Priced Out Of Your Medication? Must Be All That 'Expensive' Big Pharma R&D

from the actually,-it's-the-bullshit-that-costs-so-damn-much dept

A few months ago, the pharmaceutical industry was throwing around careless numbers to justify the exorbitant price of its products. The "industry standard" of $800 million to develop a new drug had inflated to $1.3 billion (presumably thanks to non-existent inflation), but some digging around in the very same dataset produced a completely different number: $35 million. Sure, that's not exactly "walking around" money, but it's a lot easier to recoup your investment if you don't overstate it by $1.26 billion.

Some more damning numbers have emerged in a post at Rational Arguments, showing that even the drug companies' inflated R&D costs pale in comparison to what they really spend their money on. The first post pulls numbers from the Fortune 500 listing of top 10 pharmaceutical companies (by sales) and finds some (sadly) unsurprising results:

Those companies spent a whopping $41 billion on research and development. That's a lot of money. But it's significantly less than the $49 billion (18%) in profit they made. Just so you know, the average Fortune 500 company in 2008 made 0.9% of sales in profits. So in a recession, pharma did very, very well. [The] pharmaceutical companies spent $83 billion on marketing and administration. That's more than twice as much as they spent on research and development. That's an insane amount.

So it's a little disingenuous to claim that Americans must continue to spend so much to fund R&D when you could make cuts to either profits (which are big) or to marketing and administration (which is gargantuan). R&D just isn't that big a piece of the pie. There's plenty of fat to trim in there before research and development.

And why do pharmaceutical companies spend so much on marketing? It's simple, really. They're not creating new drugs. (Yes. That seems like a really moronic explanation, but read on...)

From 2000-2007, 667 new drugs were approved by the FDA. Of those, only 75 (11%) were new molecules that were much better than what we already had. In fact, over 80% of all drugs approved were no better than what we already had. Those are "me-too" drugs. Why do the pharmaceutical companies spend so much on marketing? Because you have to really promote drugs that really have no benefit over others that already exist. You have to convince people to buy those.

You know what needs no promotion? Awesome new drugs that save lives. When was the last time you saw a commercial for chemotherapy? For epinephrine? For steroids? Those drugs need no promotion - doctors just know to use them. But I bet all of you know about Nexium. Or Cialis.

Add to that the fact that drug companies are now helping themselves to medical records to help "guide" doctors' decisions and you've got a cyclical nightmare that increases costs while doing next to nothing for the health and well-being of their customers.

If you've managed to keep your incredulous rage (and whatever meal you last digested) suppressed, here's some more evidence dismissing pharma's everlasting claim to what's left in your wallet.

The Incidental Economist has a followup post by Aaron Carroll (who wrote the previous post at Rational Arguments), detailing even more evidence that the drug industry is blatantly lying when it claims its high prices are justified by its R&D investments. The twist here is that these companies, for the most part, aren't even doing their own R&D. (Click through for an informative and highly irritating graph. The colors are nice, though...)

The majority of research cited in patent applications was done in academic centers. Some more was done in other non-profit or government research centers. Only 15% of the research was done by industry. That's not a very compelling argument for the indispensable contribution of industry to research.

Carroll quotes another study, this one performed by Public Citizen in 2001, which showed that "U.S. taxpayer-funded researchers conducted 55 percent of the published research projects leading to the discovery and development of these drugs (and foreign academic institutions 30 percent)." In fact, drilling down even further into the data reveals that only one in seventeen papers come from the industry itself.

What we've got is an industry that uses the research (and money) of others to keep its profit margins right where it wants its. Even worse, it keeps going back to the government, fur-lined pimp hat in hand, looking for more funding, more patents, more patent extensions and more control over the medical community. Anyone looking to the pharmaceutical "community" for an answer to their health problems is in for a world of very literal hurt. The industry doesn't seem to mind if you're chronically ill. It just hates losing paying customers. To, like, death and stuff. And so it lowers its costs and raises its prices, trying to find the perfect balance between lifelong medical care and the local morgue.

