America's Other Drug Problem

How the drug industry distorts medicine and politics. America’s Other Drug Problem By Arnold S. Relman and Marcia Angell he american health care Drug Costs tures is growing among all the purchasers, system cannot live without the and the media is full of critical stories pharmaceutical industry, but he rising costs of drugs are the and commentaries. So far, however, none it may not be able to live with immediate public issue. Expendi- of this has had a noticeable impact on ris- it either, unless the industry T tures on prescription drugs—now ing drug expenditures. The pharmaceuti- Tis greatly reformed. For better and for roughly $170 billion per year—constitute cal industry has been fighting effectively worse, this enormous and hugely prof- a rapidly growing fraction of our $1.4 tril- against all efforts to control prices or to itable enterprise has become a dominating lion health care bill. Greater overall use limit the markets for its expensive new presence in American life. It uses its great of drugs, higher prices for new drugs, brand-name drugs. It channels these wealth and influence to ensure favorable and steady increases in the prices of exist- efforts and most of its public relations and government policies. It has also, with the ing drugs all contribute to an annual infla- lobbying activities through its trade asso- acquiescence of a medical profession ad- tion in drug expenditures of 14 percent ciation, the Pharmaceutical Research and dicted to drug company largesse, assumed (down from a high of 18 percent in 1999). Manufacturers of America (PhRMA). a role in directing medical treatment, clin- Within a few years, this surge in costs will PhRMA’s membership includes virtually ical research, and physician education that probably make drugs the second largest all American manufacturers of brand- is totally inappropriate for a profit-driven component of our national health care name drugs, and many foreign manufac- industry. Like most other for-profit cor- budget, after hospitalization. According to turers as well. With a full-time staff of porations, drug companies are impelled statistics kept by the Center for Medicare 120 in its Washington offices and hun- primarily by the financial aspirations of and Medicaid Services, American expen- dreds of lobbyists working the halls of their investors and executives. This incen- ditures on prescription drugs, expressed federal and state government, and with a tive may serve useful social purposes in the as a percentage of GDP, were virtually core budget of some $60 million and distribution of ordinary goods in most steady between 1960 and 1980 but large additional subsidies from the indus- markets, but prescription drugs are not increased rapidly soon thereafter, and by try for special projects, PhRMA conducts like ordinary goods, and the market for 2000 they had almost tripled. an extensive, virtually nonstop campaign drugs is not like other markets. The mis- Last year, a prescription for one of the on behalf of its clients. This is in addi- conception that drugs and their market twenty top-selling brand-name drugs— tion to the millions spent in Washington are like other goods and markets explains which is usually for a one-month supply— by individual pharmaceutical firms pro- most of the serious problems with the cost on average about $100. Prices for moting their own business objectives. pharmaceutical industry today. prescription drugs are on average much PhRMA adamantly opposes any regu- higher in the United States than any- lation of expenditures for brand-name Arnold S. Relman is professor emeri- where else in the world. Many patients, drugs. It argues that high prices simply tus of medicine and social medicine at particularly the elderly, take several drugs, reflect the very high costs of discovering Harvard Medical School and is writing so drug costs have become a heavy bur- and developing new drugs. Any form of a book on health care reform. Marcia den for them; but the costs of prescription price control, it claims, would eat into the Angell is senior lecturer in social medi- drugs are now a major problem for all who industry’s research and development bud- cine at Harvard Medical School and is must pay for them. That includes govern- get, and thereby choke off the pipeline that writing a book on clinical trials. Both ment and private insurance plans, and brings the public important new drugs. served as editor-in-chief of The New uninsured and partly insured individuals. Generic drugs are different, it points out, England Journal of Medicine. Resistance to escalating drug expendi- because they are merely copies of brand- the new republic : december 16, 2002 : 27 THE NEWTHE REPUBLIC name drugs whose exclusive marketing Third, while there is no doubt that the tory animals to determine how the drug rights have expired, and therefore their best of the new drugs have