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November 27, 2006

Fighting Pharma

The weekend was dotted with articles detailing Big Pharma's readiness to go to war with the Democrats over Medicare prescription drug bargaining, which is really a way of saying the weekend was dotted by articles fed by Pharma's PR firms into the eager and willing hands of newspaper reporters, who are all too pleased to pass on their doom-and-gloom predictions.

Pharma is arguing Medicare's user base is so massive that government negotiation amounts to de facto price controls, which would decrease innovation. So though Pharma accepts such "price controls" from the VA, Canada, France, Germany, Japan, and Medicaid -- all of who pay far less than Medicare -- innovation cannot sustain the addition of Medicare's patients.

We should hope not. 2/3rds of Pharmas current R&D budget goes not towards creating new drugs for killer conditions, but towards crafting copycats of other blockbuster drugs, which evade the patent protections placed by competitors. Another massive proportion of the actual research is conducted in the public sector and licensed out at miniscule prices through the Hatch-Waxman Act. Indeed, lower prices and innovation aren't either/or, they're both/and. Were I the Democrats, I'd decree that some proportion of the savings from negotiation go to the NIH to fund the lifesaving research that gets turned into lifesaving drugs, rather than going to subsidize the useless research that goes to create a knockoff version of Lipitor.

Pharma isn't fighting this battle because they're terrified of losing even one dollar that could go towards innovation. They already spend twice as much on advertising as they do on R&D. And most of the R&D doesn't "innovate" at all. They're waging this war because they want to make more money. That's their job. But it's the governments job to advocate for the public interest, and better pharmaceutical prices, particularly coupled with more investment into cutting edge, lifesaving drug research, is the public interest.

At Tapped, too.

November 27, 2006 in Health Care | Permalink

Comments

Do you have a feed for just those posts on your site which are not crossposted to TAPPED? I subscribe to both. (And I suspect many of your readers here also read TAPPED, one way or another....)

Posted by: Vance Maverick | Nov 27, 2006 2:04:16 PM

Nah, that's beyond my technological capabilities. But today, for instance, only one of the four posts here appears in both places -- so it's not too much skipping. But I am glad you read both sites...

Posted by: Ezra | Nov 27, 2006 2:15:16 PM

Let's make a deal with the Drug Co's. The Government gets to bargain for medicare drug prices (lowest price offered would be OK), and in return we won't prohibit them from obtaining excess profits by taxation of the excess, and we won't force them to price drugs based on taxpayer-funded research at cost plus (excluding advertising and excessive executive salaries from cost).

Sound like a good deal for both the people and the drug companies.

If they refuse, then preemptive war is appropriate and deserved because they are 'bad guys'.

Posted by: JimPortlandOR | Nov 27, 2006 2:22:46 PM

whats the point of investing in life-saving drugs if people don't even know they exist?

Posted by: dan | Nov 27, 2006 2:28:36 PM

"whats the point of investing in life-saving drugs if people don't even know they exist?"

Which "people"? Somehow doctors managed to get drugs to patients who needed them just fine before changes in the law gave us Viagra clones advertising during the Super Bowl.

Posted by: Kylroy | Nov 27, 2006 3:17:21 PM

I couldn't have said it better myself, though I've tried:

In the years since direct to consumer prescription drug advertising has been allowed in the United States the pharmaceutical companies have spent large swaths of their budgets trying to get us to swallow their medicine. Television advertising is necessary, they say, because of the huge sums they are forced to spend researching and developing new treatments. Advertising helps the pharmaceutical companies recoup the cost and turn massive profits ostensibly used to create new and better drugs. But recent reports indicate that innovation is on the down-slide as companies are developing less new drugs and more new versions of already popular drugs, from allergy medications to mood stabilizers. In addition, the development of "lifestyle drugs" is on the rise.

Not to doubt the motives of the large pharmaceutical manufacturers, but anyone who has been watching television in the past year would surely believe that grave new health threats exist: being tired, green toenails, and, of course, the menace of tingly legs. And you can bet when the patents on these sure-to-sell meds run out we will get new ones that work even better.

"Tingly Legs CR" - I can't wait.

Posted by: Michael | Nov 27, 2006 3:32:17 PM

So, if Pharma won't negotiate DHS can negotiate with foreign companies that make the same drugs and Pfizer, et al can go sell their overpriced meds in Bolivia.

Posted by: bones | Nov 27, 2006 3:52:30 PM

"Not to doubt the motives of the large pharmaceutical manufacturers, but anyone who has been watching television in the past year would surely believe that grave new health threats exist: being tired, green toenails, and, of course, the menace of tingly legs. And you can bet when the patents on these sure-to-sell meds run out we will get new ones that work even better.

"Tingly Legs CR" - I can't wait."

But doesn't your argument boil down to "new drugs are useless and overpriced so we need government control to keep the costs down." If the drugs are so useless, why do we need government to control their costs? So people overpay for some drugs, they overpay for a lot of things, software (anyone tell me how MS Office XP is worth $700.00 more than Office 2000?) cars, food, clothes, cable, bunches of things. The only way you can make a compelling argument that government intervention is necessary to prevent overcharging is by making the argument that the medicine are necessary. But according to your own argument, they aren't. So why do we need gov't intervention to keep the costs down of a bunch of unnecessary drugs?

I will again give my completely free cost saving drug plan available to liberals and conservatives alike: Don't take any drugs developed in the last ten years. Easy, free, don't need an act of congress or anything and you'll save lots of money.

Posted by: Scott | Nov 27, 2006 4:26:45 PM

I think there is a cycle in place that rewards pharmaceutical companies for developing and advertising lifestyle drugs as opposed to, say, curing disease. I would say my argument really boils down to thinking about policy options that interrupt that cycle and create some kind of savings for the consumer. Healthcare should not be thought of as a luxury item like a car or software, though our laws and culture, unfortunately, create a situation in which it is.

Posted by: Michael | Nov 27, 2006 4:44:00 PM

"If the drugs are so useless, why do we need government to control their costs?"

The drugs aren't [i]useless[/i], they're [i]redundant[/i]. Pharma companies are spending lots of money reinventing the wheel so they can market their particular, patented version of something else that already works fine. And when they can spend their ad money swaying the minds of people who have no background to evaluate the releative effectiveness of the drugs (like the vast majority of Super Bowl viewers), a drug's success hinges less on efficacy and more on marketing.

Posted by: Kylroy | Nov 27, 2006 5:04:46 PM

Big Pharma spends more on marketing than they do on research. From the July 15, 2004 New York Review of Books http://www.nybooks.com/articles/17244

"First, research and development (R&D) is a relatively small part of the budgets of the big drug companies—dwarfed by their vast expenditures on marketing and administration, and smaller even than profits. In fact, year after year, for over two decades, this industry has been far and away the most profitable in the United States. (In 2003, for the first time, the industry lost its first-place position, coming in third, behind "mining, crude oil production," and "commercial banks.") The prices drug companies charge have little relationship to the costs of making the drugs and could be cut dramatically without coming anywhere close to threatening R&D."

Posted by: basic research | Nov 28, 2006 10:23:41 PM

The guys at DrugWonks are crowing about all the stories they planted in the press. They are referencing the stories as proof that the Dems should not force the government to negotiate the price of drugs.

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