Filed Under: marketing, pharma, r&d, research

FDA's Pharma-First Focus Driving Medical Device Tech Away From The US

from the total-failure dept

Five years ago, we wrote about Andy Kessler's excellent book, The End of Medicine, a book I still think about frequently. Kessler's book explores why medical innovation hasn't followed the same innovation curve as every other technology space, where the technology gets better while the prices get cheaper. There are many reasons described in the book, but one key hurdle? The FDA. And it's not just the FDA's process, but the entire concept of the FDA, which is set up to approve or disapprove drugs. That's it. It's not designed to help review what will make people healthy. And for that reason, it pretty much ignores medical devices and technology. This was a big problem described in the book, and a few FDA folks in the book suggested the FDA was working on solving that issue. But it's been five years, and new reports suggest nothing much has changed.

Reason has an article about how the FDA is driving medical device innovation to Europe and elsewhere because it's still not set up to even think about medical devices. The article focuses on the new X-Prize attempt to create a "tricorder." It's a great contest, but then the article points to the news that the FDA won't certify such things:

The regulatory environment could present problems for any such device. "The Food and Drug Administration has stated that it will not certify tech that makes a diagnosis directly," said Ross Mitchell, the author of a study published last week that shows that strokes can be diagnosed with the aid of a smart-phone application with the same degree of accuracy as with a hospital computer.

Bartholomew says that because of FDA restrictions, the contest could lead to innovations that might only be used outside the United States.

Indeed, the report points to many other examples of useful new technologies showing up elsewhere, but not in the US due to the FDA. So why is the FDA so bad at actually helping people get healthy? Take a guess. It seems like regulatory capture has taken hold of the FDA in a big bad way. Just recently, we discussed how the FDA has set up a system to limit competition in the medical field to just a few giant pharma companies, and has been actively banning cheaper drug competitors, in order to help big pharma companies jack up the prices on old medicines.

While the FDA is supposed to be keeping us healthy, it looks like its general focus is on keeping the profits of a few pharma firms healthy instead.

Filed Under: fda, innovation, medical devices, patents, pharma

FDA, KV Pharma Bend A Bit To Public Pressure; Lower Makena Costs, Allow Competing Drugs To Remain... For Now

from the public-pressure-works dept

We've been discussing how the FDA has been systematically banning drugs that have been on the market for years, and retroactively granting monopolies to particular pharmaceutical firms. The case that's drawn the most attention is that of Makena, a drug to prevent early childbirth which is provided on the market by a bunch of different firms, and was competitively priced around $10/dose. Yet, after the FDA stepped in and gave a monopoly to KV Pharmaceutical under the economically-clueless belief that this would help make the drug "more available," there was a massive public backlash when people discovered KV would increase the price of the drug from $10 to $1,500.

In response, it appears the FDA is backing down ever so slightly. Drew points us to the news that it has put out a statement that it will not stop other pharmacies from making and offering the drug. KV had been threatening others, but the FDA stepped in and said that, even though it's granted this monopoly to KV, it wouldn't enforce it against these other manufacturers. The FDA put up a statement explaining this:

In order to support access to this important drug, at this time and under this unique situation, FDA does not intend to take enforcement action against pharmacies that compound hydroxyprogesterone caproate based on a valid prescription for an individually identified patient unless the compounded products are unsafe, of substandard quality, or are not being compounded in accordance with appropriate standards for compounding sterile products.

Of course, it also says it may change its mind on this at any time (i.e., after the attention and backlash die down) and appears to have no interest in revisiting its other new monopolies.

Not surprisingly, with this news in place, KV Pharmaceutical has also announced that it is dropping the $1,500 price down to $690. Of course, that's still a lot more than $10 per dose, and this seems in response to the fact that (a) the public is blasting it at every turn and (b) the FDA won't really enforce the monopoly... for now.

How about we try to fix the underlying problem of monopolies, rather than just focusing on this one case?

Filed Under: drugs, fda, makena, monopolies, pharma
Companies: kv pharmaceutical

Drug Firms Freaking Out Over Expiring Patents

from the live-by-the-patent... dept

Glyn Moody points us to a discussion about how the big pharma firms are freaking out because their key patents are expiring, and they've failed to develop any new patentable drugs in a while. This is leading the usual patent supporters to worry and fret. Of course, the whole thing is backwards. As Moody points out, expiring patents should be a cause for celebration, not dismay. It means the public is getting access to all sorts of important medicines at much more reasonable prices. That's good news.

