The consumer and the pharmaceutical industry

What do we do when we need prescription medication?

-         Executive Summary

-         A review of the Medicare Prescription Plan: The Gordian Knot

-         The high costs of “Research”

-         The higher costs of marketing

-         Citizen actions

-         Links to resources

Executive Summary

            In the spring of 2004, the Congress passed The Medicare Prescription Drug, Improvement and Modernization Act of 2003, P.L. 108-173.  This 681-page document ostensibly was an effort by the Bush administration to provide financial support to the elderly to aid in payment for prescription drugs. The bill in its final form is about as easy to understand as one of Kafka’s novels or a Nietzsche philosophical treatise.

We will deal with the specifics of the bill in section 2; however, it should be noted that under the bill, pharmaceutical companies receive $139 billion of taxpayer money over the next ten years, while the insurance companies (the HMOs) will receive $20 billion in taxpayer money. The bill prohibits the Federal Government from negotiating lower prices as is done with the Veterans Administration.  Strict limits are put on the individual importing medications from abroad.  Beneficiaries will be penalized for each year that they do not join a private plan.  Beneficiaries in rural areas will have limited options with higher costs.

Remember, as well, if you sign up for a plan that you are paying twice, first, as a taxpayer and secondly as a plan member.  One’s financial relief may be less than one perceives.  One should ascertain how their local Congressmen and U.S. Senators voted on this issue.

We will look further as to why prescription medications cost approximately twice in the United States than in any other developed country, considering the industry’s contention that it is secondary to research costs.  We will look, as well, at the marketing costs of prescription medications as compared to true development costs.  Finally, we will address the method used in presenting their data to the medical profession and further misinformation provided to an innocent public.

A Review of the Prescription Drug Plan

The Gordian Knot in mythology was a knot tied by Gorius, a legendary king of Phrygia, that according to the prophecy was to be undone only by the person would rule Asia.  The current definition is: “an intricate, seemingly insolvable problem.”

Herein lies the problem with “The Medicare Drug Plan.”  To date, no one this author has talked to can make any reasonable evaluation.  The various insurance companies on TV, in magazines, in the newspaper, using paid advertisements, assure one that their plan is the plan of choice.  The benefit, of course, is to the insurance company, and not the potential customer.

The New York Times (8), prior to the passage of the bill establishing the plan, warned of confusion and bewilderment.  This has proved to be on the mark, since there are approximately 18 insurers offering the plan, and each insurer gives approximately five options.

One must understand the background of the bill which was lobbied extensively by the pharmaceutical and insurance industries.  Major supporters were General Motors, Dow Chemical, and Lucent Technologies (6).  The House of Representatives voted first, in the middle of the night.  At the end of the customary 15 minutes allocated for electronic voting, the bill seemed to be failing.  The Republican leadership held open the voting for nearly three hours until they succeeded in arm-twisting a few GOP votes from nay to yea.  The bill passed by a single vote (11).  The bill will add approximately $4.7 trillion to the Medicare budget from 2005-2014.  This will necessitate either a tax increase or restriction of other Medicare benefits. 

There is a peculiar  format for coverage.  The first $2,250 for drug expenditures receives various benefits under various plans.  The individual drug costs between $2,251 and $5,100 are not covered at all.  Those costs over $5,100 receive 95% coverage (10).  One must enroll prior to May 15, 2006 or pay a penalty.  In passing, AARP, which sells insurance, supported the plan. 

The American College of Physicians issued an advisory to the membership as to how to answer patients’ questions.  This basically is of no real help, as it provides a review of the law, giving certain websites that provide information including government and senior organizations, sign-up dates, addresses special plans for the poor, discusses that various plans will have various formularies (lists of brand name and generic drugs that will be paid for under the plan), warning to check with employers as to how the plan will dovetail with pre-existing employee drug plans, and noting that if one chooses a plan one can start coverage January 1, 2006 (9). 

Unfortunately, we are unable to cut the Gordian Knot and help one with their choice.  This author, and many folks I have consulted with (pharmacists, accountants, professors, and attorneys) are just as confused as is the general public. 

