Big Pharma has argued for decades that documented higher drug prices in the United States are required to support their research and development (R&D) efforts for the benefit of all Americans.
Their oft-stated position is clearly disingenuous and misleading at best. Scandalous examples of corporate greed (remember the recent conviction of Martin Shkreli, also known as the “Pharma Bro” CEO, who received a 7-year sentence for fraud) point to the fact that the underlying reasons for higher pricing include ever-increasing corporate executive compensation, lavish corporate spending and unwarranted shareholder earnings.
Just as in military expenditures — in which we Americans contribute much more than all our allies combined — the U.S. is permitting itself to be exploited by the rest of the world in the pharmaceutical sector.
How are we exploited? By having much higher pharmaceutical prices in the United States than in other nations. Excess profits go to the pharmaceutical companies, and in the meantime, many of our citizens cannot afford the medications that they sorely need.
According to a Reuters study, we pay three times as much as the British for the exact same drugs. And 16 times more than people in India. In these other nations, the central government restricts pricing inflation. Our federal government has a “hands off” policy, which has unintended consequences, the main one being to subsidize research and development for the rest of the world.
Another consequence is that the health status of our low-income population is worse that of other developed nations, because these people cannot afford needed drugs. In July 2016, Harvard researchers had their findings on American drug price inflation and discrepancies published in JAMA (the Journal of the American Medical Association). According to the Harvard researchers, only 10 percent to 20 percent of pharmaceutical company revenue goes to research and development.
They also found:
a. Drug manufacturers set their own prices in a monopolistic manner here as compared to other nations.
b. We have artificial barriers preventing competition. For example, the 20-year patent rule preventing generics from entering the market. Plus, big drug companies game the system by tweaking a product (for example, the delivery system on albuterol inhalers), extending patents and increasing profits at consumer expense.
c. The majority of states prohibit a pharmacist from automatically switching a drug to the low-cost generic without patient approval.
d. Application backlogs at the FDA slow up the approval process for generics, sometimes by three or four years.
e. And the NIH (the government’s National Institutes of Health) and venture capitalists fund the majority of R&D efforts, not Big Pharma.
Obviously, these policies could be changed quickly by congressional action, if Congress were so inclined. But currently it is not.
We have clear ideas about what can and should happen. Medicare should be legally able to negotiate drug prices. Our drug pricing should be given “most favored nations” status. In other words, drug companies selling products here should have to match the lowest prices they are giving to any developed nation. Patent times can be shortened, and not extended for minor alterations. National legislation can give pharmacists the responsibility to automatically switch to generics unless the patient requests otherwise. Staffing could be increased at the FDA, and the processes for approving generics could be made more efficient.
Why should our country — via higher drug pricing — have the primary financial burden to support research and development for drugs that will help not only Americans, but people in all countries? Shouldn’t the burden be spread equally among all the wealthy, developed nations?
In other words: “Why do we get soaked?”
The underlying answer is that America believes too strongly in the myth that free markets and competition solve all pricing problems. That is clearly untrue in the case of health care. But when Big Pharma makes its arguments, our politicians are likely to buy into them, especially when companies spend heavily to influence public and political opinion.
So, what is the remedy? In the long term, the U.S. must have campaign finance reform to reduce the outsized role of corporate dollars in congressional decision-making. But in the short term, each of us voters must become more knowledgeable of the issues. We must refrain from supporting any politician who puts some corporate interest above the public interest, especially when the issue directly affects the health of Americans.
Jack Bernard is the former Director of Health Planning for Georgia and a retired senior vice president with a health care corporation. Dr. Doug Skelton is the former Dean of the Mercer School of Medicine and current Chancellor and Dean of the Trinity School of Medicine in St. Vincent.