Recently President Trump told the Big pharmaceutical companies and their CEOs to cut their prices and move their production back into the U.S. Josh Keefe wrote that while both political parties have denounced the rising cost of prescription drugs, neither Democrats nor Republicans have done much to address the problem. But this summer, a new tool to restrict the rising prices of drugs developed with taxpayer dollars has been introduced by the two U.S. senators who don’t belong to either party.
The mechanism works like this: Drug manufacturers who take federal money to develop drugs must keep their U.S. prices in line with the prices they charge in other economically advanced nations — typically much lower than drug prices in the U.S.
The system would prevent pharmaceutical companies from effectively double-charging U.S. consumers by using their tax money for research and then charging them some of the steepest prices in the world at the pharmacy. Pharmaceutical companies, who pour millions of dollars into both the Democratic and Republican parties, are against the idea, which is perhaps why the fix is being pushed by Bernie Sanders of Vermont and Angus King of Maine, the only independents in congress.
The U.S. has the highest level of per capita pharmaceutical spending of any nation on Earth, according to the Organisation for Economic Co-operation and Development (OECD). And while Americans spend more than any other country to buy their drugs, they also spend more than any other country to develop those same drugs.
Senator Angus King introduced an amendment into a military spending bill that would require drug makers keep drug prices in line with pharmaceutical costs in other countries.
In June, King successfully added language to the 2018 military spending bill (still working its way through Congress) that would allow the Department of Defense to take away exclusive patents from drug companies that benefitted from DoD funding if their drug price in the U.S. rises above the median price in seven foreign countries with similar economies.
Then last week, Sanders introduced legislation that would tie the prices of drugs made with government funding to costs in other countries. Unlike King’s language, Sanders’ bill would expand the concept beyond the DoD. The bill requires companies taking federal funds to develop drugs to enter into “reasonable pricing” agreements with the Secretary of Health and Human Services.
“Under this insane system, Americans pay twice. First, we pay to create these life-saving drugs, then we pay high prices to buy those drugs,” wrote Sanders in a New York Times op-ed. “Our government must stop being pushovers for the pharmaceutical industry and its 1,400 lobbyists.”
The bill defines a “reasonable price” as no more than the lowest prices charged in countries with GDP and per capita income similar to the U.S. (The bill specifically pegs pricing to countries in the Organization for Economic Co-Operation and Development.)
The proposal is the latest salvo in Sanders’ effort to stop the military from granting French pharmaceutical company Sanofi Pasteur the exclusive right to sell a Zika vaccine.
“The days of allowing Sanofi and other drug makers to gouge American consumers after taking billions in taxpayer money must end,” Sanders told HuffPost this week. “That is why I am introducing legislation to demand fairer, lower prices for the Zika vaccine and for every drug developed with government resources.”
But just how much government support the industry receives is up for debate. While industry estimates put total annual private R&D spending by biopharmaceutical companies at about $60 billion per year, the government’s contribution is much harder to nail down. The National Institutes of Health, the government’s main funder of health research, told International Business Times in a statement that “there is no exact number which would accurately capture NIH investment” in drug development. In total, NIH spends about $32 billion on medical research annually.
Last year, the National Center for Science and Engineering Statistics estimated that in 2014, total federal government R&D spending on pharmaceuticals and medicines was just $267 million. But that number takes into account only money given directly to drug makers.
“Federal support of biopharma R&D isn’t going to take the form of big checks cut to companies,” Scott Hinds, a pharmaceutical industry analyst for investment research firm Sector and Sovereign Research told IBT in an email. “Rather, it’s going to come through funding grants and research for academics, government employees, and other non-industry scientists.”
“Typically, then, if anything of commercial value is discovered in this sponsored research, those compounds will be sold or licensed to drug companies who have the capital and resources to spend on later phase (more expensive) clinical development necessary to bring them to market,” Hinds said.
Other experts told IBT federal support of drug development goes well beyond just funding research.
“It’s not so much the money we are actually spending through NIH. We are providing huge value to companies in tax credits, other incentives, expedited FDA approval, exclusivity agreements… all of these are benefits,” Rachel Sachs, an associate professor at the Washington University in St. Louis School of Law told IBT.
Sachs cited a 50 percent tax credit for the development of “orphan” drugs as an example of the government’s support of the pharmaceutical industry. The value of that orphan drug tax credit is estimated to be worth $50 billion between 2016 and 2025, according to the Treasury Department.
Big pharmaceutical companies spend nearly double on advertising as they do on research and development. Maybe Congress could look into drug prices?
But the benefits flow both ways between the pharmaceutical industry and Washington, which is why the Sanders bill faces an uphill battle to reach the floor for a vote. The bill was sent to the Senate Health, Education, Labor, and Pensions committee, which are chaired by Lamar Alexander. Pharmaceutical and health products companies gave more to Alexander’s campaigns between 2011 and 2016 than did any other industry, according to the Center for Responsive Politics. And even if the bill gets to the floor, it would face opposition from the industry’s 1,350 lobbyists, who don’t come cheap. The pharmaceutical and health products industry has spent a remarkable $144 million on lobbying so far in 2017, more than double what the defense industry has spent over the same time period.
