The Drug Profiteers
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Faced with exorbitant prescription drug prices and contemptible marketing tactics, the American public seems to be swinging back against major drug companies. Marcia Angell, for two decades the Editor-in-Chief of The New England Journal of Medicine, is contributing boldly to that fight with a front row expose of Big Pharmas excesses and neglects. In a disturbing new book, Angell, now a Senior Lecturer in Social Medicine at Harvard Medical School, spotlights the dubious tactics that garnered big drug companies an estimated $400 billion in worldwide sales in 2002.
Once tapped by Time magazine as one of Americas 25 most influential people, Angell uses her penetrating new work, The Truth About the Drug Companies: How They Deceive Us and What To Do About It , to propose reforms that could bring the megacolossal industry under control. Angells book will be published by Random House later this month. She talked with AlterNet about the excesses of the drug companies, the failure of the government to rein them in and about what it will take to turn things around.
Drug companies claim that high drug prices are needed to offset research and development (R&D) costs. You point out that this isn't particularly true in part because of the industry's reliance on so-called "me too" drugs. Can you explain?
A "me too" drug is a drug that's a minor variation of a drug already on the market. Most of what big drug companies turn out are "me too" drugs. There are, for example, six statin drugs on the market. These are cholesterol-lowering drugs of the Lipitor type. Lipitor wasn't the first statin. The first statin to come on the market was called Mevacor. It had such a large potential market that other companies realized that rejiggering the molecule a bit would allow them to have a share of this very large market. Lipitor is now the best-selling drug in the world. But it is a "me too" drug.
Likewise, your analysis of SEC documents revealed that R&D for many companies is a rather mysterious budget category that could include what some would consider to be marketing programs. How do R&D expenditures generally rank when compared to expenditures for marketing and administration costs? And to profits?
The pharmaceutical industry talks a lot about how much R&D costs. But the R&D is consistently less than big companies make in profits and far less than what they spend on something they usually call "marketing and administration." Companies vary a little in the name for this but it's a big category that includes all kinds of promotional activities plus administrative costs like executive salaries, legal fees and so forth. This is by far the largest part of their budgets, usually somewhere from two to two-and-a-half times what they spend on R&D.
Medicare was enacted in 1965 with no provision for outpatient prescription drug benefits for seniors. You point out that drugs were cheaper, people took fewer drugs and seniors could afford to buy what they needed. Today, because many seniors don't have supplemental insurance or collective bargaining power, prices are highest for the people who most need drugs. Will the recent Medicare reforms help?
The Medicare drug benefit that was just passed in late 2003 will do very little to help senior citizens because it specifically prohibits Medicare from bargaining with drug companies for lower prices. All large private insurers already do this. So do some government programs such as the Veterans Affairs (VA) system. Medicare would be the biggest purchaser of all. It would have enormous bargaining power. The pharmaceutical industry did not want that to happen and they made sure it would be explicitly prohibited. And it was. What we are left with is a drug benefit that is inadequate to begin with. It has this huge donut hole for example. As prices increase at the rate they are now, and they'll probably increase at least that fast, [the benefit] will quickly be washed out by rising prices.
Are there other potential reforms waiting in the wings?
There are some. The most important reform in my view would be for the Food and Drug Administration (FDA) to require that new drugs be tested – not against placebos, but against older treatments already on the market for the same condition. If that were required, most new drugs, which are "me too" drugs, wouldn't be approved. That's because there's no reason to think they are better. By default, that would force the industry to put some real R&D efforts into genuinely important novel drugs. They wouldn't get away with this gigantic "me-too" industry.
That would be important but it wouldn't directly deal with costs, although I think it would have ripple effects that might. As I said, the biggest part of Big Pharma's budget is marketing and administration. They have to spend a lot to market "me too" drugs because there is no particular reason to think that one is better than the other at comparable doses. So it takes a heap of marketing to convince doctors and patients to buy one statin instead of another statin or one SSRI antidepressant instead of another. If it were a genuinely important new drug, if it were a cure for cancer, you wouldn't have to promote it incessantly. That would save a lot of money right there because marketing budgets could shrink. That would take an act of Congress and my understanding is that similar bills have been introduced to look at how new drugs compare with older ones. My proposal is a little different in that I would see it as something the FDA would require as a condition for approval. Others, I think Senator Clinton for example, have suggested the National Institutes of Health (NIH) might want to study "me too" drugs already on the market. But, to me, that's too late.
You call for breaking the dependence the medical profession has on drug companies. As a reporter, I constantly confront the trend of drug companies paying doctors to evaluate their products. Those evaluations, or at least the ones that are pleasing to industry, are then fed to us as though they were the latest, greatest scientific finding. How much does this erode public confidence and what could be done to stop it?
It ought to erode public confidence. It's not so much the fact that the drug companies are sponsoring clinical trials as it is the terms of sponsorship. Drug companies have always sponsored trials of their own drugs. But they used to give a grant to an academic medical center and the center would get a faculty investigator to do the trial. The company would stand back and wait for the results. Now they don't do that. They are intimately involved in all aspects of the trial. They design the trial. They analyze the data. They write the paper. They even decide whether the paper will be published. So now they do have real control over the evaluation of their own products. That's a terrible conflict of interest.
