Category Archives: Patents

Pharmaceuticals Profitability makes Walmart feel Sick

Compare the revenues and profits of these companies : (Data from Fortune 500 2010)

Medicynical Note: Using profits as a percent of total revenue the pharmaceutical industry may well be the most profitable sector in the Fortune 500. For example, Walmart offers a paltry 3.51% of revenue as profit, Exxon 6.77%, Apple a mere 15.6%. Drug companies and these are not the foreign based big earners garner Johnson and Johnson 19.8%, Pfizer 17.6%, Merck 47.2% and Abbott 19.1%, Lilly 19.8%, Bristol-Meyer Squibb 49.05%.

You gotta feel sorry for the poor drug companies. Guess who pays?

Epogen, Aranesp and Procrit–Tumors grow faster

Epogen and Procrit have been used for about 20 years. They have been shamelessly marketed as an adjuvant to treat fatigue, rather than therapy for cancers. They were promoted as safe and effective.

Now after all these years we learn:

Studies have shown that the drugs, which sell under the trade names Epogen, Aranesp and Procrit, can cause tumors to grow faster and shorten the lives of some cancer patients.

They also:

increase risk of heart failure, blood clots and stroke.

Medicynical note: This is a more profound product liability problem than Toyota’s. Where’s the outrage? Congressional interest?

These drugs accounted for tens of billions of dollars in health care expenses since the early 90’s. The companies aggressively, and I mean aggressively, marketed to consumers as well as physicians. Creating organizations to flog the concept that we needed to address the fatigue in cancer problem. There was a feeling all along that these blood cell stimulators might have an effect on tumor cells as well. Were the studies done early on? No! Who knew what and when?

This is a strong argument for a routine impartial review of drug efficacy rather than leaving it to the undermanned FDA and biased drug companies.

Your Money of Your Life–Herceptin and Breast Cancer

Very strange article in the Atlantic arguing all sides of health/cost debate. Virginia Postrel apparently believes that Heceptin, a costly ($60,000 for a course of treatment) biological drug that is used for breast cancer, saved her life. This despite the fact that at one year after diagnosis it is much too early to declare victory.

She indeed has a bad form of breast cancer, 6 lymph nodes positive. She was told there was a 50% chance of surviving.

The statistics she provides are vague and not well documented in the medical literature. For example she states:

“Adding the biological drug Herceptin, approved by the FDA in 2006 for use in early-stage cancers like mine, could increase my survival odds from a coin flip to 95 percent.”

There is no data to support this contention. Herceptin appears to delay recurrence and probably improves survival but how much is still unclear. 95% is a number that greatly exaggerates the benefit.

The New England Journal article cited by the Atlantic piece reported:

“1694 women assignedto one year of trastuzumab, and 1693 women assigned to observation.We report here the results only of treatment with trastuzumab for one year or observation. At the first planned interim analysis(median follow-up of one year), 347 events (recurrence of breastcancer, contralateral breast cancer, second nonbreast malignantdisease, or death) were observed: 127 events in the trastuzumabgroup and 220 in the observation group. The unadjusted hazardratio for an event in the trastuzumab group, as compared withthe observation group, was 0.54 (95 percent confidence interval,0.43 to 0.67; P<0.0001 by the log-rank test, crossing theinterim analysis boundary), representing an absolute benefitin terms of disease-free survival at two years of 8.4 percentagepoints. Overall survival in the two groups was not significantlydifferent (29 deaths with trastuzumab vs. 37 with observation).”

Not nearly as impressive.

The data Ms Postrel herself provides is that chances of recurrence were 1 in six without Herceptin and 1 in 12 with it after two years. Just to be clear, consider that the 1 in 6 recurrence rate means that 16.6% would recur in the non Herceptin treated group. And 1 in 12 (8.3%) would recur in the treated group.

This is a considerable improvement but an exceptionally costly one. It means that out of 100 people treated 8 or so get a benefit. 84 were not going to recur with or without treatment. And around 8 would recur regardless of the treatment used.

At $60,000/patient for Herceptin, 100 patients treated would cost 6 million dollars to treat. Out of the 100 treated, 8 patients would have an improved outcome, a cost of $750,000/patient who benefits.

This is an unimaginable amount for a health care system to spend and it is no wonder that systems think twice before implementing routine use of Herceptin.

The question is whether any health care system can afford this unless they more carefully select patients.

Medicynical note: Our costly pharmaceutic industry prices drugs for cancer patients an order of magnitude higher than drugs developed for less severe illness. Their development costs are a “trade” secret so one can only guess whether the pricing is justifiable. A medicynical guess is that this is a very profitable cost-plus business and that frugality and efficiency are not in these companyies lexicon. They charge based more on the desperateness of the patient’s situation than by the cost of development or even effectiveness of the drug. For example they spend more on drug promotion and advertising than on research.

