Bernie Madoff is a choir boy next to these guys

[Scooter]

Fron the L.A. Times:

How Big Pharma distorts the costs of developing new drugs

A new study systematically dismantles the industry's claim that the research and development cost of bringing a new drug to market is $1.3 billion.

April 03, 2011 | Michael Hiltzik

Every time I come across a big-number statistic about the size or significance of some industrial activity, my nose wrinkles.

You know the figures I mean: The porn business takes in $10 billion to $14 billion a year. California's marijuana harvest is worth $14 billion a year, making it the state's biggest cash crop. NCAA March Madness costs employers $1.8 billion in lost productivity.

Figures like these have several things in common: They're eye-catchingly big, they're unverifiable by empirical means and they reek of fakery.

The statistic that may be most hazardous to your health is one pegging the research and development cost of bringing a new drug to market at $1.3 billion. Its purveyor is the Pharmaceutical Research and Manufacturers of America (PhRMA), which exploits the number's shock value to secure its lobbying agenda on Capitol Hill.

Tax breaks for drugs for rare diseases? Faster drug approvals by federal regulators? Stronger protection against competition from generics? All these goals have been achieved, based at least partially on the claim that drug makers require huge profits to fund R&D.

The supposedly high cost of research and development is also cited to argue against the reimportation of cheap drugs from Canada and direct negotiation over drug prices by Medicare.

These arguments are backed by truckloads of cash: Big Pharma has been the biggest spender on Washington lobbying of any industry, laying out $2.1 billion over the last dozen years to get its way, according to congressional figures.

The industry's R&D claim has been questioned for years, but seldom as thoroughly as in a recently published paperthat calculates the true mean R&D cost as less than $60 million per drug in 2000 dollars ($76 million today).

The study's authors, Donald W. Light of the University of Medicine and Dentistry of New Jersey and Rebecca Warburton of the University of Victoria in Canada, systematically dismantle what they call "the wholly artificial 'fact' of average R&D costs per new drug" by removing inflated multipliers and calculating the tax breaks drug companies get for their R&D, among many other steps.

And they underscore that the industry's estimate always has been based on raw data the drug companies keep confidential. That's a major issue because the industry has an obvious incentive to maximize its R&D claims; this way, they can't be double-checked.

Stop giving in to the blackmail, and bring in price controls. What is big pharma going to do, give up on producing new drugs for world's largest market for its products?

[dgs49]

It might be useful, first of all, if people writing articles like this understood the difference between markup and operating profit.

Accounting for the cost of a new drug (in the context of a company that may be developing hundreds of possible new products, only a few of which may make it to market) is not something for dillettantes.

If you think the Pharma companies have a license to print money, then invest in them. Or establish your own.

One could very strongly make an argument that Big Pharma is the single most valuable private sector contributor to our society, since they have been largely responsible for increasing the lifespans of Americans (and Europeans, if you want to know the truth) dramatically over the past 50 years - and improving the quality of life of our Old Farts. What can MS or Intel or GM say to top that?

[Scooter]

Did you even bother to read the study debunking the ridiculously inflated number pharma is pushing as its alleged R&D cost per drug?

Didn't think so.

[Gob]

The drug retails in the United States for US$1,850 for a one-month supply. As of 2007, annual cost in India is US$1,344, and US$528 in Africa. It was approved by the U.S. FDA on July 12, 2006. In the UK, the drug cost to the NHS is £620 ($1016 US) per month.

Someone's getting ripped off....

[dgs49]

I have read, over the years, many articles that detail the apparent profiteering of Pharma, at the expense of Americans, the taxpayers, the medical insurers, and so on.

They are an easy target. They are in many cases selling nothing more than reconstituted dirt (minerals and chemicals) for astronomical prices. And yet, it is the same for EVERY enterprise that produces any high-tech product or service. They are all striving for either patent or trade secret advantages that permit them to sell their "stuff" for monopolistic prices. OTOH, they spend a lot of money going down blind alleys; how do you account for the development cost of drugs that don't work, or cannot adequately be proven safe, or turn out not to be any better than the existing products in the marketplace? How do you account for the cost of American product liablity law, and the unpredictability of American juries, who very well might find a company liable for diseases and deaths that have nothing to do with their product (e.g., silicone breast implants). This largely explains the differences in price between the U.S. and other countries where the same products are distributed. YOu are not going to have class action suits in any other country that rival the costs of a successful class action in the U.S., and again there is no mechanism in the American tort system to keep "junk science" from being presented, successfully, to juries. Market conditions also play a major role.

The profitability of Big Pharma is in line with other major industries taking comparable risks. It is EASY to point out a particular product and say that it is grotesquely overpriced. Maybe so, but as I wrote above, you have to look at the big picture.