The real issue here is that for years patents massively distorted the healthcare market. It hasn't been about keeping people healthy at all. It's been about finding patentable drugs to extract monopoly rents (often at the expense of actually keeping people healthy). Perhaps, if we can get past this silly and short-sighted focus on patentable medicine as being the key component of healthcare, we can start seeing smarter companies develop smarter business models that actually align interests: firms that recognize there's tremendous value in actually keeping people healthy, rather than trying to sell them a tiny pill.

If you start looking at the economic research behind healthcare, you begin to realize that the economic incentives around healthcare are totally screwed up. The reports have shown that keeping people healthy for longer contributes billions, if not trillions to the economy. If firms can't figure out how to profit from keeping people healthy, they're not paying attention. But that's never been the focus of our healthcare policy, and it's a shame. If today's drug companies are felled by their overreliance on patents, perhaps we can finally move on to rethinking healthcare towards making people healthy and improving the economy at the same time... rather than the current structure that appears to do neither of those things all too often.

Filed Under: business models, drugs, health care, healthcare, patents, pharma

Revolving Door Between Gov't And Industry Continues: Pharma Lawyer Goes To USPTO As Gov't Financial Regulator Goes To Wall St.

from the who-needs-bribes? dept

The level of regulatory capture between the government and industry is really quite sickening these days. There's a revolving door where government officials go work for industry and vice versa, with plenty of back-scratching in both directions. Two separate stories crossed my desk at about the same time, highlighting this in both directions. First up, it's really no surprise that one of the pharma industry's favorite lawyers has just become deputy director of the US Patent Office. Of course, the pharma industry is one of the more aggressive ones when it comes to expanding the power of patents, and abusing them to block innovation in healthcare. Now they have another person on the inside to help.

Going in the other direction, a senior "dealmaker" and advisor to the government's FDIC program has jumped ship to Goldman Sachs. That article lists a bunch of other top government officials involved in dealing with the financial crisis and setting the new regulatory rules, who have wasted little time in taking new jobs in the private sector on Wall Street. As some have pointed out, this kind of revolving door makes bribes totally unnecessary. You don't need any form of bribery or overt corruption, when the corruption is entirely implicit in the nature of the revolving door.

Filed Under: corruption, patents, pharma, politics, revolving door, wall street

Indian Scientists Refuse To Patent Tuberculosis Genome, Encourage Anyone To Make The Drugs

from the good-for-them dept

We recently wrote about the pharmaceutical industry in India, noting that it had been thriving prior to foreign pharma lobbyists pressuring India through international trade agreements to change its patent laws to cover pharmaceuticals. As usually happens when we write about examples like this, some patent supporters in the comments insisted that no Indian research could possibly result in serious drug breakthroughs without patents (apparently those who write this are unfamiliar with Jonas Salk's opinions on patents in reference to the polio vaccine he created: "Could you patent the sun?")

So it's nice to see that even now that India does allow patents on pharma (and, as we noted in the original story, Indian patent laws have been abused by foreign pharma firms in order to jack up prices on commonly used medicines), some Indian scientists have mapped out the tuberculosis genome, which should help creating new drugs that can help respond to that disease.

But rather than rushing to the patent office, the scientists are freeing up the research through an open source effort:

"What we have not done so far has been achieved. I thank all those students who have helped it become a reality. We are doing this through open source drug discovery (OSDD) and anyone across the world is free to join the effort," [Council for Scientific and Industrial Research (CSIR) chief Samir] Bramhachari told IANS....

"OSDD is a completely new formula across the world. Here we are making all our progress available to public. Anyone can take advantage and develop a drug based on our research. The aim here is not patents but drug discovery for a neglected disease," said Rajesh Gokhle, a senior scientist associated with the project.

And I thought that no such breakthroughs were possible without patents?