greatly im- is absorbed, metabolized, and excreted, manufacturers do not have high research proved or saved many lives, this is cer- and to learn about its toxicity. According costs. Moreover, PhRMA contends that tainly not true of all of them; most add to PhRMA’s annual report, approximately high profits are a necessary incentive for little or no medical value. The use of some one-quarter to one-third of all pharma- undertaking the risky and arduous busi- drugs has saved money by reducing hospi- ceutical R&D expenditures are involved ness of discovering innovative drugs. talizations or the need for expensive pro- in finding or acquiring a new drug candi- These drugs are vital to the health of cedures, but whether prescription drugs date and taking it through the pre-clinical Americans, according to the industry, reduce total expenditures for health care screening phase. The industry claims that and it would be disastrously shortsighted in the long run is an imponderable ques- only about one in one thousand screened to lessen the incentives to find them. tion. As expenditures on drugs continue to compounds makes it through the pre- PhRMA also maintains that, whatever the rise, the answer becomes more uncertain, clinical phase to the clinical phase—that expenditures for prescription drugs, we the industry’s insistence to the contrary is, to testing in human subjects. get more than our money’s worth. Accord- notwithstanding. To begin clinical testing, a drug must ing to this argument, the output of the Far from being a “research-based indus- be registered with the Food and Drug industry’s research laboratories not only try,” as it likes to call itself, the pharma- Administration (FDA), which by law must cures disease and extends and improves ceutical industry now devotes most of its ultimately approve all drugs for safety people’s lives, but probably even saves resources to functioning as a vast mar- and effectiveness before they can be sold. money by avoiding hospitalizations and keting and advertising enterprise whose There are four phases of clinical testing. other more expensive kinds of treatment. best products were discovered and often In Phase I, the new drug is given to a few In sum, the industry portrays itself as an partially developed elsewhere—usually at human volunteers to establish safe dosage exemplar of science-based free enterprise, public expense. And this industry is hardly levels and to study its metabolism and primarily dedicated to discovering— a model of free enterprise. It may be free to side effects. If the drug looks promising, through costly and risky research—new decide which drugs to develop and to set it moves into Phase II, which involves treatments for disease. It wants the public its own prices, but its lifeblood is govern- small clinical trials at various doses in to believe the catchy slogan of the phar- ment-granted monopolies—in the form patients with the relevant medical condi- maceutical giant Pfizer: “Life is our life’s of patents and FDA-approved exclusive tion. Finally, if all goes well, Phase III clin- work.” marketing rights. Drug companies appar- ical trials are undertaken. These evaluate ently see no contradiction in manipulat- the safety and the effectiveness of the he rhetoric is stirring, but the ing existing laws and regulations to stave drug in much larger numbers of patients arguments simply do not hold up. off competition from generic and foreign (hundreds or thousands of them), with the T First, research and development manufacturers and lobbying for even expectation of gaining FDA approval if (R&D) constitutes a relatively small part of more governmental protections while at the trials are successful. No more than one the budgets of the large drug companies. the same time using free-market rhetoric in five drug candidates entering clinical Their marketing and advertising expendi- to demand less government involvement testing make it through to FDA approval tures are much greater than their invest- in the pricing and the marketing of drugs. and reach the market, so the chances ment in R&D. Furthermore, they make The industry wants to obscure a basic that a drug candidate, once selected, will more in profits than they spend on R&D. fact: there is not and there cannot be any- ever get to the market are said to be less In fact, their profits are consistently much thing like a free market in prescription than one in five thousand. higher than those of any other American drugs. The pharmaceutical business is, for The total time from the beginning of industry. Prices (which bear little relation many reasons, critically dependent on pre-clinical testing of a candidate drug to the costs of developing and manufactur- government help. That is why it spends so to FDA approval ranges from about six ing a drug) could be lowered substantially much on lobbying.

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