Prescription Filled: Getting What We Want from Big Pharma

Not long ago, I went down to my neighborhood chain drugstore to get my prescription filled.  The medicine was a common, ordinary prescription medication, but I was scared. You see, I’m one of the “uninsured”. Or, as Randites like to call it, “self-insured.” Or, as I like to call it, “screwed.”

Might as well have been standing in line with Mr. Jimmy.

The pharm tech typed into her computer, trying to divine from their system how much the prescription would set me back.

“A hundred and seventeen dollars”, she finally told me.

I blanched. “How about generic?” I asked.

“That is generic”, she answered. “And I gave you credit for our store discount, since you’re uninsured.” She almost whispered the last word, as if it were somehow dirty.

I needed the meds quickly and didn’t have time to shop around. Not that I was likely to find a better deal, even assuming I could coax other pharm techs to check prices for me. I steeled myself and ponied up, trying not to think of the fact that this was more than half of what I brought home in a typical week. I didn’t have much choice.

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When I got home I looked up the same drug on the website of an off-shore pharmacy I’d used several times in the past. They’d always been reliable and provided quality prescriptions. The only problem was that it took three to four weeks to receive it, and I simply couldn’t afford to wait. Plus, ordering from them probably was illegal, given the bedmate relationship U.S. drug makers have with U.S. lawmakers.

The price there: $22.20, including shipping. Same drug, from a dependable company that legally obtains it from legitimate sources.

I had paid more than 5 times as much for my medication than I had to. Because I had to.

Maybe I should’ve just gotten a soda instead.

_____

It’s no secret that the U.S. spends far more than any other developed country on health care, and yet our health outcomes are generally worse than most of these countries.

The fact that this doesn’t cause Americans apoplexy continues to amaze me. Worse, Republicans in Congress not only aren’t flinching about U.S. health care‘s failures, they’re trying to roll back what little reform we’ve managed to pass.

Why? It’s obvious. Most Republicans in Congress are owned by the companies and people getting rich off our existing, dysfunctional system.

The reasons that U.S. health care fails so miserably is complex. Capitalism really can do many things very well, but with health care, the stars line up to produce the worst results possible. Health care is an industry with a perfect storm of market failures. Way too much gets spent on the wrong things, and far too little on the right ones. Health care is the poster child for an industry that could be vastly improved with the right kind of government involvement.

The big pharmaceutical companies are a textbook example of what’s wrong with the system. These companies develop many wonderful medications that can – and do – improve the lives of millions. The problem is, there’s a lot more money in keeping people sick but alive than there is in curing them. Chronically-ill consumers who require continuous treatment mean a long-term, steady stream of profits. A cure is just a one-shot deal.

_____

Look at the Big Six pharmaceutical companies – Johnson & Johnson, Pfizer, Merck, Abbott, Bristo-Myers Squib, and Eli Lilly. Between them, they raked in more than $2 trillion in revenues in the last ten years. That’s “trillion” with a “tr”, not “billion” with a “b”. What’s more, they netted – after tax – nearly $400 billion in profits in that time. For those of you keeping score at home, that’s a 17.7% profit margin.

Why do drug makers net almost 4 times what other Fortune 500 companies do? Are they just that pillsmuch better?

Far from it. The main reason is that we as a society grant them legal monopolies (called “patents”) on the drugs they develop.

Patent systems are intended to ensure that people who spend time and money developing new products can recoup their investments and earn enough profit to reward their innovation. Unfortunately, Big Pharma is abusing patent laws – with at least tacit political approval – in order to milk every penny they can out of anyone silly enough to require their drugs for their lives and well-being.

There’s a movie called Ultraviolet where an evil drug company tries to infect everyone with a deadly disease, just so they can sell them the drug that treats it. Big Pharma doesn’t have to infect everyone. It just has to convince us with massive marketing campaigns that we have diseases that only their drugs can treat.

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Last year, J&J’s total sales were $67 billion, with a net income of almost $11 billion – a tidy 16% profit margin. But J&J’s total R&D spending was less than $8 billion. They spend $20 billion on sales, marketing, and admin.

It’s a similar story with Pfizer. Eight billion spent on R&D, with more than twice that spent on sales and admin. And almost $15 billion in net income.

