Someone explain this:
Drug companies are quietly pushing through price hikes of 100% or even more than 1,000% for a very small but growing number of prescription drugs, helping to drive up costs for insurers, patients and government programs.
The number of brand-name drugs with increases of 100% or more could double this year from four years ago, researchers from the University of Minnesota say. Many of the drugs are older products that treat fairly rare, but often serious or even life-threatening, conditions.
Among the examples: Questcor Pharmaceuticals last August raised the wholesale price on Acthar, which treats spasms in babies, from about $1,650 a vial to more than $23,000. Ovation raised the cost of Cosmegen, which treats a type of tumor, from $16.79 to $593.75 in January 2006.
The average wholesale price of 26 brand-name drugs jumped 100% or more in a single cost adjustment last year, up from 15 in 2004, the university study found. In the first half of this year, 17 drugs made the list.
There is no justification for this, despite Big Pharm’s attempts to do so. The R&D has long been recouped as these are much older drugs, the production costs are minimal, and for specific drugs that target rare ailments such as spasms in babies, there are no marketing costs.
jake
Viva Le Free Market! You see John, the stock holders & CEO’s have rights too. If the stock holders aren’t happy with the company’s profits, they won’t approve the CEO’s insane salary. And then the CEO won’t buy things and the people who make the things that CEO’s buy won’t have jobs.
Why do you hate the makers of solid gold toilets, John?
Karmakin
Profits HAVE to go up year after year.
Unless you’re willing to deal with that little truism, unfortunately, they got us by the balls.
bootlegger
These drugs may be used on relatively rare conditions, but they are conditions that without the drug are life-threatening. “Your money or your life” takes on a whole new context.
rachel
The beauty of the free market is if one company’s product is overpriced, consumers will buy from another company that make their product more affordable.
That argument doesn’t work? Try this one:
Those people (parents of spasming babies, etc.) need to work harder so that companies with better insurance programs will hire them. The fact that they can’t afford healthcare is their own fault.
That doesn’t work either? Hm. Maybe we’ve let the “free market” handle our healthcare long enough.
Robert Johnston
Our patent laws–and intellectual property laws more generally–are completely broken. The best way around broken patent laws for pharmaceuticals is, of course, for the government to directly fund research so that there aren’t any private patents on medical–as opposed to cosmetic or lifestyle–pharmaceuticals. As is patent law results in huge inefficiencies on the back end due to monopoly pricing on drug products that inevitably end up viewed as necessities without substitutes, and it also results in inefficiencies up front as the race to be the first to patent a drug and get it to market makes for a lot of duplicated research and, generally speaking, inadequate testing for safety. Patent law is a bit of a kludge in other areas, but it’s a disastrous non-solution in the area of medical pharmaceuticals.
Cap and Gown
So sayeth Mr. “it none of the government’s business how much profit a company makes.” John, its called rent, whether you apply it to a patented product, a piece of real estate, or a non-renewable resource. Henry George may have been delusional in thinking the single tax would have solved all the problems of the new economy, but at least he understood the concept of rent.
NJDave
Doing a little research on Questcor shows that they are not in any way ‘big pharma’. More like, tiny pharma. They couldn’t turn in an operating profit in ’06. After almost quadrupling sales in ’07, they became handsomely profitable.
Now, if they’d come up with a new product that everyone loved, that performance turnaround would be admirable. But ‘pricing to what the market will bear’ invites price regulation. There’s always the faint odor of extortion around drug marketing.
Dennis - SGMM
Because they can.
keith
I’ve said a few times that the majority of Americans are capitalists in everything except sports and gas. If Big Pharma raises prices enough for life-saving drugs, maybe we’ll be able to add medical costs to my list and the USA can finally get universal healthcare. I just don’t see a third option; either you think that healthcare providers should be able to charge whatever they want, or you don’t, and more people will just have have to admit that healthcare isn’t the same as consumer durables when it comes to the applicability of a free market.