Filed Under: dna, genetics, india, patents, pharma, tuberculosis

Pfizer, Novartis & Eli Lilly Received A Bunch Of Illegal Pharma Patents In India

from the jacking-up-the-price-on-known-medicines dept

As you may or may not know, India only recently changed its patent laws (under sever pressure from foreign countries and pharmaceutical companies) to allow pharmaceutical patents. Before that, pharmaceuticals (for the most part) were unpatentable there. Of course, contrary to what patent system supporters would tell you, India had a thriving pharma industry. Yes, a lot of it was in generic drugs, but according to patent system supporters if people can just copy each other, no one will even bother to get into that business. Reality shows that wasn't true. But, of course, the big pharma companies were quite upset by all of this, and got their governments to put pressure on India to "join the world community." In 2005, India's new patent laws went into effect, and while the results of all of this are still being analyzed, one thing that politicians smartly put into the law were sections 3(d) and (e), "which restrict protection being granted to already known and long-ago patented drugs and their combinations." This upset pharma industry sympathisers, but it's hard to fathom who could reasonably be against such a rule. You simply should not be able to patent things that are already known or patent the simple combinations of drugs that are already known. This is just common sense to prevent pharmaceutical firms from getting monopolies on drugs already out there.

However, Jamie Love points us to the news of a new report that found that the Indian patent office has gone against this law and issued such patents quite frequently and, no surprise, the main recipients are among the world's largest pharma companies, including Pfizer, Novartis and Eli Lilly. Is it any wonder that they've all been pushing to dump sections 3(d) and (e) all along? Remember, pharma patents are not about drug discovery, but about jacking up the prices on drugs.

Filed Under: india, patents, pharma
Companies: eli lilly, novartis, pfizer

How Pfizer And The US Gov't Set Up A Fake Subsidiary To Take The Brunt Of Lawsuit Over Falsely Marketed Drugs

from the don't-you-feel-healthy-now dept

The pharmaceutical industry is a huge mess, which has little, if anything, to do with making people healthy. The way the system is currently designed, if it's more profitable for a pharmaceutical company to put you at greater risk, it will do so. And sometimes the US gov't will help them brush it under the rug. Reader Bill Pickett points us to a recent investigative report concerning the big, high-publicity lawsuit the US gov't filed against Pfizer, after the company blatantly went against FDA approvals and marketed a drug for all sorts of alternative uses, which the FDA had specifically noted could be dangerous and could put people at greater risk.

The FDA approved Bextra only for arthritis and menstrual cramps. It rejected the drug in higher doses for acute, surgical pain. Promoting drugs for unapproved uses can put patients at risk by circumventing the FDA's judgment over which products are safe and effective. For that reason, "off-label" promotion is against the law.

But with billions of dollars of profits at stake, marketing and sales managers across the country nonetheless targeted anesthesiologists, foot surgeons, orthopedic surgeons and oral surgeons. "Anyone that use[d] a scalpel for a living," one district manager advised in a document prosecutors would later cite.

A manager in Florida e-mailed his sales reps a scripted sales pitch that claimed -- falsely -- that the FDA had given Bextra "a clean bill of health" all the way up to a 40 mg dose, which is twice what the FDA actually said was safe....

Internal company documents show that Pfizer and Pharmacia (which Pfizer later bought) used a multimillion-dollar medical education budget to pay hundreds of doctors as speakers and consultants to tout Bextra.

Pfizer said in court that "the company's intent was pure": to foster a legal exchange of scientific information among doctors.... But an internal marketing plan called for training physicians "to serve as public relations spokespeople."

Where the story gets scary is in what happened when all this came out. Federal officials announced a criminal case over this, but they didn't actually sue Pfizer directly. Instead, they sued a (not kidding) subsidiary of a subsidiary of a subsidiary of a subsidiary of Pfizer, which was basically set up just take the brunt of this lawsuit:

According to court documents, Pfizer Inc. owns (a) Pharmacia Corp., which owns (b) Pharmacia & Upjohn LLC, which owns (c) Pharmacia & Upjohn Co. LLC, which in turn owns (d) Pharmacia & Upjohn Co. Inc. It is the great-great-grandson of the parent company.

But it was only that last one, Pharmacia & Upjohn Co. Inc., that was sued -- and the report also notes that this company just happened to be set up the same day that Pfizer and federal officials worked out a deal for it to plead guilty -- even though it, as an entity, hadn't done anything.

