Big Pharma is revving up its propaganda machine to ward off challenges to high drug prices. Talk about false advertising.
Two issues are pressing in on the drug makers. First, legislation allowing Americans to buy medicine from abroad is gaining ground with members of both parties in Congress. Second, Medicare beneficiaries and their families are pushing the government to use its negotiating power to get them the best deal possible on prescription drug prices. Both issues are an attempt to turn the Bush administration’s inadequate senior drug benefit into something more than a down payment on future price hikes when it goes into effect in 2006.
To counter both threats, the industry and its apologists have launched a national advertising campaign and released some new studies that trot out the standard claim: Pharmaceutical research and development will dry up if anything is done to reduce drug companies’ corporate revenue, which has been rising by better than 10 percent in recent years. By suggesting it is the sole source of medical miracles, the industry asserts that any reduction in price through cheaper imports or Medicare negotiating clout will slow the delivery of cures for Alzheimer’s, cancer, heart disease and diabetes. In their dystopian future, once fertile R&D research parks will turn into high-tech ghost towns.
The latest study to peddle these claims was unveiled earlier this month in the battleground state of Michigan. According to a University of Michigan study funded by Pfizer Inc=, the Senate bill allowing imported medicines will cut industry support for R&D by 75 percent and cost Michigan every single one of its biotechnology and pharmaceutical industry R&D jobs as the shrunken sector consolidates on the coasts. These outrageous claims generated uncritical TV coverage and headlines across the state.
In order to reach this conclusion, the study assumed that all drug prices would fall immediately to generic drug price levels as a result of unlimited importation. Oh really? Is it possible for all Americans to get all their drugs from abroad? One reason some analysts think the importation issue is a red herring is because the distribution channels simply aren’t there to allow massive imports. Under this view, import legalization will only benefit a handful of drug consumers who live in border states or can tap into the limited supplies available over the Internet. Pharmaceutical companies like Pfizer are working hard to make this outcome a reality by threatening to cut off supplies of their drugs to Canadian pharmacies that export medicines to U.S. patients.
But even if millions of Americans could get drugs from abroad, they wouldn’t be getting ultra-low prices. Canadians, Europeans and other potential exporters are not paying generic prices for drugs. They are paying discounted prices negotiated by their national or provincial health authorities – something specifically prohibited in last year’s Medicare prescription drug bill. If the U.S. joined the party, a bill allowing drug imports would be unnecessary.
But what is most disturbing about these industry-funded pseudo-studies is the assumption that R&D will take the biggest hit if the U.S. government takes steps to hold down drug prices.
R&D is the lifeblood of any high technology industry. It currently takes about 20 cents of every drug industry dollar. Compare that to marketing and profits, which each take over 30 cents, while overhead and manufacturing split the rest. Isn’t it possible that this supposedly forward-looking industry will cut back on its television commercials, its 70,000 salespersons or physician junkets before whacking away at R&D?
Indeed, a more intelligent response to reduced revenue would be for industry R&D to become more focused on legitimate medical advances. Currently, the industry wastes more than half of its $35 billion R&D budget on drugs that add nothing to physicians’ armamentarium for fighting disease. They develop drugs that mimic others already on the market; they develop slightly altered versions of drugs that are coming off patent; they enroll physicians and their patients in clinical trials for already approved drugs, which are thinly veiled marketing stunts designed to get more physicians using their drugs. If Medicare were allowed to negotiate drug prices, these so-called me-too drugs would be a likely starting point. Why should seniors or taxpayers pay top dollar for drugs that are therapeutically no different from generic drugs or cheaper drugs in the same or another class that accomplish the same thing?
Ironically, the Michigan study, although funded by Pfizer, was released by the state’s biotechnology industry trade group. As Big Pharma’s labs have declined as a source of innovation, the companies have turned to the biotech sector for promising new drug candidates. Virtually the entire sector is the product of the tens of billions of dollars that taxpayers have poured into medical research over the past 30 years. Most biotechnology products are invented by government-funded researchers who either start their own companies or transfer their therapeutics to start-ups that use venture capital funding to carry them through the early stages of development. When one of these firms comes up with a potential breakthrough, it is usually licensed to a larger firm for final clinical trials.
Efforts to limit drug expenditures won’t affect that process. If these start-ups come up with something new and truly effective against diseases for which we currently have no cures, they will be able to command high prices all over the world. Precisely because biotechnology products have that potential, venture capitalists will stay involved. Big Pharma will continue knocking on innovators’ doors.
Alas, breakthroughs in medicine are rare. But as long as biotechnology firms are pursuing legitimate breakthroughs, neither imports nor Medicare price negotiations pose a threat to their continued development.
Merrill Goozner, author of “The $800 Million Pill: The Truth Behind the Cost of New Drugs,” directs the Integrity in Science Project at the Center for Science in the Public Interest.
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