I have personally worked for many companies over the years that have exploited patents, trade secrets, and just plain hogwash to obtain absurd pricing and margins in the marketplace. I worked for a company that sold railroad signals once, and we "required" our customers to touch up their wayside products with only our-company branded touch-up paint, which we sold for $40/pint. We bought it in 55 gallon drums for $200. Just a silly, inconsequential example, but illustrative of the phenomenon.

[Scooter]

I have read, over the years, many articles that detail the apparent profiteering of Pharma, at the expense of Americans, the taxpayers, the medical insurers, and so on.

So the answer to my question is no.

Didn't think so.

This largely explains the differences in price between the U.S. and other countries where the same products are distributed.

The largest single component of the price difference between U.S. and other countries is the cost of marketing, which most other countries restrict and to which the U.S. gives virtually free rein, such that it far outstrips the cost of R&D.

[Gob]

This largely explains the differences in price between the U.S. and other countries where the same products are distributed.

The largest single component of the price difference between U.S. and other countries is the cost of marketing, which most other countries restrict and to which the U.S. gives virtually free rein, such that it far outstrips the cost of R&D.

It must be a major factor. In the UK and Aus, the only medications you see advertised are over the counter cold and flu, pain killers, and other generic medications.

[rubato]

There are only two countries in the first world which allow the direct advertisement of prescription drugs to the general public, who are wholly incompetent to make a decision about using them, New Zealand and the United States.

One of the stupidest pieces of legislation ever passed by whores for pharma.

yrs,
rubato

[dgs49]

SHOCKING NEWS (to rubato): Pharmaceutical companies ADVERTISE THEIR PRODUCTS! HOPING TO GET PEOPLE TO ASK THEIR DOCTORS ABOUT THEM!!!!! SO THEY MIGHT EVEN BE PRESCRIBED!!!!!

WHAT A FUCKING OUTRAGE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

[rubato]

In doing so, they prey on the suggestibility of the most stupid. There is a reason that all of the 18 countries who pay less than we do for far better care do not allow it.



yrs,
rubato

[Scooter]

SHOCKING NEWS (to rubato): Pharmaceutical companies ADVERTISE THEIR PRODUCTS! HOPING TO GET PEOPLE TO ASK THEIR DOCTORS ABOUT THEM!!!!! SO THEY MIGHT EVEN BE PRESCRIBED!!!!!

WHAT A FUCKING OUTRAGE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Strange then, isn't it, that 30 years ago it was the pharmaceutical industry itself that was opposed to direct-to-consumer (DTC) advertising, arguing from a position akin to rubato's. When the FDA asked the pharmaceutical industry for its opinion on DTC advertising, here are the sorts of responses it received:

In a typical letter, Thomas Collins, chairman of SmithKine French, warned that "advertising would have the objective of driving patients into doctors' offices seeking prescriptions. We believe that the chances for damaging doctor-patient relations and for encouraging costly competitive battels are real, while the likelihood that meaningful patient education will occur is small." The vice president and general counsel of American Home Products, Charles Hagan, put a finer point on it: "DTC advertising would make [patients] extraordinarily susceptible to product promises." The chief of Eli Lilly: "The potential pressures of public advertising of prescription drugs on the scientific decisions of the physician are both unwise and inappropriate." The head of Johnson and Johnson: "[DTC] could adversely affect the traditional patient-physician relationship. Physicians might find themselves having to defend their choice of what they consider an appropriate medication simply because the chosen drug is not heavily advertised and not familiar to the consumer... Conversely, a patient may actually demand a particular medication when it might not be the best choice based on the physician's diagnosis or practice."

Greg Critser, Generation Rx: How Prescription Drugs Are Altering American Lives, Minds, and Bodies (New York: Houghton Mifflin Company, 2005), pp. 35-36.

If the pharmaceutical industry was opposed to DTC advertising of prescription drugs, who, then, was the force behind it's legalization?

Ralph Nader.

In a case brought by a group called the Virginia Citizens Consumer Council against the Virginia Board of Pharmacy, the Supreme Court ruled in a 7-1 decision written by Justice Blackmun that DTC advertising of prescription drugs was protected speech. The lone dissent in the case came from Justice Rehnquist:

As far as he was concerned, the First Amendment was an instrument to protect public decision making in a democracy - period. "I had understood this view to relate to...political, social, and other public issues, rather than the decision of a particular individual as to whether to purchase one or another kind of shampoo," Rehnquist wrote. Worse, he argued, where would industry take this new freedom? Might we next see advertisements that said things like "Pain getting you down? Insist that your physician prescribe Demerol," the future chief justice jabbed. "You pay a little more than for aspirin, but you get a lot more relief." He went on, clearly having some fun: "Don't spend another sleepless night. Ask your doctor about Seconal without delay." No, no, no, said a now very serious Rehnquist. "The societal interest against the promotion of drug use for every ill, real or imaginary, seems to me extremely strong."