These drugs are priced high despite the fact that many of them were financed with public funds. Even very effective drugs that required little clinical testing because of their obvious efficacy (admittedly an unusual occurrence) are priced over $50,000/year.

To give this pricing perspective consider that

  • drug costs are increasing at double the rate of inflation
  • incomes dropped several thousand dollars over the past few years
  • the cost of these single drugs alone exceed the median income of U.S. citizens
  • Medical care has superseded home and auto purchases as the most expensive purchases in a lifetime. Amazing

Ms. Postrel notes that we pay more/capita for drugs than New Zealand but what she doesn’t say is that the U.S. non-system spends twice as much as many industrialized nations on all aspects of care; that the U.S. is the only industrialized nation without some form of national health system; and that our outcomes in cancer are only as good as but not significantly better than many other industrialized nations.

As T.R. Reid noted recently:

“Which, in turn, punctures the most persistent myth of all: that America has “the finest health care” in the world. We don’t. In terms of results, almost all advanced countries have better national health statistics than the United States does. In terms of finance, we force 700,000 Americans into bankruptcy each year because of medical bills. In France, the number of medical bankruptcies is zero. Britain: zero. Japan: zero. Germany: zero.”

For people with cancer it’s truly your money or your life, and sadly most of these treatments in advanced disease do not cure and often don’t even improve patients’ outcomes.

Lastly I certainly hope that Ms. Postrel is cured.

AIDS in Africa–We Have a Problem

It was hoped AIDS in Africa was being managed and controlled. Uganda’s victory lap appears to have been premature. It was the poster child for first ignoring the epidemic and later in managing it but now is in danger of “showing (us) how to lose the fight.”

It appears with the emphasis on treatment, prevention was deemphasized and/or mismanaged–the abstinence approach may well have failed. (not a big surprise) In addition the US is not increasing funding leading to question whether the “full $48 billion authorized by Congress by 2013” will be provided.

The challenge is enormous. Some 33. 4 million people worldwide have HIV, and under new guidelines by the World Health Organization, the number eligible for treatment has grown to 14 million, dwarfing the 4 million in treatment currently. Another 2.7 million people become infected each year. Those who don’t die first will eventually need to take antiretroviral drugs, a mixture of medications that helps the body suppress the disease and must be taken every day for life. The therapy, which doesn’t cure AIDS but allows people with HIV to live normal lives, means the number of people who need drugs will continue to grow.

One irony is that lifesaving medicine makes the prevention message harder to deliver. That much is clear in Uganda, once a leader in preventing the spread of HIV.

But the biggest distraction from prevention was likely the sudden flood of lifesaving drugs beginning in 2005. Fear of HIV dissipated as memories faded about the disease’s ravages. People gradually increased their number of sexual partners again. “Women are now more scared of getting pregnant than getting AIDS,” says researcher Phoebe Kajubi, who conducted a survey in a poor area of Kampala funded by the AIDS Prevention Research Project at Harvard University.

Medicynical Note: There are unintended consequences of introducing technology. The question is where do we go from here? We need a reinvigorated prevention/education program and less expensive medications. This is a medical emergency and patent holders should cooperate and provide generics to these countries.

Health Care Reform–Not nearly perfect, it may not even be good…..

It’s fascinating to watch our flawed legislative system “work.” Buy offs, illegitimate martinets demanding their 15 minutes, deals with money hungry corporate entities, bribery at every level, compromises until it’s hard to recognize what’s really been accomplished and complexity that violates the KISS principle. It’s certainly not pretty, efficient or effective.

Despite all that the resulting bill improves the current dysfunctional non-system and should be passed. This conclusion is more a comment on the current pathetic state of health care in America than an unqualified endorsement.

In a “two party” democracy one would have thought the opposition would have something to offer. But in this case the best they could do was maintain that free emergency room care was the answer to our health care problems. Incredible.

The bill allows insurers to rate on age but appears to stop the practice of varying rates according to illness.

‘‘(a) IN GENERAL.—With respect to the premium rate charged by a health insurance issuer for health insurance coverage offered in the individual or group market—
‘‘(1) such rate shall vary only by— ‘‘(A) family structure; ‘‘(B) community rating area; ‘‘(C) the actuarial value of the benefit; ‘‘(D) age, except that such rate shall not
vary by more than 2 to 1; and
‘‘(2) such rate shall not vary by health status- related factors, gender, class of business, claims ex- perience, or any other factor not described in paragraph (1).