Also many of the researchers have other financial ties with the same companies whose drugs they are studying. They sometimes have equity interest in the company. They get consulting fees. They are on speaker's bureaus and so forth. So they are biased from the get-go. I think the public ought to be very concerned about this.
Recently we have heard calls for a registry of clinical trials. This was in the wake of reports that GlaxoSmithKline had suppressed negative information. I don't think this is unique to GlaxoSmithKline at all because, as you say, the companies are not very much interested in publicizing their negative studies. Even though they are supposed to provide the FDA with all trials when they apply for approval, they don't have to publish all of them and the FDA is prohibited from making them public. So negative trials are suppressed and I think the literature is very biased as result of that suppression.
A registry would be a very good thing to have but it has to be done the right way. It should be one central, public registry, probably administered by the NIH. All trials ought to be in that registry, not just the ones the companies find meaningful. I would make it a condition of enrolling human subjects in research. As soon as a drug company enrolls human subjects, it no longer is dealing with a purely private matter. It is using people who rightly expect they are contributing to scientific knowledge and have a right to expect that the work will be publicly accountable. The registry, then, would contain all work on human subjects from the inception of that piece of research. Before the study even begins, the design of the trial should be placed in the register. This should include the number of human subjects, whether they are old or young, the drug that will be tested, whether it will be compared to a placebo or an older drug, how long the study is going to last, what the endpoints will be, everything before the trial starts. Then when the trial is finished they would add the salient results to this registry.
It is terribly important that it be done this way. If you wait until the trial is finished, you permit companies to change the goalposts as the trial goes along. There was a widely publicized case of a one-year study of Celebrex. The company published the first six months as though it were the complete study. That's because the drug looked good in the first six months but not so good in the second six months. In the registry, they would have entered the design of the trial at inception. It would say, "This is a one-year study." Then they wouldn't be able to shift the goalposts.
Recently, big drug companies have been the target of lawsuits alleging all kinds of wrongdoing including fraud, burying research evidence, fraudulent advertising and overcharging Medicare and Medicaid. What are the most important kinds of cases, those that can make the biggest dents?
I'm not sure these cases can make any dents in the dubious practices. Even though the fines have been huge, they are nothing compared with what the dubious practices have garnered them in revenue. They are a cost of doing business. Most of the big drug companies are under investigation now for one thing or another. Some of the pharmacy benefits management companies are also under investigation. It is a constant thing, involving charges of Medicare or Medicaid fraud, of advertising for off-label uses, of giving doctors kickbacks. But I'm not sure it has any real effect.
You quote an industry spokesman saying that the pharmaceutical industry is facing "the perfect storm." Health insurers, for instance, are developing formularies. Many profitable patents are nearing their end. And consumers are buying cheaper drugs from Canada over the Internet. What is the most intractable problem for the pharmaceutical industry? Is it the fact that very few blockbuster drugs are in the development pipeline?
There are two problems. Number one, the pipeline is drying up. Big drug companies are in serious trouble. They are trolling small biotech companies all over world. They are hovering around academic medical centers hoping someone will come up with something they can license and develop. Number two, there is nobody left to pay the prices. The prices keep rising but individuals can't afford it. The federal government is running a huge deficit now, so that's not going to be much help. The states are also hurting. Medicaid is one of the biggest expenditures for state governments and a big part of that expenditure is the drug costs. So there's nobody left who can keep paying these prices.
One reform you suggest is to require pharmaceutical companies to open their books to the public. Why shouldn't the pharmaceutical industry be able to protect it's proprietary information just as other industries do?
This is a well-protected industry that depends utterly on government favors. It lives to a large extent off taxpayer-funded research done in universities and funded mainly by the NIH. It lives off government-granted monopoly rights in the form of patents and FDA-conferred exclusively. It also gets huge tax breaks, both tax deductions and tax credits. So although it talks the rhetoric of the free market, it is on welfare big time. I think this industry owes the public something for being treated so very well.
You have said that an "aroused and determined" public can provide the political power needed to counterbalance the influence of drug companies. What are examples of groups that are helping to organize public dissatisfaction?
I think the AARP is one. Their members were very unhappy when the AARP leadership supported the Medicare drug benefit without any provision for bargaining for good prices. Many members quit. The leadership has had a change of heart and now they want to see this bill changed. Senior citizens are among the most sophisticated people on this issue because they pay for drugs out of pocket. Also, state governments are getting fed up. The attorneys general are among those who are legally challenging this industry.
I think there is a general mood that holds, "They are getting away with price gouging and they shouldn't be allowed to do that anymore." But many people still respond to the blackmail that if anything is done to contain prices, it will somehow cut into R&D and innovation. That is one reason I wrote the book, to show that is not so.
Kelly Hearn is a correspondent for The Christian Science Monitor and a former science and technology writer for UPI. Based in Washington DC and Telluride, CO, he is currently investigating the political influence of major pharmaceutical companies.