Wednesday, May 9, 2007

Failed Treatment - Drug Resistant Prices

The Drug Industry can break out the champagne - and continue realizing the payoffs on their purchased support in Congress and the Bush Administration. The industry makes an extra $100 billion annually by overcharging for drugs in the US compared to average European or first world prices. A mere one percent of this set aside for lobbying, influence buying and contributions provides a billion dollar war chest to stymie reforms.

On May 7th, the Senate finally allowed the long overdue cheaper drug imports into the US, but only with a rider that made the whole enactment fruitless.

This rider is the requirement that the Secretary of Health (HHS) certify that the imported drugs are safe, which of course he won't do (at least when he is part of the Bush Administration.) This safety provision is an obvious excuse since many drugs are imported into the US by drug manufacturers under FDA oversight with no such certification requirement. See for example this long-standing refutation:

Disallowing cheaper imports complements the other element that allows higher drug prices in the US - the government neither able nor willing to directly negotiate the prices of drugs that it pays for. The official logic for that policy is even more absurd (i.e., that negotiations are tantamount to price controls) and deserves a separate discussion.

After 2008 a Democratic President and a filibuster-proof Democrat controlled Senate / Congress may finally manage to bring down drug prices. But don't count out the possibility of the drug industry using its largesse to buy enough Democratic support to preserve the status quo. Jack Abramoff (who bought off lawmakers for years) is gone, but not the culture and system that enabled him to thrive.


Anonymous said...

Yes, it is ironic that we debate whether we should allow more illegals in to do the dishwashing and gardening, while doctors have minimized the number of medical practioners that are allowed to enter the country. If more doctors were allowed to immigrate, the cost of medical insurance and hospital charges would plummet.
We should lower the immigration quotas on the lower skilled workers so there is less poverty, and increase it on the doctors and lawyers(God forbid) so those wages come down.

david mcmahon said...

Hi Sandip,

I wish I was the first person to post a comment on your blog - but welcome to the blogosphere, from the bottom of my heart.

Nice to have you on board.

Sursum Corda


Sandip Madan said...

Hi David,

Thank you so much. I also greatly appreciate your mentioning my new effort in your own (and deservedly) very popular blog!


Anonymous said...

Drugs in the US are high for several reasons:
1. Someone has to pay for the research.
2. We research too many trivial diseases that not many people suffer from, eg Lou Gehrig's disease has only 30k sufferers, while cancer and heart have millions.
3. Too many headline procedures like separating conjoined twins, botox, lifestyle drugs like Viagra.
4. More drugs should be made available over-the-counter instead of through the pharmacy.
5. Are the imported drugs really safe even though they may be cheaper? Take the case of the Chinese cough medicines that were contaminated reported in the NY Times on May 6, 2007. Even the Canadian govt. cannot certify the quality on drugs bought over the internet.

May 11, 2007 1:47 AM (Copied over from the May 10 post)

Sandip Madan said...

"Anonymous" touches on many of the grounds advanced by drug industry proponents to justify high US drug prices.

There is no doubt that inefficient distribution and middlemen like the Pharmacy Benefit Managers (PBMs) further inflate drug prices and this aspect should also be addressed in the reform efforts.

On the import safety issue, almost everyone (me included) agree that there must be an effective safety verification and/or approval process. But here's the rub: True drug import proponents simply want the existing system/process of FDA import testing / approval as it applies to drug companies to be extended for extended for other approved suppliers. Those who want to sabotage the measure introduce the unworkable "poison pill" of the entirely new precondition of the Secretary of Health providing such certification.

In regard to the other points, this article by two Harvard academics refutes almost all of the arguments of the drug industry:

Anonymous said...

The govt. has no business negotiating the price of drugs. It uses a one-size-fits-all, heavy handed approach to force the drug companies into lower prices. They don't know what works and doesn't work. If you want lower prices you will get it but will those approaches work, and will there be any more innovation?

It is easy to villify the drug companies and say they charge $10 for something that cost $1. But look at some of the results. Few years ago we performed surgeries on ailments like ulcers and clogged heart vessels. Today we take pills like Tagamet for ulcers and Lipitor for blood pressure. Compare a surgery to a lifelong supply of Tagamet. Obviously pills are cheaper, both in actual costs and quality of life of patient. If the govt. simply came and said to lower prices, it would happen but innovation would disappear. If Medicare, a LBJ program, is so good why is it going bankrupt? All the govt. should do is set guideline for private industries to follow. Insurance companies are doing fine negotiating the prices for their patients.

Sandip Madan said...

Kenrod, I believe the government can and should negotiate the prices for drugs it pays for, just like any other buyer. The more useful a drug the greater will be the pressure on the government to make it available to its members, which will impact the price it would be willing to pay. However, even if we differ I appreciate your sharing your perspectives that benefit everyone seeing this. And they may tend to agree with you rather than me! :-)

Anonymous said...

Sandip, It is true that the govt will be able to use its heavy hand to bring down the price of drugs. But the feds knows the price of everything, and the value of nothing. In the private sector, they have controls like formularies, pharmacy benefit managers like ExpressScript, drug store chains, generic manufacturers like Teva and Mylan, etc to keep the checks and balances. And that applies not only to the price but the efficacy of the drugs. All the govt can do is say the drug cos have to bring down the costs. But with the skyrocketing prices, I agree with you that something has to be done. Let's debate universal coverage which I think will be the hot topic of the 2008 election.

Sandip Madan said...

Good idea, Kenrod. Universal coverage is an important issue, and one that should indeed be discussed separately.