“Proposals to insert a reasonable pricing clause ignore the substantial R&D investments and risks undertaken by the private sector in developing and bringing a new medicine to patients,” the Pharmaceutical Research and Manufacturers of America (PhRMA), which has spent $14 million on lobbying so far this year, told IBT in a statement. “Such proposals undermine critical intellectual property rights and incentives, create substantial uncertainty for companies and establish completely arbitrary criteria for taking intellectual property. This could chill critically needed collaborations and investment by the private sector to address some of our most serious unmet medical needs.”
Most surveys reflect what is included in the following graph, that they favor actions to keep drug costs down. Do they realize that malpractice adds a tremendous addition to the cost of all drugs??
The pharmaceutical industry, which says it costs $2.6 billion to bring a drug to market (while spending more on marketing than research) made a similar argument against “reasonable pricing” more than two decades ago, when it successfully persuaded the Clinton administration to repeal a “reasonable pricing” rule implemented by President George H.W. Bush.
An example of the increase of drug prices in one year.
Allowing Americans to purchase lower-priced medicines from other countries would save the federal government alone more than $6 billion, according to a new analysis from the Congressional Budget Office. The report comes as the pharmaceutical industry has ramped up its lobbying — including against a legislative initiative that would let Americans purchase lower-priced medicines from countries such as Canada.
Under existing law, drug makers are permitted to produce pharmaceuticals abroad and then import them into the United States, where on average they charge Americans the highest prices for medicines in the world. However, while drug makers themselves are allowed to import medicines, current law prohibits U.S. consumers and pharmaceutical wholesalers from doing so, even when the same medicines are sold at much lower prices abroad.
Spending millions on campaign donations and lobbying, the pharmaceutical industry has for years successfully fought off legislation to end the prohibition. This year — nearly 17 years after President Bill Clinton’s administration killed Democrats’ drug importation legislation — the importation initiative has once again been renewed. Looking to take advantage of President Donald Trump’s promise to lower drug prices, Vermont Sen. Bernie Sanders, along with 21 Democratic lawmakers, introduced the Affordable and Safe Prescription Drug Importation Act on Feb. 28. The bill was referred to the Senate’s Committee on Health, Education, Labor, and Pensions.
CBO estimates that the change would in total reduce federal government drug spending by more than $6.8 billion over ten years, including a reduction of $5.1 billion in direct spending and roughly $1.7 billion in increased revenue.
Before introducing the new legislation, Sanders and Democratic Sen. Amy Klobuchar of Minnesota in January introduced a budget amendment allowing Americans to purchase drugs from Canada. In contrast to typical party-line votes, 13 Republicans voted with the Democrats in supporting the amendment, while 13 Democrats joined the remaining Republicans in voting it down. The tally was 52-46 against the amendment.
Among the Democrats who voted against the cost-saving measure was potential 2020 presidential candidate Sen. Cory Booker of New Jersey, a state that is home to several major pharmaceutical companies including Bayer USA, Johnson & Johnson and Merck & Co. As The Intercept reported, Booker’s argument for voting against the measure was the same as that of the primary pharmaceutical trade organization, the Pharmaceutical Research and Manufacturers of America (PhRMA). Both Booker and pharmaceutical representatives argue that drugs from Canada have insufficient safety standards.
“Any plan to allow the importation of prescription medications should also include consumer protections that ensure foreign drugs meet American safety standards,” said Booker in a statement to Jezebel. In the 2014 election, when Booker ran for Senate, he had the highest total — over $220,000 — in campaign donations from the pharmaceutical manufacturing industry of any member of Congress.
Like Booker, the drug industry’s lobbying group, PhRMA, warns that Canada can’t properly regulate the medicine that is shipped through its borders. However, Canada does not suffer from problems with poor quality or counterfeit drugs.
“My first response to that is, show me the dead Canadians. Where are the dead Canadians?” said Republican Minnesota Gov. Tim Pawlenty in 2003 as he unsuccessfully asked the federal government to allow his state to import cheaper drugs from the United States’ northern neighbor.
Some drugs sold in the United States are in fact “fully manufactured overseas, or made in the United States but have some foreign ingredients,” according to the Food and Drug Administration, which for this reason already has in place a robust mechanism for inspecting drugs across the globe.
Critics, including writers at conservative think tanks such as the Cato Institute, argue that importing drugs would also import foreign price controls that, they claim, would drastically cut the drug companies’ funds for research and development of future drugs.
After intense pressure from progressives, Booker reversed course and teamed up with Sanders and other Democrats to sponsor the Affordable and Safe Prescription Drug Importation Act in February. That, however, did not eliminate all Democratic Party opposition to the initiative.
During May deliberations over an FDA authorization bill, Sanders, and Democratic Sens. Bob Casey and Elizabeth Warren proposed an amendment allowing for the importation of drugs from FDA-approved facilities in Canada. The amendment was “laden with protections,” according to Casey. But Democrats Patty Murray (WA) and Michael Bennet (CO), two big beneficiaries of pharmaceutical company’s campaign cash, voted against it in committee, and it failed 13-10.
