Thursday, May 8, 2014

America the Swindled - How Big PhrMa Games Us All

As is generally well known, Americans pay the highest prescription drug prices in the world. Drugs to treat diabetes cost 3-5 times more than just about anyplace else, including Europe, ditto for statins (such as Lipitor) and cancer drugs. According to one Big PhrMa honcho, we Americans have to pick up the slack in drug costs given how the rest of the world remains firmly subsidized by their own governments. Translation: their governments actually care enough about them to control drug costs and not let the people get scalped and swindled.

But why should this state of affairs exist? The reason, we are told, is that it costs mucho money to bring decent drugs to the marketplace, the costs of research and all. Hence, unless these costs are borne by someone, some group the research won't get done and the drugs won't manifest - so millions will then have to do without, including the ones getting 'freebies' off us Yanks.

Is this really true, or is it mostly horse manure and PR?

Consider just eleven of the 12 new cancer drugs approved in 2012 which were priced above $100,000 annually. Further, a 20-30 percent copayment can make them unaffordable even to well-insured patients (i.e. those with at least 'Cadillac' health care plans).

But why these outrageous costs? On the one hand the companies claim the high prices reflect high research costs, but on the other hand they insist the high prices reflect the precious "added benefits" of controlling and curing cancer. In other words, the costs aren't really based on current expenses for research but rather future projections of effectiveness such that future health costs don't come to pass. In other words, the current costs of these drugs are really predicated on imagined savings once cancer is cured or controlled.

Is it just me or does this not sound an awful lot like the Neoliberal ploy  (in the “Postal Pension Reform Act of 2006”) requiring prepayment of pensions for 75 years by the U.S. Post Office - which effectively incepted its bankruptcy?  Of course, in this instance we have the future projections of Post Office obligations engendering  monstrous debt - suggesting a need for privatization - which Neoliberals get boners about. But when you think about it carefully the future "benefits" toted up to costs by Big PhrMA also translate to debt - either by the gov't or by the people who have no choice except to purchase these drugs (unless they prefer to die).

A recent piece in the AARP Bulletin (May, , p. 22) provides further insight into the PhrMA gaming on this. Or should we call it Neoliberal faux market gamesmanship?:

"The argument that companies are offering improved drugs for these higher prices is not true. Oncologists find that most new cancer drugs provide few clinical advantages over existing ones. Only one of 12 new cancer drugs approved in 2012 helps patients survive more than a few months longer."

In other words, it's all about milking massive extra profits out of "new" drugs that provide little added benefit. The drug companies, we can conclude, are only in it for profits - and could care less about substantive new research that truly advances cancer treatments.

The AARP piece goes on to puncture more BS:

"The industry argument that high prices reflect huge research and development costs also doesn't hold up - at least given the few facts companies make public .  Indeed, the actual dollars that companies have put into research from 1995 to 2010 have generated six times more revenue than the costs of the research - a sign that they are charging too much for little patient benefit."

Again, we're being led by the proverbial nose to believe a pile of codswallop. And now, if these companies are lying through their teeth on the benefits of the cancer drugs, what about statins and other high priced drugs? It makes sense their benefits are oversold as well (especially given the fact that nearly as many people with low cholesterol have myocardial infarctions as those with high cholesterol.) Not told you is that cholesterol isn't the real bugbear here. Its measurement in a blood test - which often indicated statins to the medical druggies - is really a sophisticated dodge. The real culprit is not cholesterol but c-reactive protein.  This substance indicated the degree of inflammation which is the actual agent triggering heart attacks. The test needed is the one for CRP not cholesterol, but then the CRP blood test is much more expensive.

The AARP article goes on to deal with these inflated costs:

"The most famous industry-sponsored estimate claims that it costs nearly $1.3 billion to develop a new drug and get it approved. This includes the cost of failures. Half that estimate, however, is not research costs at but rather a high figure for profits that companies would have made if they had invested their research money in stocks and bonds instead."

In other words, total Neoliberal perversion of the cost basis. Instead of tallying actual costs to do the research these drug company sharks are tallying up the costs of profits foregone in a whizzing stock market. (They seem to forget that stock markets can crash too.) 

In any case, it isn't a real cost to recoup from customers who faithfully pay up their hard earned money, but rather a phony cost to gouge and swindle them.   As the AARP piece points out:

"Eliminating it brings the actual research costs down from $1.3 billion to $650 million. "

Extrapolating from this, the cost of the typical drug ought to be half of what it is.  Probably less since taxpayers subsidize half of company research costs through credits and deductions granted to drug companies. The AARP author estimates these inputs bring the research costs down to $325 million.  The article adds:

"Moreover, the industry's $1.3 billion is based on a sample of the most costly fifth of new drugs, not the average for all drugs. Correcting this distortion brings company research costs down by 30 percent, to $230 million. "

The AARP goes on to point out the effect of a few expensive projects that inflate the value of the whole, hence why the median is best used instead of the average drug cost. In this case the company cost of research projects dives to $170 million.

The article also exposes more cost pricing gimmickry:

"A final way in which research costs are inflated is by backing in a large estimate for the cost of basic research to discover new drugs. In fact, no accurate estimate exists because the costs of discovery very so much, from an inexpensive lucky break to a costly 30-year search before a new drug is discovered. Removing that inflated estimate for basic research costs brings the net, median corporate research costs down to just $125 million for developing drugs."

Then we also learn (ibid.):

"Overall, basic research by pharmaceutical companies is quite small - about one sixth of overall company research costs and about 1.3 percent of revenues after deducting for taxpayer subsidies. The rest of company research costs foes to developing all those drugs with few advantages over existing ones so they can charge higher prices for them."

In another words, Americans are being swindled by sophisticated market projections, cost inflation, minor changes and other trickery. In the parlance of Neoliberals, it's what's called a "market spiral pricing strategy". It is more or less the same tactic used in inflating the costs of student loans, to increase debt there as well, despite the added costs and burdens being of marginal benefit because the benefits are so low in the existing job market. In the end it is all about enriching the Neoliberal market niche - whether drug companies or banks - at the expense of average citizens.

As the AARP article puts it:

"No other advanced country allows companies to raise prices on older drugs. No other industry raises prices on last year's cars or telephones."

It ends by advising that Congress needs to hold hearings on these spiraling drug prices especially for specialty drugs. In addition, Congress needs to eliminate the stupid rule that prohibits Medicare from negotiating discount drug prices- like the VA does. This dumbass rule entered with the Bushie Medicare Modernization Act of 2003, and was intended to be one prop (the other being Medicare Advantage) to drive Medicare into insolvency.  It should have been repealed under Obamacare, but wasn't.

With rational changes the health care cost curve can truly be bent but it will require gutting the Neoliberal imperative that encourages companies to swindle citizens to make profits. At its heart it means providing incentives for drug companies to provide truly new and effective drugs and powerful disincentives for them to produce only slightly better drugs at sky high prices.

We shouldn't remain hostage to these perverted market and pricing schemes any longer!

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