Read on, however, and perhaps one can understand how we achieved this very perplexing and crucial time in history.

The High Costs of Research

By now, if you have done your homework, you will be aware of the fact that if your annual drug bill is in four figures, that you will still pay up to $3,600 out of pocket.  Why then this insurance?  Why the high costs of prescription drugs?  Why are medications bought around the globe at a fraction of what we pay in the United States?

The prescription plan is flawed and complicated and the reason: I quote from an article by Paul Krugman, a Princeton economist, “‘Lots of things in life are complicated,’ declared Michael Leavitt, the Secretary of Health and Human Services, in response to the mass of confusion as registration for the new Medicare drug benefit began.”  But the complexity of the program, which has reduced some retirees to tears as they try to make what may be life-or-death decisions, is far greater than necessary.

One reason the drug benefit is so confusing is that older Americans can’t simply sign up with Medicare, as they can for other benefits.  They must, instead, choose from a baffling array of plans offered by private middlemen.  Why?

Here’s a parallel: earlier this year, Senator Rick Santorum introduced a bill that would have forced the National Weather Service to limit the weather information directly available to the public.  Although he did not say so explicitly, he wanted the service to funnel that information through private forecasters instead.

Mr. Santorum’s bill didn’t go anywhere.  But it was a classic attempt to force gratuitous privatization, involving private corporations in the delivery of public services even when those corporations have no useful role to play.

The Medicare drug benefit is an example of gratuitous privatization on a grand scale (12). 

Thus the glut of Medicare insurance ads in the media.  Ads that add to the profit of the advertising media and do not frequently present the consumer with the truth (5).

Why then the prescription drug prices so high?  We are told, over and over, that drug prices in the U.S. are higher because of pharmaceutical industry spends billions of dollars on research and development.  All the evidence shows that this is a myth and a product of creative accounting.  The drug companies have the highest profit margin of all American corporations; although, of late they may be exceeded by the oil industry.  Their profits as a percentage of sales run about 19% compared to a median of about 5% for the Fortune 500 companies (1).

Drug prices are much higher in America than in any other country – about 60% higher, on the average, than prices in Canada, the U.K., Europe and Israel.  Our drug companies claim that the U.S. pharmaceutical industry carries the burden of doing R & D for the rest of the world.  Yet the European countries put out approximately the same number of new drugs a year as we do in America.  And our drug industry’s R & D gets huge taxpayer subsidies from government-supported drug research done by the National Institutes of Health and American Universities (1). 

Research information is not always what it appears to be.  Normally physicians at a reputable health care institution or university spend months carefully analyzing data on a specific drug prior to any publication of the data.  Yet the British newspaper, The Observer, reveals that drug firms “hoodwink” medical journals.  Hundreds of articles in medical journals claiming to have been written by academics or doctors have been penned by ghostwriters in the pay of drug companies (7).

The other myth is that pharmaceuticals not made within the United States are “unsafe.”  More balderdash!  The flu vaccine provided in the United States the past two years was made by Sanofi Pasteur, a French company, and the Tamiflu, which the President is  stockpiling against a possible avian flu pandemic, is made by Roche in Switzerland.  As a matter-of-fact, most of the major pharmaceutical companies manufacture many of their medicines overseas.  The reason that the pharmaceutical companies deride foreign purchasing is that it will reduce the profits here in the United States. (I would beware of ordering from unknown sources on the Internet, either here or abroad).

If one is currently getting their medications from abroad, I would express concern that once the Medicare drug bill is fully implemented that there may be a variety of problems regarding importation.  Remember, as well, that the reason most countries in the world have much lower drug prices is the fact that pharmaceutical prices are negotiated nationally by their national health services.  The U.S. is the only nation in the western world that does not have a health service with universal health care.

The most compelling revelation of the improprieties of big PhRMA, Pharmaceutical Research and Manufacturers of America, is the book, “The Truth About the Drug Companies,” by Marcia Angell, M.D., who was editor of The New England Journal of Medicine, the gold standard of medical journals, for many years.  This is available in paperback (2). 