The publicity on the bill claims no one can be denied coverage and that rates will not be increased (presumably after issuance) for a pre existing illness. It does sanction a 3:1 increase based on increasing age, hardly a people friendly policy. Considering that the average cost of insurance for a family is in the range of $10,000, such variation in charges are prohibitive. If this is so it’s hardly a benevolent system or one in which the health and well-being of those covered is the primary objective.

See this in LA Times

Companies in the exchanges would have to offer policies to all customers, regardless of their health status. Insurers could not charge older people more than three times what they charge their youngest customers, an unprecedented national restriction on what is known as age-rating.

It’s also unclear what the bill will do to decrease costs to a more reasonable level; to rein in corporate profits; or whether it will provide objective evaluations of the effectiveness of outrageously expensive therapies and improve efficiency.

Until we are more concerned with patients than corporate profits our health care will be costly and, for the amount spent, mediocre.

Medicynical Note: I’m in awe of a health care system that can charge $20 for a flu vaccine and then add $38 to the bill as a fee for the injection–as I was recently billed. We need to put the health care reform ball in play and make changes in its trajectory as we go.

A new low (i.e. high price) $30,000/month (Folotyn)–Your money or your life, maybe

The maybe in the title is because no one knows whether this new $30,000/month drug (Folotyn) works to prolong life.

And Folotyn has not even been shown to prolong lives — only to shrink tumors. The drug was approved by the Food and Drug Administration in late September as a treatment for peripheral T-cell lymphoma, a rare and usually aggressive blood cancer that strikes an estimated 5,600 Americans each year.

and later in the article:

But Dr. Newcomer said insurers would be obligated to pay for Folotyn because there were no alternatives.

Medicynical note: Even if this new drug worked perfectly in 100% of cases can any health care system afford such pricing? Think of it as sophisticated blackmail rather than health care and you get the idea.

Of course this is simply the most egregious example of drug company gouging. Pricing drugs proportional not to costs or benefit but on how desperate the patient is. A more cynical approach is hard to imagine.

This drug is a poster child for patent reform. We’ve argued that patent length (government sanctioned monopolies) should be dependent to some extent on responsible pricing. If a drug is priced ridiculously the patent should be of shorter duration. The more reasonably priced the advance, the longer the patent–a market solution to price gouging.

Baffle em with your BS–PhARMA

Nice article at TPM on pharmaceutical manufacturers manipulating the market. After all money is what it’s all about. Health care, pshaw!

Congress is thinking of doing something about it. PhARMA’s memorable response:.

  • “Patent settlements between brand-name and generics companies can resolve expensive patent disputes to help foster innovation and improve access to medicines so that patients can live healthier, more productive lives.” Medicynic: Huh? Improve access by charging more?
  • “Law and public policy have always favored settlements, including patent settlements. PhRMA continues to believe that legislation that would impose a blanket ban on certain types of patent settlements or otherwise prevent them could decrease the value of patents and reduce incentives for future innovation of new medicines. This is also unnecessary because the Federal Trade Commission (FTC) and others already have the authority to review and evaluate any patent settlement agreement between a brand name company and a generic company. The courts and enforcement agencies like the FTC are in the best position to review these settlements on a case-by-case basis to ensure that they are not harmful to competition. By imposing a general ban or imposing harsh disincentives, pending legislation would effectively remove the decision-making process from this appropriate venue.”

Medicynical note: So call “ethical” (they used to call themselves this) pharmaceutical manufacturers pay off generic companies, some would say bribe, to not market generics that compete with their branded drug. It’s apparently legal but highly disadvantageous to consumers. A free market, no! Guess who pays?

Drug Pricing and Health Care Reform

Interesting take on drug prices in Health affairs blog– –Donald Light commenting on his article Global Drug Discovery: Europe Is Ahead” noted:

  • “Europe outperformed the United States and also significantly increased its productivity of NMEs (new molecules) per billion invested. Regarding critical new drugs that are first in class, Europe and the United States were about even, but this means that U.S productivity decreased substantially and Europe productivity increased, as shown in Exhibit 4 of the article.”

He also observes:

  • “European countries have also signaled more strongly that companies will be rewarded for significantly better drugs but not for marginally better ones, while U.S. purchasers tend to pay high prices for marginally better drugs as well as good ones. Although the Pharmaceutical Research and Manufacturers of America (PhRMA), the industry trade association, champions high prices, they create an industry fat on easy profits and well-documented opulence.”