(In reply to an earlier comment, I’m led to believe that the majority of basic US pharma research is already done by publically-funded bodies)
Dick Weathers
You have to keep in mind that for every successful drug like Acthar there are hundreds of drugs that died for one reason or another in the developmental process. The companies take a hit on the cost for R&D for everyone of these failures. Pfizer lost well over a billion dollars in R&D investment when Torcetrapib died late in phase III development and essentially shut down their Ann Arbor site to try and recoup losses. Pharma’s got a limited amount of time to recoup their investments on approved drugs before they go off patent and generics enter the market. On top of that, companies only turn a profit on something like every one out of ten FDA approved drugs. Which I’m sure is small solace when the price of your medication increases 1000%. That and you know, the fact that Pharma far outspends on direct-to-consumer advertisement than they do on R&D.
Richard Bottoms
Republicans are evil?
slippy hussein toad
So what?
I hear little violins playing but I don’t give a fuck.
Oh, that’s right. If we don’t give pharmaceutical companies every goddamn thing they want, stockholders will CRY and then HOLD THEIR BREATHS UNTIL THEY TURN BLUE. We can’t have that.
DanM
This reminds me of something that has been rattling around in the back of my head for some time. It seems to me that when a government grants a company a limited monopoly (a more fitting word for patent in my opinion) then that monopoly should carry with it certain obligations.
Nothing severe or onerous, mind you. Just some very basic things such as, for example, non-extortionate pricing on life-saving medicine.
Seems to me these particular patents need to be rescinded
Dave_Violence
Twenty-three grand for pills to treat a spasming baby? Man, that’s a lot of money. Don’t we long for the good old days when life was precious, yet cheap. Nowadays it’s not precious and expensive.
Tsulagi
My first guess would be they’re rising prices in advance of an Obama or McCain presidency when health care costs including prescription drug prices might get looked at. Kinda like when drug prices increased before the Prescription Drug Bill took effect. Great benefit; seniors paying for a prescription card could then maybe get a 20% discount on a drug that may have just risen 30% or more, while taxpayers pick up the subsidies. Win/win for Pharma. Cost to taxpayers? $600+B or so. Chump change.
Little anecdote. Early this year wife saw a dermatologist because she had an allergic reaction to something. While there, she asked him if there was anything for fine lines that were showing up near the corners of her eyes and mouth. Laugh lines. Only lines on her face. He recommends a Johnson & Johnson Retin-A based product called Renova and writes her a prescription. At a pharmacy, she finds the cost for Renova is $160 a tube. At that price must be good stuff. Understandably (to me) insurance wouldn’t cover it as it’s for cosmetic purposes.
Fine with me, but wife grumbled about the price. Does some research. A sister in Argentina could get the same Johnson & Johnson Renova product there for around $40. Ultimately, though, she ordered a Retin-A product from an online pharmacy in India at $2.50 a tube. The product arrives, and get this, the tubes and their packaging indicate they’re produced by Johnson & Johnson, India carrying their trademark. The exact same active ingredient, and likely in the same cream that in the U.S. market gets sold for $160 in their Renova brand. A 6,000+ % price differential.
And contrary to bogeyman scare tactics pushed by Big Pharma you’re in grave danger not buying their branded prescription products and only in a US pharmacy, the product has worked for her and she hasn’t died a slow, agonizing death. Know this isn’t on a life-sustaining drug, but guessing similar pricing structures apply to a fair number of commonly used drugs that are.
Christastrophe
Actually, I work at Pfizer so I can speak to this with some experience. I know Big Pharma has a rep as this big evil Thing, but the death of Torcetrapib didn’t mean that executives had to light their cigars with twenties instead of fifties. 10,000 people lost their jobs (and it wasn’t just the Ann Arbor site: four other manufacturing sites shut down). Pretty much everybody I work with in New York lost their jobs.
Anyway, I can’t speak to what’s going on with Questcor, but I can further vouch to the cost of R&D (which is not publicly funded, as someone up there suggested). Once you factor in all the study managers, clinicians, monitors, investigators, manufacturing costs for test drug, etc etc you realize that bringing a drug to market is a long, expensive process that doesn’t always pay off. It costs billions to bring a single drug to market, and most of them aren’t moneymakers.
