Big pharmaceutical companies are the one who says that they are committed to discovering new medicines and delivering medicinal breakthroughs to the patients who need them. But at what cost? Price gouging by the pharmaceutical industry is soaring exponentially. The US drug market is full of pharma players who organize aggressive pricing strategies for lifesaving drugs that are only intended to maximize their capital gains and shareholder profits.
Quoting the example of the story of Martin Shkreli (the most hated man in America), the pharmaceutical tycoon known for raising the price of an AIDS and Malaria drug, Daraprim, by 5500% overnight, is just the initial glimpse of what is happening around the drug pricing and how pharma giants are manipulating the cost of a lifesaving drug. Another emphasizing example is Revlimid, the analogue of the infamous drug, thalidomide. The story of Revlimid’s development is unique, even uplifting. But the story of what it costs is all too familiar. In the past decade, the drug’s price jumped from $78,000 a year to $156,000. Last year, the median myeloma patient on Medicare—a person supposedly shielded from extortionate drug prices—paid $11,538 out of pocket each year for the medication. (Most American families have less than $5,000 in savings.) The prices of new treatments for rare diseases represent even less affordability. In the US in 2016, the median annual price for each patient treated with the top-selling orphan drugs was $83 883. This is 5.5 times the median yearly cost for non-orphan top-selling medicines. Some orphan drugs come at such high prices that they achieve “blockbuster drug” status despite treatments for rare diseases.
An example of this is ivacaftor, a treatment for certain subtypes of cystic fibrosis. It was priced in the US at about $300 000 per patient per year and has earned its manufacturer net global revenues of $3.65bn from 2014 through 2018—with an additional $4.68bn for related combination products over the same period. Eculizumab, used to treat paroxysmal nocturnal haemoglobinuria and atypical haemolytic uraemic syndrome, was priced in the US at roughly $400000 per patient per year. It is expected to achieve over $5bn in annual sales by the end of this year (i.e., 2022).
In the United States, drug prices are not regulated by any federal government agency. Other than generic medications, which face a lot of competition, prices for brand-name drugs and specialty drugs are often set by how much the market will bear. For instance, in the case of drugs used to treat and cure Hepatitis C (i.e., Sovaldi, Harvoni), the cost of these medications easily tops $150,000 per treatment. The price justification for these medications is two-fold:
- Recoup research and development investments (with the US being the backbone of R&D returns for the world), and
- Set drug prices at a value point below the ultimate cost of forgoing treatment. (Undergoing a liver transplant due to a case of untreated Hepatitis C can cost upwards of $750,000.)
In 2020, pharmacy costs were account for 31 percent of overall health care costs, becoming the number one driver of expenses of an average American.
Another factor that impacts the cost of drugs is the role played by pharmacy benefit managers (aka PBMs). Created to increase efficiency and reduce costs by acting as third-party administrators of prescription drug programs for commercial health plans, PBMs now control prescription drug benefits for more than 260 million Americans, with three companies—Express Scripts, CVS Caremark, and OptumRx, controlling almost 80 percent of the market. PBMs contract with drug manufacturers and pharmacies to develop and maintain the drug formulary used by healthcare plans. They earn revenue by negotiating discounts and rebates with drug manufacturers, charging various fees to pharmacies (including fees for pharmacies to have the right to be compensated by the PBM), and processing and paying prescription drug claims fees to health insurers.
To highlight the jeopardy of big pharma player in the name of providing crucial breakthrough therapies with advance R&D, a brief on new prices for medicines in 2022 would be an eye opener. Americans spent $535 billion on prescription drugs last year, an increase of 50% since 2010, according to one estimate. As that to was not suffice therefore, drug companies raised the prices of hundreds of medications on Jan. 1, with most prices up 5% to 6% on average. The start of the new year is the most popular time for drug companies to hike prices, and even though high drug prices remain one of the biggest political health care issues, increases in 2022 are tracking in line with other recent years.