Why did they do this? Well, if Pfizer itself had been found guilty then it would be barred from Medicare and Medicaid, and prosecutors figured it would effectively close down Pfizer -- and Pfizer was deemed "too big to fail" like that. Why? I have no idea. If the company really did have to close down, it seems likely that others would have picked up the company's various products -- and perhaps done so without putting people's lives at risk.

Really, the problem here is the way the entire system is set up. The FDA requires expensive and involved clinical trials. This is very good, because we want to make sure that any drugs actually do what they're supposed to do, and don't have serious side effects or cause even worse problems. But, the system is currently set up so that the pharmaceutical company itself is in charge of paying for and running those clinical trials, which creates two very problematic situations. First, it gives the company all sorts of incentives to fudge the results or to pretend the results said something different than they really did (see the example above, or Merck with Vioxx) and second, it contributes to the "expense" that a drugmaker can claim comes from developing a new drug, which is part of why it demands patent rights. But if you break out the costs of the clinical trials, the marketing-hidden-ad-development-costs, and the amount of research that's actually funded by gov't grants -- you find that pharmaceutical firms really aren't spending nearly as much as they claim. A big part of the issue is the clinical trials, and that's leading to all sorts of questionable behavior. In the past, some have suggested that such trials should be conducted by the gov't, rather than by the pharma companies themselves. While I'm not sure that's the answer, it's pretty clear that the existing system is not working, if our end goal is to make people healthier.

Filed Under: off-label, pharma
Companies: pfizer

Pay-For-Delay Anti-Trust Lawsuit Against Pharma Company Dismissed

from the monopolies-galore dept

Last year, we wrote about the rise of pay-for-delay programs being run by big pharmaceutical firms to use patent lawsuits as a cover to pay off generic drug makers to prevent them from competing in the market. We were pretty disappointed that a part of health care reform that would have outlawed such deals got dropped, but figured that these still seemed like anticompetitive actions that the FTC could deal with.

Well, that might not work either. Joe Mullin points out that one such lawsuit suggesting that some of these deals were anticompetitive has been tossed out. The specifics here are a bit more complex -- as the deal that the big pharma, Schering-Plough (now owned by Merck) worked out with two generic drug makers was technically structured as a "license deal" where Schering got to license drugs from those generic drugmakers -- even if it never really did so. It still provided some amount of "cover." Furthermore, the agreement not to introduce the generics in the market only occurred during the time when Schering's drug was still covered by the patent. So, really, there was some dispute as to whether or not the generic actually violated the patent or not -- but since the ruling was not about determining that fact, just whether the actions were anti-competitive, the judge concluded that there wasn't enough evidence of any anticompetitive behavior.

So, basically, the only reason this wasn't anticompetitive was because it all happened under a government-granted monopoly. Talk about ironic, right? Because there's a monopoly, the company doesn't get labeled a monopolist. Isn't the patent system great?

This ruling is unfortunate for a variety of reasons. You can see why generic drug makers agree to these deals: it's either go through an expensive fight to put a drug on the market, or get out of the lawsuit and get paid a ton of money for nothing. Not hard to make that decision. But the end result is anti-competitive, in that it allows big pharma firms to keep the prices jacked up very high on their drugs, much to the detriment of everyone else.

Filed Under: anti-trust, pharma
Companies: schering-plough

Pharma Patent Nuclear War In Action

from the boom-goes-the-dynamite dept

Peter Amstutz writes "Techdirt often talks about the "mutually assured destruction" model of patent litigation. Well, here is an excellent example of the staggering costs of competing through the courts instead of the markets. Boston Scientific and Johnson & Johnson have been locked in patent disputes for years, each alleging the other infringed on the their patents. Recently, Boston Scientific was ordered to pay a staggering $1.73 Billion (with a B!) in settlement to J&J. As if that's not enough, apparently there are additional unrelated patent cases still ongoing between the companies. One wonders how much has been spent on lawyers."

Think of all this money being shuffled around having nothing to do with actually creating new products that help people or actually getting those products to market where they can help. The patent system isn't being used to promote progress here at all, but to stifle competition and hold back progress.

Filed Under: patents, pharma
Companies: boston scientific, johnson & johnson