current pricing structure, it is estimated that the annual cost of treatment for toxoplasmosis, the pyrimethamine component alone, will be $336,000 for patients who weigh less than 60 kilograms [132 pounds] and $634,500 for patients who weigh more than 60 kilograms,” the letter said. “This cost is unjustifiable for the medically vulnerable patient population in need of this medication and unsustainable for the health care system.”
So how do exorbitant pharmaceutical costs get approved? While it’s easy to condemn the egregious greed of a young CEO gouging vulnerable AIDS patients for unaffordable life-saving treatments, the answer becomes more complex looking at R&D costs upfront. It costs about $2.6 billion to develop a drug and win approval from the Food and Drug Administration, according to a 2014 report from the Tufts Center for Study of Drug Development (November 18, 2014). Pharmaceutical companies pay that money up front, and part of the high costs for drugs is to recoup the investment.
But recouping research & trial costs has a set amount, that eventually gets paid back to the pharmaceutical corporation. Then a price reduction would seemingly be warranted. However, the 11 largest global drug companies made an astonishing $711 billion in profits over the 10 years ending in 2012, according to an analysis of corporate filings by Health Care for America Now (HCAN).
For years, I have had a cold sore/oral herpes simplex on my lower lip. In the US, I struggled without success to find a cream that could help the painful eruptions, and only in Thailand did a pharmacist recommend Acyclovir cream that made a significant difference. The cost of this tube sold in Bangkok without prescription over the counter was roughly $3.20. Returning to the United States, I sought to refill my Acyclovir cream at a local pharmacy, and was told it required a doctor’s prescription. After securing my doctor’s prescription, I went back to pick up two tubes. The pharmacist struggled to ask me, “You sure you want this? It’s not covered by Medicare, or your supplemental insurance.” I expected the cost to show a reasonable increase, but the pharmacist told me the shocking price of $1,500 per tube, or $3,000 for both. I refused. I wrote a Thai friend, who mailed me a refresher tube, with the postage costing more than the $3.50 for the tube.
Other countries have lower prices, since governments regulate prices. In Canada, you can purchase a 5 gram tube of acyclovir for $25, and reason according to a 2015 LA Times article, is the Canadian cream is “manufactured in Britain, not the U.S., and British law requires that drug prices be reasonable. So does Canadian law.” “Reasonable” seems the operative word. In contrast, U.S. pharmaceutical companies charge consumers whatever they want. The largest consumer of drugs, Medicare, is prohibited by U.S. law from pressuring these companies for lower prices. In 2006, the first year of Medicare’s prescription drug program, the combined profits of the largest drug companies soared 34 percent to $76.3 billion.
In another personal example, I recently had a heart attack that led to a stent placed in one artery. Upon discharge, I was given five prescriptions to treat the heart condition, one of which was the drug, Brilinta, a blood thinner. Going to renew the prescription, I was told the cost for 30 days would be $340, or more than $10.00/day. While the cost would have been covered by insurance after I completed my deductable for 2016, I asked whether there was a generic alternative. I was told generic Plavix would cost $6.50/month, leaving me to question why the generic blood thinner was not originally prescribed, instead of the high-priced Brilinta.
In the May 2016 Atlantic, Neal Gabler writes on “The Secret Shame of the Middle Class.” In this excellent piece, he cites a 2014 Bankrate survey that “found that only 38 percent of Americans would [be able to] cover the $1,000 emergency room visit” from existing liquid assets, and “median net worth for the bottom income quintile” was down 85.3% from 1983 to 2013. So, for financially stressed families, finding affordable medicines is a critical part of managing their lives. And having government control pharmaceutical costs, as many other countries do, is one way to make sure we as U.S. citizens can afford the health care we need.