By
Robert Reich
According to a new federal database put online last week, pharmaceutical
companies and device makers paid doctors some $380 million in speaking and
consulting fees over a five-month period in 2013.
Some doctors
received over half a million dollars each, and others got millions of dollars
in royalties from products they helped develop.
Doctors claim
these payments have no effect on what they prescribe. But why would drug
companies shell out all this money if it didn’t provide them a healthy return
on their investment?
America spends a
fortune on drugs, more per person than any other nation on earth, even
though Americans are no healthier than the citizens of other advanced nations.
Of the estimated
$2.7 trillion America spends annually on health care, drugs account for 10 percent of the total.
Government pays
some of this tab through Medicare, Medicaid, and subsidies under the Affordable
Care Act. But we pick up the tab indirectly through our taxes.
We pay the rest
of it directly, through higher co-payments, deductibles, and premiums.
Another
technique is called “product hopping” —making small and insignificant changes
in a drug whose patent is about to expire, so it’s technically new.
For example,
last February, before its patent expired on Namenda, its widely used drug to
treat Alzheimer’s, Forest Laboratories announced it would stop selling the existing
tablet form of in favor of new extended-release capsules called Namenda
XR.
The capsules
were just a reformulated version of the tablet. But even the minor change
prevented pharmacists from substituting generic versions of the tablet.
Result: Higher
profits for Forest Labs and higher costs for you and me.
Another
technique is for drug companies to continue to aggressively advertise
prescription brands long after their twenty-year patents have expired, so
patients ask their doctors for them. Many doctors will comply.
America is one
of few advanced nations that allow direct advertising of prescription drugs.
A fourth tactic
is for drug companies to pay the makers of generic drugs to delay their cheaper
versions. These so-called “pay-for-delay” agreements generate big profits for
both the proprietary manufacturers and the generics. But here again, you and I
pay. The tactic costs us an estimated $3.5 billion a year.
Europe doesn’t
allow these sorts of payoffs, but they’re legal in the United States because
the major drug makers and generics have fought off any legislative attempts to
stop them.
Finally, while
other nations set wholesale drug prices, the law prohibits the U.S. government
from using its considerable bargaining power under Medicare and Medicaid to
negotiate lower drug prices.
This was part of the deal Big Pharma extracted for
its support of the Affordable Care Act of 2010.
The drug
companies say they need the additional profits to pay for researching and
developing new drugs.
But the
government supplies much of the research Big Pharma relies on, through the
National Institutes of Health.
Meanwhile, Big
Pharma is spending more on advertising and
marketing than on research and development – often tens of millions to promote
a single drug.
And it’s
spending hundreds of millions more every year lobbying. Last year alone, the
lobbying tab came to $225 million,
according to the Center for Responsive Politics.
That’s more than
the formidable lobbying expenditures of America’s military contractors.
In addition, Big
Pharma is spending heavily on political campaigns. In 2012, it shelled out over $36 million,
making it the biggest political contributor of all American industries.
Why do we put up
with this? It’s too facile to say we have no choice given how much the industry
is spending on politics. If the public were sufficiently outraged, politicians
and regulatory agencies wouldn’t allow this giant ripoff.
But the public
isn’t outraged. That’s partly because much of this strategy is hidden from
public view.
But I think it’s
also because we’ve bought the ideological claptrap of the “free market” being
separate from and superior to government.
And since
private property and freedom of contract are the core of the free market, we
assume drug companies have every right to charge what they want for the
property they sell.
Yet in reality
the “free market” can’t be separated from government because government
determines the rules of the game.
It determines,
for example, what can be patented and for how long, what side payoffs create
unlawful conflicts of interest, what basic research should be subsidized, and
when government can negotiate low prices.
The critical
question is not whether government should play a role in the market. Without
such government decisions there would be no market, and no new drugs.
The issue is how government organizes the market. So
long as big drug makers have a disproportionate say in these decisions, the
rest of us pay through the nose.
ROBERT
B. REICH, Chancellor’s Professor of Public Policy at the University of
California at Berkeley and Senior Fellow at the Blum Center for Developing
Economies, was Secretary of Labor in the Clinton administration. Time Magazine
named him one of the ten most effective cabinet secretaries of the twentieth
century. He has written thirteen books, including the best sellers
“Aftershock" and “The Work of Nations." His latest, "Beyond
Outrage," is now out in paperback. He is also a founding editor of the
American Prospect magazine and chairman of Common Cause. His new film,
"Inequality for All," is now available on Netflix, iTunes, DVD, and
On Demand.