Overall, campaign spending by the pharmaceutical industry is skyrocketing. Congressional donations from pharmaceutical PACs are up 11 percent as compared with a similar time frame in 2015, and donations to ranking members of health-related committees have risen by 80 percent from two years ago. Lobbying is also on the rise, according to a Kaiser Health News analysis.
After the 1980 Bayh-Dole Act, private researchers could patent intellectual property they developed using federal funding. But by the late 1980s, outrage over the $8,000 annual cost of AIDS drug AZT, which was the only drug approved for treatment of the disease at the time, prompted the Bush administration to implement price control measures. In 1989, NIH was granted the right to review the introductory prices of drugs that were produced with government research, over the objections of the pharmaceutical industry.
“The Bush administration felt it was appropriate to expect some concessions on pricing if the government was involved in the drug and funding research,” James Love, director of Knowledge Ecology International, told IBT. Love researched the original rule while working for Ralph Nader’s Center for the Study of Responsive Law in the early 1990s.
But unlike the specific criteria for reasonable pricing put forth in the Sanders bill, the Bush rule was a bit ambiguous. “The agreements said something to the effect that it had to show some relationship between price and government’s role in developing the drug… Nobody really knew what it meant,” Love said.
Just six years later, the Clinton administration rescinded the order on the grounds that it was harmful to innovation.
“The pricing clause has driven industry away from potentially beneficial scientific collaborations… without providing an offsetting benefit to the public,” NIH Director Dr. Harold Varmus said at the time. “Eliminating the clause will promote research that can enhance the health of the American people.”
Additionally, most of us always thought that a generic was an exact copy of a brand-name drug. Perhaps the patent expired, and another company was free to make the same chemical compound. Perhaps the capsule compound could be different, or some of the inert ingredients might be different, but the chemical functioning drug itself was identical.
Psychiatrists often use a drug called Concerta, which is an extended release form of Ritalin that may work for 12 hours. With Concerta, parents could give a child a pill before the child left for school, eliminating midday trips to the school nurse’s office for a new dose.
Concerta’s secret was the way the pill slowly released the medication. The pill absorbed fluid as it passed through the body, and pumped the active drug out of a laser-cut hole.
However, the FDA recently announced that two of the three available Concerta generics, one made by Mallinckrodt Pharmaceuticals and the other by UCB, could no longer be considered the equivalent of the brand and, in most states, could not be automatically substituted by pharmacies for the brand name.
The agency said that although it considered the drugs to be safe, its own lab tests and other analyses suggested that their effectiveness began to wear off much more quickly — after about seven hours. That time frame is important, because the pill can be taken only once a day. What about the generic equivalency? Under F.D.A. rules, generic companies do not need to use the same mechanisms to produce copycat versions of long-acting drugs. The manufacturers must instead prove that their products release the drug into the body at the same rate as the brand-name drug. The Mallinckrodt and UCB products use different techniques, which may account for the shorter effectiveness. (So they are NOT equivalent!)
In spite of all this, The FDA allowed the companies to continue selling their drugs but gave them six months to either prove the drugs were equivalent, or remove them from the market.
Seven months later, the deadline has passed and the drugs are still being sold. Major pharmacies like CVS and Rite Aid continue to stock and sell them.
Now as a physician, I have no objection to good quality generic medications. But these drugs are not generic equivalents and never were. Just because of a drug has the same result does not mean it is a generic equivalent. But, even more important as a patient of mine pointed out the difference in the prices between the brand name and generic drug are huge and now we find out that the generics are not the equivalents…Something is wrong here.
Another part of the equation is where the insurance companies control how we treat our patients including the restriction on the drugs that we can prescribe.
At least sometimes the private insurers eventually let you get the medication that you need after you beg. Medicaid is currently requiring chart note, a letter, and forms including the number of months of treatment for anything not explicitly covered. They have ridiculous algorithms in place, e.g. never a PPI first, will question reason if you want it for more than 6 weeks; if you have something more exotic that does not have “spastic” or “spasticity” in its billed diagnoses list, e.g. Rett syndrome or Alexander disease, they make us go through the process for expensive drugs even though they are more effective. They are busy pretending not to know the difference between “experimental” vs. off-label, and will even deny FDA approved drugs if they can pretend to think the evidence is too preliminary.
It’s just great to practice 10 years in the past and realize no benefits from recent breakthroughs. Do I blame them or the price gouging pharmaceutical companies or the horrible system here in the USA that allows healthcare for-profit with no negotiability on prices, and labeling of any charitable price break or co-pay/deductible coverage as fraud?
I think the parents are going to have to rise up and take stronger actions than we the physicians who are without any power. But most them are swamped with trying to negotiate the systems of “service” that have been progressively stingier with any kind of family support or home care, and progressively more demanding of more and more documentation. They act as if the profiteers won’t just fabricate the documentation that the rest of us struggle to complete honestly but successfully on a daily basis.
Please get involved and get educated. We the people need to correct the mess because our Congress has no idea what the real answers are.