Why are we paying five times as much as we should for our prescriptions again?

You can’t really blame companies for making “too much profit”, at least as long as they’re doing that legally and ethically. Setting aside the “legal” and “ethical” parts, the blame rests on us – and our political leaders – for allowing these companies to make such stratospheric margins year after year after year.

Over the past ten years, Wal-Mart had total sales of $3.5 trillion – 68% more than the Big Six combined. But Wal-Mart only netted $122 billion in profits off that, compared with Big Pharma’s $371 billion.

Sure, completely different industry and business model. And yet. What if Big Pharma’s profit margin were just half-way between its 17.7% and Wal-Mart’s 3.5%? What would that mean to us?

Even without decreasing the Drug Lords’ R&D spending a dime, you could take that 7.1% out of their massive advertising spending. Pfizer spends hundreds of millions of dollars on direct-to-consumer advertising for each of its blockbuster drugs. Are those annoying, misleading TV commercials really doing anything to improve the health of Americans?

If Big Pharma’s profit margins had been 10.6% instead of 17.7%, it would’ve saved consumers $150 billion over the last ten years.

That would buy a lot of cherry sodas.

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Obviously, unregulated “free” markets aren’t doing a very good job of providing Americans with good health care outcomes at reasonable costs. In fact, they’re doing the opposite:  Ensuring that as many Americans as possible have as many ailments as possible so that drug companies can sell them as many drugs as possible at the highest prices possible.

The profit motive isn’t working here.

So what to do about all this?

First, ban advertising of prescription drugs. Any “information benefits” are far outweighed by the cost and negative side-effects. No one hears the litanies of problems the drugs cause, only the “Ask your doctor about Prozium(tm) today!”

Second, ban any and all drug company reimbursements to physicians. No more junkets for doctors to “present papers” at pharm-sponsored “conferences” at Hawaii resorts. No more “honoraria” for physician “cooperation” in “research programs”. No more drug sales reps wining and dining every Tom, Dick, and doctor.

Finally, regulate the hell out of Big Pharma. Yes, we already do that, but not enough, and not the right way. Eliminate patent abuse and “pay for delay” schemes. Federally subsidize research into cures, not just treatments. Provide incentives for preventing disease, rather than closing the barn door after the virus has escaped. Enact laws that force drug companies to do what’s best for patients, not stockholders, and then enforce those laws vigorously.

Longer-term, single payer’s the only real answer, of course. If a Medicare-esque government agency were the only buyer of pharmaceutical products, it could dictate the prices we have to pay for the chemicals we need to live. Those prices can provide sufficient margins to fund necessary research and development, but limit the extra money thrown into drug executive bonuses and lobbying efforts to promote counter-productive profit-enhancing laws.

It’s time we stop Big Pharma from taking us to the cleaners every time we go to the drugstore.

It’s the only way we’re going to get what we need.

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7 thoughts on “Prescription Filled: Getting What We Want from Big Pharma

  1. Wonderful post, I would add that it is just not Republicans in Congress, though they do make the most noise, who prevent any changes you suggest; too many of our legislators are happy with the status quo – it works for them, even if it doesn’t for the American people. Just recently, Max Baucus (D-MT) supported the Amgen subsidy in the fiscal cliff deal. This isn’t surprising since from 7/1/06 – 6/30/12, he received $553,432 from big pharma and $524,048 from the health services and HMO industry. If you recall, he was one of the Democratic senators who voted against a public option in the ACA. Blanche Lincoln and Kent Conrad were among other Dem senators who voted the same – both of them are gone now – Conrad did not run for re-election; Lincoln lost – but the influence of money, sadly, is an issue on both sides of the aisle.

    • True, but so far only Republicans have tried to repeal Obamacare.

      “Sen. Tom Harkin (D-Iowa) noted that Friday’s vote is the 36th time that Senate Republicans have tried — and failed — to repeal Obamacare. ”

      Thirty-six times.

      McConnell’s got his sights on it, too:

      “The Kentucky Republican called a handful of top aides into his office and told them, “Figure out how to repeal this through reconciliation. I want to do this.” McConnell ordered a repeal plan ready in the event the GOP took back control of the Senate in November — ironic considering Democrats used the same process more than two years earlier in a successful, last-shot effort to muscle the reforms into law. “

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