A word of caution.  Your local independent pharmacist is a victim of the system.  She/he is a hard-working, dedicated individual who has nothing to do with the high price of what she sells.

The Higher Costs of Marketing

Has one ever watched a football game on television?  Has one ever wondered about the plethora of ads for “medication” for erectile dysfunction?  Has one ever wondered what those ads cost?  Let us estimate that a primetime ad costs $500,000 to $1,000,000.  How many elderly people are paying for those ads, at the same time they overpay for their medication for high blood pressure or diabetes?

The United States and New Zealand are the only developed nations in which PhARMA advertises on TV.  It should be noted, as well, that most drugs advertised are for ongoing, long-term use.  Drugs for high cholesterol, diabetes, high blood pressure, asthma, allergies.  One seldom sees an ad for an antibiotic or other product that will be used for a transient condition.

There are a plethora of ads for antidepressants and drugs that lower cholesterol (the statins).  Most are a chemical variation of a molecule, have the same mode of action, and the same side effects (which may be considerable), but are advertised as being superior to all others.  The idea is to brainwash the consumer, who will browbeat her/his doctor, into prescribing the drug.  Many doctors do not take time to reason with the demanding patient; hence, they acquiesce and big PhARMA has made their point.  Generic medications are just as good, just as safe, and a lot less expensive. 

PhARMA spends more on marketing than on R & D.  There are ads on TV, in magazines, in medical journals.  At medical conventions cocktail parties and banquets are underwritten by PhARMA.  “Seminars,” all expenses paid, are provided for physicians by various manufacturers.  The contributions of PhARMA to our politicians and lobbyists is one of their highest priorities.  The amount of money involved is staggering (2). 

It is by now well-known that the drug companies provide huge sums of cash to politicians - $133 million to federal candidates since 1998, according to the Center for Public Integrity, with upwards of $1.5 million going to Bush; the top recipient.  The industry operates an elaborate lobby in Washington that in 2004 spent $123 million and employed an army of 1,291 lobbyists, more than half of whom were former federal officials.  The industry’s sales machine aims to bypass doctors with TV and other advertising aimed directly at the patient, appealing to his or her judgment over that of a physician (13).

Citizen Actions

1.)    Become informed.  As long as the public accepts this violation of their right to decent medical care, we get what we deserve.  Spend a few bucks for the books recommended herein and make yourself heard.

2.)    Take a careful look at the voting records of your elected representatives.  Do not just believe what you hear, as frequently this is diametrically opposite of the voting record.  Look, as well, as to what contributions your elected representatives get from big PhARMA.

3.)    GET OUT AND VOTE AGAINST THOSE WHO ARE VOTING AGAINST YOUR BEST INTERESTS.  It is fairly obvious that an under-funded challenger in any federal election is not subsidized by PhARMA or the HMOs. 

Links to Resources

1.)    Health Care Meltdown, Bob Lebow, M.D.; J.R.I. Press, Boise, ID 83703, Published 2002

2.)    The Truth About the Drug Companies, Marcia Angel M.D.; Random House. Published 2004.

3.)    Critical Condition, Barlett and Steele; Doubleday, Published 2004.

4.)    Medicare Prescription Drug Improvement and Medicare Act, PL 108-173

5.)    Alliance for Retired Americans Website, Feb. 7, 2004.

6.)    Alliance of Retired Americans Website, Jan. 17, 2004.

7.)    Revealed: How Drug Firms ‘Hoodwink” Medical Journals, The Observer U.K., December 16, 2003.

8.)    Criticism of Drug Benefit Is Simple: It’s Bewildering, New York Times, June 28, 2003.

9.)    American College of Physicians “Medical Prescription Drug Coverage Basics, Released on Web Nov. 2005.

10.)  AARP Bulletin, November 2005.

11.) The Washington Spectator,     January 15, 2004.

12.)A Private Obsession, Paul Krugman Ph.D., New York Times, November 18, 2005.

13.) The Village Voice, November 20, 2005.