  • “The second, bigger point of my article for Congress, employers, and insurers is that regardless how productive pharmaceutical companies are, studies show that 85-89 percent of new drugs provide little or no advantage over existing drugs when measured by clinical improvements.”

Medicynic believes patent reform is one way to deal with the drug cost problem as outlined here and here. We should:

  • “link the length of patents to reasonable pricing. As part of the FDA approval process the proposed price of the new medication would be compared with similar medications already on the market and with the same medication in other countries. The same process that the Canadian patent drug review board uses. If priced a significant amount over the comparator, the patent length would be decreased by some period of time to be determined by the review process–there are many ways such a link could be structured. For unique innovative drugs the cost of development could also be factored into the pricing length of patent equation. Price increases during the duration of the patent would be tied to the rate of inflation. If they exceed that rate the patent length would be proportionally shortened.”

Prevacid Off Patent–Don’t look for bargains from Novartis

Subverting the patent system is big PhARMA’s area of excellence. Watch for new OTC Prevacid (lansoprazole). Novartis, the company with the patented version, will be releasing an OTC (so called “generic”) version shortly. They will be touting their drug in a $200,000,000 yes 200 million dollar ad campaign. Care to guess who pays for the advertising?

Medicynical Note: Branded generics drugs cost more than true generics given the costs of advertising as noted above and the company’s high profit expectation. Novartis has already handsomely profited from a generation long government sanctioned monopoly on the drug. They now want more! Greed, remember, is good.

The challenge is to encourage consumers use of approved non brand name generics in the face of deceptive advertising and hype. It is America’s version of the shell game. Now you see it, your money, and now you don’t–if you fall for their hype)

Top Ten Issues that Go Away with Health Reform

Ten issues that can go away with Health Reform:

1. The approximately 47,000,000 uninsured: Virtually all will have access to coverage with incentives for provider efficiency and the most cost efficient interventions.

2. The profit squeeze on employers who provide health insurance to employees: It’s estimated that U.S. car makers have had expenses of over $1500/car related to health care coverage for employees. A national system, delinked from employer based insurance, allows employers to compete on the same basis as those in other industrialized countries.

3. Our disgraceful system of health care for GI’s and their families: Incorporating the VA and military health care systems is into a National Health Insurance program provides more and better options for care. These would be community based and thus provide more convenient access.

4. The administrative duplication and fraudulent behavior of multiple insurance providers, each with their own administrative overhead and fiduciary responsibility to generate profits: It’s estimated that we spend 30% of our expenditures for health on administration ($1059/capita in U.S. vs $307/capita in Canada). That could easily be halved or more with a national health program.

5. The conflict of interest between insurers, providers and patients.

6. The crisis in emergency rooms: With insurance people will have a place, other than ER’s, to go with non-emergent medical issues Our republican friends cite ER access as health insurance for all but guess who ultimately pays. ER care is the most inefficient expensive care imaginable. Is this the republican way?

7. The dance of the veils billing system: There is no set price for services. Those with leverage, i.e. large insurers, are given large discounts while the individual pays the full amount. If everyone has insurance there will be a consistent negotiated price.

8. Big PHARMA’s free ride: We pay more for medications than any other industrialized country. PHARMA’s mantra that they need profits to encourage creativity is bogus when one considers they spend more on promotion and advertising than research. In a national insurance scheme drug price negotiation will be the rule–as it is in the rest of the industrialized world. (see more below)

9. Bankruptcy due to enormous medical bills

10. Our mediocre health care outcomes: We spend more per capita than anyone, yet our outcomes (longevity, infant mortality etc) are in the middle of the pack. We do better with diagnosed disease but not significantly better than other industrialized countries paying half of what we do. With universal access we can expect this to change.

Medicynical Note: None of this will be automatic and actually having an efficient functioning system of care will require much due diligence and negotiation.

What won’t change is physician unhappiness with reimbursements and the continuing issues with intellectual property rights. No where in the world are physicians as well paid as here. We’ve made the profession entrepreneurial and money driven and in the current non-system reward procedures rather than primary care. It can be anticipated that a national health insurance scheme will want to flatten the disparities and redistribute, somewhat, the fees. One would hope this would guarantee all physicians reasonable reimbursement for their time and expenses. However, meeting the expectations of the profession will be almost impossible–as it is now.

We do need some type of protection for innovators in our system. We should not however delude ourselves that this is a “free market”. Patent protection creates monopoly and in health care that has resulted in a life threatening market distortion that we can no longer afford. We need to somehow require patent holders to price their products responsibly and to be efficient in their product development and marketing. Once again meeting the expectations of the industry and their stockholders will be almost impossible–as it is now.

But in both cases the status quo is not working.