Critser, p. 40.

It is no small irony that conservatives now champion an advertising regime instigated by that most irritating (to them) of liberal gadflies, and which was (at the time, at least) opposed most vociferously by one of the most conservative justices in history.

[Sue U]

But then they found out how many more dumptrucks full of money they could make even with the initial costs of DTC advertising. The costs of advertising wars became insignificant when compared to the profits of blockbuster drugs -- even drugs of marginal utility and dubious safety (see, e.g. Vioxx and other cox-II inhibitors).

[Scooter]

Indeed. Concern for the consumer was subtefuge. They were horrified at being trapped in a prisoner's dilemma of huge spending on DTC advertising for what they believed would be insufficient returns. They never counted on how well physicians have been pressured into playing along by prescribing the newest, shiniest and most expensive therapies at the behest of their patients.

[Big RR]

Scooter--do you have any links with a breakdown of marketing costs; I have always thought that the direct marketing to physicians (even after some of the reform on boondoggles and gifts) is the largest part of the marketing costs. This includes sending paid (oh, sorry, independent) scientists to present papers at meetings, to the hiring of opinion leaders as "consultants" to do the same, to direct bonuses for physicians prescribing the drugs (there are many ways to shield this from illegality). Certainly patients will push for drugs they are familiar with from general advertising, but the physicians are also pressured/tempted/convinced by the sales reps (generally very attractive young women) who visit again and again. Those individual visits and followups are big costs compared to broadcast and mainstream print ads.

[Scooter]

I don't have a breakdown of the costs, however it is something I have heard reported in many quarters, including by bureaucrats at Health Canada who are continually analyzing the issue (because pharma continues to push the envelope in the way it markets its products up here). I don't know which component (physician or consumer) is greater, only that U.S. marketing costs far outstrip those in other countries.

If you think about the cost of creating TV and print ads and running them in major markets, it adds up pretty quickly.

[dgs49]

What has changed in the past thirty years is the types of drugs that are being produced.

These are mainly drugs that are not intended to cure any sickness, but to make one's daily life better in one way or another. Drugs to help asthma patients breathe easier, better anti-depressant drugs, drugs to improve your sex life. They didn't exist until fairly recently.

It is entirely appropriate that (a) they be advertised to the general public (what good would advertising them in medical publications do?), and (b) they be controlled substances, only available by a doctor's prescription.

I am not a huge supporter of pharmaceutical advertising. I find it more of an irritant than anything else. But it does come clearly under the heading of "free speech," and thus should not be subject to Congressional prevention, and I find no fault with the companies trying to drum up sales for their products - like companies in every other industry do.

The thrust of this thread is that pharmaceutical companies are doing things that they ought to be prevented from doing, which is nonsense, sprouting from economic ignorance and naivete.

[Scooter]

I guess the rest of the developed world is economically ignorant and naive, then, because their pharmaceutical industries are thriving without the wild west mentality that pervades the U.S. market.

One of the reasons U.S. health care costs so much more than anywhere else, btw.

Last time I checked, asthma and depression were illnesses, and doctors are fully capable of diagnosing and selecting the best treatment for them without a barrage of billboard and TV ads prompting consumers on what symptoms to exhibit (or what side effects of existing treatments they should purport to suffer from) so that they can be prescribed the newest, most expensive entrants into the market.

Strange how congressional action to rein in pharma's excesses is verboten, but congressional action to bloat pharma's profits by prohibiting its biggest customers from negotiating the price of their purchases is hunky dorey.

[Gob]

It's worth noting as well that no matter how efficiently a medicine is marketed it has little or no bearing on the prognosis for a patient.

If a patient badgers his or her doctor into prescribing say Luvox over Xanax as he's heard it "makes more serotonin available to stimulate other nerves in the brain". (Though they probably don't understand this beyond the simple "it's cheaper and sound good to me", what is gained? Two weeks into taking it the client may experience adverse effects worse than the illness itself.

Surely it's the role of the GP to determine the most likely efficacious meds?

[Gob]

A very funny read; American Drug Culture" by Bill Bryson/

[oldr_n_wsr]

Pharmaceutical companies ADVERTISE THEIR PRODUCTS! HOPING TO GET PEOPLE TO ASK THEIR DOCTORS ABOUT THEM!!!!! SO THEY MIGHT EVEN BE PRESCRIBED!!!!!

I would still be smoking if I hadn't heard of Chantix via advertising.