The Big Pharmas - Part 8 - It's Time To Take a Pill

In this series we’ve looked at the big pharmaceutical companies (“Big Pharmas”), how they bring new drugs to market, their competitors and the many challenges that they face. We’ve also looked at their triumphs and their corporate behavior.

There’s no doubt that the Big Pharmas are worried about being able to continue increasing their, already astronomical, profits. Imminent patent expiration, pressure from states and governments to negotiate lower prices and competition from the legal and illegal generic drug manufacturers are all forcing a gradual slowdown in the rates at which their profits are increasing. However, as we’ve seen in the previous article in this series, we aren’t getting value for our money as consumers of their products.

In this, the final article in the series, we’ll look at some of the many reforms that have been suggested to rein in the Big Pharmas and get them back to being the responsible corporations that many of them once were.

Medicare Prescription Drug Prices
The Big Pharmas have the largest political lobbying force in Washington and they give copiously to political campaigns. As we’re seeing in the health reform debate, our legislators are so beholden to the pharmaceutical industry that they are unashamedly working on its behalf, instead of in the interest of their own voters and communities. One major change that may come about as a part of the health reform bill is a change to the way that the Medicare program negotiates drug prices with the suppliers. Right now, it can’t. Medicare, unlike some other programs, such as the Veterans Health Administration, is legally barred from negotiating prescription drug prices. That’s crazy! The government is spending taxpayer money on products whose prices can be set at any level the Big Pharmas choose. This will be a big fight, because Medicare is a major revenue source for the Big Pharmas and they are piling on the pressure behind closed doors and with major political advertising campaigns.

A frequent theme in their messages is that without the profits they won’t be able to afford the R&D to bring new drugs to market. However, as we’ve seen, R&D costs are a small proportion of their costs and their percentage profits are at twice the level of other major corporations. They’re also bringing far more “me-too” drugs to the market to gain revenue at the expense of their competitors, rather than innovative new drugs.

The FDA Must Change the Rules
The FDA usually approves a drug only if it is better than a placebo (which does exactly nothing). It needn’t be better than a drug that is already on the market to treat the same condition or disease. It may even be worse. The drug companies are not required to test their new drugs against older ones for the same conditions at equivalent doses. The FDA should make this a requirement and only allow a new “me-too” drug onto the market if it is significantly better than an existing one. Experts believe that very few new drugs could meet that test.

The Big Pharmas would then have to concentrate on finding truly innovative drugs. We would also finally find out whether this self-lauding industry is actually turning out better drugs. This reform would also reduce the enormously expensive marketing necessary to make an impact in the me-too market. Genuinely important new drugs do not need nearly as much promotion because physicians will start using them as soon as they are available.

Patents are a vital tool in extending the revenue stream for a new drug. The Big Pharmas have successfully pressured legislators into extending the lifetime of drug patents. They’ve even somehow bent the patent laws in their favor. Minor changes in a drug molecule have quietly become patentable. That’s in in direct contravention of patent law, which states that obvious minor changes are not patentable. Mere changes in a drug’s formulation somehow became protected, allowing the manufacturer to extend the revenue stream at minimal cost.

The Big Pharmas are not obligated to publicly release the results of clinical trials they sponsor, although they sometimes release the most favorable ones. The FDA is not allowed to reveal the results that it has because the industry claims that it is all “proprietary” information. However, unlike most other manufacturers (until the recent bailouts, at least), drug companies depend on the public for a whole range of handouts —including the rights research funded by the National Institutes of Health, long periods of market monopoly, and multiple tax breaks that boost their percentage profits to twice those of the largest petrochemical companies. The only results that taxpayers see in return for their contribution to the coffers of the Big Pharmas are higher prices and a decreasing flow of genuinely new drugs.

More Detailed Financial Disclosures
Drug companies hide details of their costs behind generalized categories, such as “Marketing and Administration”. Although we can see that it’s the largest part of their budget, we have no clear idea of what those costs cover. We also don’t know the true costs of bringing a typical drug to market. The Big Pharmas claim that the costs are huge and burdensome, but all of the evidence says that they’re exaggerating the costs in order to justify price increases and fewer regulations and price controls. They should be forced to reveal the prices that they charge for their products here and abroad and to justify any differences, which appear to be in the 35 to 55 per cent range and in favor of the International market. Some industry observers believe that, because of the importance of its products to public health, as well as the fact that the government is a major purchaser of its products, the pharmaceutical industry should be regarded much as a public utility, with much closer regulation and scrutiny.

Even Tighter Quality Controls
As we pointed out in yesterday’s article, the Big Pharmas are increasingly manufacturing their products in cheaper, less tightly regulated facilities abroad. This is particularly dangerous in the case of some countries, such as China, that are notorious for major quality lapses and also sustain a huge counterfeit drug market. Even worse, most batches of drugs shipped into the USA aren’t even tested before being distributed.

It’s true that the manufacturers have to be able to trace the origin of a batch of suspect or bad drugs, but that trail depends upon the foreign manufacturer, which might accidentally or deliberately provide faulty documentation of its ingredient sources and manufacturing process. What good is a safety seal and a batch number on a bottle of pills with toxic or useless counterfeit ingredients? How does the distributor know that the real goods weren’t stolen, replaced with counterfeits and sold elsewhere? Technology may help here, with specially coded electronic tags, supplied to the manufacturer by the Big Pharma, inside every single package. Each package could then be tracked all the way from the origin to the consumer. Any attempt to copy the chips would soon be detected as multiple chips make their way across the world to authorized distributors. There would, of course, be a price, but it would be a small one to pay for increased safety. Wouldn’t you rather see a part of a product’s costs going to safety rather than advertising?

Improved Regulation and Monitoring
The Big Pharmas have a very stained record when it comes to the problem of bribery and corruption. Some part of that “Marketing and Administration” budget clearly goes to bribe FDA officials, procurement officials, physicians, research facilities and generic drug manufacturers. That’s not an opinion, it’s very well documented in the legal records and press reports of fines and settlements. They’re also very fond of illegal off-label marketing, where the drug company touts its products to consumers and physicians for purposes that they weren’t approved for, often with marginal or negative effects.

The pharmaceutical companies also selectively release trial results that will help them sell a new product, but suppress access to information about failed trials, or the level of probability of adverse side effects. It’s nice to know that “Some people may experience vomiting, stomach cramps or heart failure” as a result of taking an itch reliever (OK, we made that one up), but what’s the probability that it will affect me?

Increased disclosure of financial and drug trial results, along with improved and better-manned monitoring, could force the Big Pharmas to focus on delivering better, cheaper and more innovative products, rather than the over-priced “me-too” products that they are currently bringing to market, often using highly questionable, and sometimes downright illegal, tactics.

The Way Ahead?
Contrary to the Big Pharmas’ public relations messages, consumers and taxpayers don’t get value for their money. People who need to take drugs to improve or maintain their health can’t simply stop buying a product and often have no alternatives to turn to. We are all being taken for a ride, and there will be no real reforms in the pharmaceutical industry unless an informed, aroused and determined public forces legislators to make them happen. We need more innovation, responsible profit making, more facts and far fewer half-truths from the Big Pharmas.

If you’d like to learn more about the Big Pharmas, we highly recommend today’s Hot Reading. We’ve also added some material to the Audio & Video page, including a nice spoof of a drug company infomercial.