Medicynic

We’ve talked in the past week about the quality and costs of care in the United States. Our patent (government sanctioned monopoly) system is part of the problem.

Big PHARMA maintains that it is essential to have exclusive patents now up to 20-25 years in length to assure profits that will allow continued research and development of new drugs. As a result of Pharma’s effective congressional lobby, pharmaceuticals are the only uncontrolled, i.e. not open to negotiation and price setting, of the health care expense areas. Hospitalization, doctor’s fees, laboratory costs are all negotiable and discounted by the various health care payers. As a result, the rate of increase of spending on pharmaceuticals far exceeds that of other areas–13% a year since 1980. More on health care costs here and here.

Patent law has been carefully crafted to maximize profits of the drug industry. During the patent protected period drug companies can and do charge whatever they wish for a product. As a result, over the past 30 years drug prices have risen exponentially to unimagined levels and the industry has enjoyed record profitability “one example is that in 2002, the combined profits for the ten drug companies in the Fortune 500 ($35.9 billion) were more than the profits for all the other 490 businesses put together ($33.7 billion).”

When I started my medical oncology practice in the 70′s the cost of anticancer drugs averaged under $100/month. By the 90′s the pricing of new drugs broached the $1000/month, and by 2005 we were in the area of $10,000/month for some new drugs. For more look here.

It’s an unfortunate fact that in cancer therapy pharmaceutical costs have become what is essentially a death tax on the desperately ill. Your give your money or your life is on the line. Consider the number of people each year facing a life threatening illness. Consider also that the cost of many of these new drugs/year exceeds the average and median incomes in the U.S.; exceeds the cost of new automobiles; and over the lifetime of a patient the cost of a single medication can exceed the cost of the home of most americans. (see previous post on imitinib) Instead of a benevolent health care system in which access to care and restoration of health are the goals, we have a system whose main purpose is to maintain the profits of the health care industrial complex. The result is wealth redistribution rather than a fair price.

Pricing of pharmaceuticals is not sustainable and is the equivalent of a market bubble that cries out for correction.

Medicynic:  This post is reprinted from 2006.  The Ryan plan is the same idea.  It formalizes a tax on whatever wealth you may have  from those with limited resources to the one of the wealthiest industries.  It’s rationing of care by wealth–the new American way? 

That we are suckers and fools when it comes to pricing of drugs is evident from the fact that we pay much more for drugs than any other place in the world.  It make no difference  if the drug was researched and developed here or overseas, we pay more, much more.

Check our this from Bloomberg:

In the years since 2007:

The average quarterly earnings growth for drugmakers was 10 percent since the first quarter of 2007.

But there are problems with generics:

Pfizer, Merck & Co. and Bristol Myers Squibb Co. are eliminating jobs, cutting costs and shedding business units to prepare for patent expirations. In 2011, drugmakers face generic rivals to products with $34 billion in yearly sales, a figure 34 percent higher than last year. Sales at risk from patent losses will swell to $147 billion by 2015,

But, price increases have the potential to ease the pain:

Most U.S. revenue growth in the pharmaceutical industry will come from price increases after some drug costs were raised more than 10 percent, Bernstein’s Anderson wrote in an April 12 note. Pricing outside the U.S. probably declined after cost reductions were implemented last year in at least 10 European countries, he said. (Emphasis by medicynic)

Medicynical Note:  What’s impressive is the fact that health reform is already having some effect on pricing and that the industry expects the effect of the reform to be lower prices, and lower profits.  It’s about time.