If we go by the stats, Pharmaceutical companies increased prices on 460 drugs on Jan. 1, according to drug prices monitored by research firm 46brooklyn. The number of drugs that had price increases on Jan. 1 of prior years’ according to 46brooklyn: 629 (2021), 385 (2020), 359 (2019), 538 (2018) and 494 (2017). Many drugmakers implement price hikes on other days throughout January, so expect more increases in the coming days. The price of blockbuster HIV drugs like Biktarvy and Descovy of Gliead is increased by 5.6%. Pfizer increased the breast cancer drug Ibrance price by 6.9%. Price increase of 6.9% is also observed on Pfirzer’s Prevnar Vaccine and a 4.4% rise is observed on the costly heart drugs Vyndamax and Vyndaqel. The blood thinner Pradaxa, is also expected an up of 8% in the prices. Purdue increased the price by 5% on opioid poster child OxyContin. Vertex has also raised the price by 4.9% on Trikafta, a blockbuster cystic fibrosis medication that has no competitors and already has a list price of more than $311,000 per year!
The scenario can be well described by the subversive attitude of both Big Pharma and Politicians against the common taxpayer in the form of pharmaceutical lobbying. The pharmaceutical industry has spent nearly $263 million on lobbying so far last year, employing three lobbyists for every member of Congress, according to OpenSecrets, which tracks money in politics. Millions of those dollars are in the form of campaign donations. Congressman Scott Peters, a Democrat, sparked protests outside his San Diego district office when he came out against a plan to cut drug costs for seniors earlier this year. He’s received nearly $130,000 from the industry this year, according to OpenSecrets data. About $100,000 has been donated to Democratic Senator Kyrsten Sinema this year. Senator Robert Menendez, also a Democrat, has taken nearly $80,000 in 2021.
Drug companies say they must raise prices to fund development of new medicines. PhRMA, the pharmacy industry’s trade group, said the analysis was “flawed and inaccurate,” failing to account for the rebates and discounts provided to insurers.
“The data focus on a selective sample of companies and medicines and ignores how the competitive market works to control costs,” it said in an emailed statement. “Due to negotiations in the market, retail medicine costs grew just 0.4 percent in 2017, the slowest rate since 2012, and net prices for brand medicines grew just 1.9 percent.”
People don’t have an idea of what they are paying for because public don’t know how much it costs to actually develop a drug; the FDA doesn’t require comparative effectiveness studies, so they don’t know if new drugs work better than existing competitors; and people have little information about how much other consumers are paying for the same products.
Figuring out if a drug is priced fairly is not a simple process. One of the first things we have to do is put a value on human life. A quality-adjusted life year, or QALY (pronounced “kwaly”), is the metric that health economists use to measure the value of medical treatments over time. Based on data from the World Health Organization and other sources, the Institute for Clinical and Economic Review (ICER) puts the value of a quality-adjusted life year in the United States at between $100,000 and $150,000. Any drug that provides significant health benefits at under $100,000 per QALY is golden and ICER rates it as “high value”. Ones that cost more than $150,000 per QALY get “low value” or, at best, “intermediate value” if the drug provides a legitimate benefit to patients. But this all is a cold-blood math, QALYs aren’t controversial for health economists, but the very idea of quantifying life upsets plenty of people—the approach carries a whiff of “death panels,” after all.
The other facet of the story is how the watchdog & controller of drug stance in the country is potentially influenced by pharmaceutical funding. The panel of advisors that vote each year on whether the Food and Drug Administration (FDA) should approve therapy for the US market or not was found to have close links with pharmaceutical companies that drive the whole approval process with of power of money. An analysis published in science.org showed that:
- Of 107 physician advisers who voted on the committees Science examined, 40 over a nearly 4-year period received more than $10,000 in post hoc earnings or research support from the makers of drugs that the panels voted to approve, or from competing firms; 26 of those gained more than $100,000; and six more than $1 million.
- Of the more than $24 million in personal payments or research support from industry to the 16 top-earning advisers—who received more than $300,000 each—93% came from the makers of drugs those advisers previously reviewed or from competitors.
- Most of those top earners—and many others—received other funds from those same companies concurrent with or in the year before their advisory service. Those payments were disclosed in scholarly journals but not by FDA.
- An analysis of pharma payments to 107 physicians who advised FDA on 28 drugs approved from 2008 to 2014 found that a majority later got money for travel or consulting or received research subsidies from the makers of the drugs on which they voted or from competing firms.
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