Which is not to say that there is not inflation (and, for that matter, overpaid executives up there at the top and other obscenities), or that I endorse what’s going on in the original article. But there are plenty of us low and mid level people in this huge monolith who are affected by something as cataclysmic as a drug failing in the pipeline.
J. Michael Neal
I don’t think that anyone is arguing that the cancellation of a drug doesn’t have serious consequences. Throw in there that it also disappoints the patients that were hoping for relief.
However, this doesn’t have very much to do with ridiculous price increases, or huge disparities in pricing of the same drug in different places.
The biggest problem is that, when the price charged for a product isn’t closely related to the marginal cost of producing that product, you get all sorts of weird distortions. It happens in the entertainment industry, too, though it doesn’t have the same consequences. This is why, even if we don’t change the health care system overall, I’d be in favor of having the government buy patents to drugs that get through all of the trials (within a certain range of actually being for medical purposes) from pharamaceutical companies, and just letting things go generic from very early in their lifetimes.
Sloegin
The Invisible Hand is a bitch slap when the consumer doesn’t have a choice. There’s no capitalism and no free market when there’s no competition. If the buyer can’t walk away from the transation, a fair value exchange is a fantasy.
Markets and choices don’t exist when the consumer’s alternatives are illness, pain, and death.
J Bean
Drugs to treat orphan diseases are going to be a problem. Unfortunately, infantile spasms (whatever the hell those are) are not acne and wrinkles. If your only product is a drug that sells a few thousand doses a year, then the cost per unit dose is going to be much higher than if you sell a mix of drugs that includes a Retin-A that sells 200 million doses a year. If the company doesn’t turn a profit and the employees don’t get paid, then in a year or two, there isn’t going to be any drug to treat the infantile spasms.
jvill
Would I be too cynical to say it’s in preparation for universal healthcare when the government will be picking up the tab?
It’ll be like the military: who cares if it costs $1 million for a piece of body armor that costs $10,000 to create. It’s for our military!
What are you, unAmerican?
keith
It’s all about motives. If there’s a profit motive to create something, then great. But the profit motive isn’t the only one. Nobody expects the army to make a profit, but apparently they do expect healthcare to make one.
I was wrong about my factoid above; it’s basic science research, not basic pharma.
LongHairedWeirdo
R&D has been recouped? Sure, but marketing costs exceed R&D costs. Yes, everyone *talks* about R&D costs, but that’s because people thinks that “Money to treat disease” is more palatable than “money used to make more money by selling more drugs, whether necessary or not”.
NJDave
Well, yes. But nobody knows, i.e. in a clinical trial proven way, whether this works or not. From the company’s 10K:
They then go on to talk about how getting sales reps to convince doctors of the value of this drug wasn’t working. So they fired the sales folks (and CEO) and raised the price. Those MD’s who thought it was useful continued to prescribe, at a much higher price.
This isn’t an orphan drug, it hasn’t even been shown to work for “infantile spasms”. But because an irreducible number of MD’s are convinced that it does, the company raised the price to maximize the return to shareholders. Which, as any finance course will teach you, is what they should be doing.
But, as a society, does this make sense? A product with very unproven effectiveness has a huge price.
IMHO, the answer is that the FDA should nail the “off-label”, unproven use of this drug. If its good, PROVE IT. If you can’t attract the capital needed to fund the studies to prove it, then you haven’t much of a compelling case. There’s lots of careful money willing to make bets on drugs. Orphan drugs (this seems like a prime candidate) have been very good investments.
gorp
Could it be that Big Pharma sees national health insurance as inevitable, coupled with government standards for drug pricing, and are trying to set the prevailing price for life or death treatments ahead of time?
jbarntt
There is no justification for this, despite Big Pharm’s attempts to do so. The R&D has long been recouped as these are much older drugs, the production costs are minimal, and for specific drugs that target rare ailments such as spasms in babies, there are no marketing costs.
A company has a product and they decide to increase the price. I would assume they would have made the decision based on lost sales vs. increased revenue on the reduced sales.
Seems to me an ordinary business calculation and I’m not sure what your point is . Please explain.