A Peek at Big Pharma’s Playbook That Leaves Many Americans Unable to Afford Their Drugs

Yves here. While this post is yet another reminder of how Americans are victims of Big Pharma price gouging, the evidence it presents is weak tea. It omits the degree to which drug companies use intellectual property developed on the public dime (both basic and more specific research) without paying royalties to Uncle Sam or being subject to price restriction. It also omits that the overwhelming majority (close to 90% by some estimates) of “new drug applications” are for minor reformulations to extend patent life. It finally omits that the major drug companies spend more on marketing than on R&D, putting paid to the claim that major drug companies need their egregious prices to fund development of new medications. The US could simply (once again) bar TV advertising, which would free up plenty of dough for more socially productive uses (if you live in the US and ever watch old people programming, you’ll see near-saturation levels of pharma commercials).

By Elisabeth Rosenthal, KFF Health News Senior Contributing Editor and former Editor-in-Chief, who was previously a 22- year correspondent with The New York Times. Originally published at KFF Health News

America’s pharmaceutical giants are suing this summer to block the federal government’s first effort at drug price regulation.

Last year’s Inflation Reduction Act included what on its face seems a modest proposal: The federal government would for the first time be empowered to negotiate prices Medicare pays for drugs — but only for 10 very expensive medicines beginning in 2026 (an additional 15 in 2027 and 2028, with more added in later years). Another provision would require manufacturers to pay rebates to Medicare for drug prices that increased faster than inflation.

Those provisions alone could reduce the federal deficit by $237 billion over 10 years, the Congressional Budget Office has calculated. That enormous savings would come from tamping down drug prices, which are costing an average of 3.44 times — sometimes 10 times — what the same brand-name drugs cost in other developed countries, where governments already negotiate prices.

These small steps were an attempt to rein in the only significant type of Medicare health spending — the cost of prescription drugs — that has not been controlled or limited by the government. But they were a call to arms for the pharmaceutical industry in a battle it assumed it had won: When Congress passed the Medicare prescription drug coverage benefit (Part D) in 2003, intense industry lobbying resulted in a last-minute insertion prohibiting Medicare from negotiating those prices.

Without any guardrails, prices for some existing drugs have soared, even as they have fallen sharply in other countries. New drugs — some with minimal benefit — have enormous price tags, buttressed by lobbying and marketing.

AZT, the first drug to successfully treat HIV/AIDS, was labeled “the most expensive drug in history” in the late 1980s. Its $8,000-a-year cost was derided as “inhuman” in a New York Times op-ed. Now, scores of drugs, many with much less benefit, cost more than $50,000 a year. Ten drugs, mostly used to treat rare diseases, cost over $700,000 annually.

Pharmaceutical manufacturers say high U.S. prices support research and development and point out that Americans tend to get new treatments first. But recent research has shown that the price of a drug is related neither to the amount of research and development required to bring it to market nor its therapeutic value.

And selling drugs first in the U.S. is a good business strategy. By introducing a drug in a developed country with limited scrutiny on price, manufacturers can set the bar high for negotiating with other nations.

Here are just a few of the many examples of drug pricing practices that have driven consumers to demand change.

Exhibit A is Humira, the best-selling drug in history, earning AbbVie $200 billion over two decades. Effective in the treatment of various autoimmune diseases, its core patent — the one on the biologic itself — expired in 2016. But for business purposes, the “controlling patent,” the last to expire, is far more important since it allows an ongoing monopoly.

AbbVie blanketed Humira with 165 peripheral patents, covering things like a manufacturing step or slightly new formulation, creating a so-called patent thicket, making it challenging for generics makers to make lower-cost copycats. (When they threatened to do so, AbbVie often offered them valuable deals not to enter the market.) Meanwhile, it continued to raise the price of the drug, most recently to $88,000 a year. This year, Humira-like generics (called biosimilars for its type of molecule) are entering the U.S. market; they have been available for a fraction of the price in Europe for five years.

Or take Revlimid, a drug by Celgene (now part of Bristol Myers Squibb), which treats multiple myeloma. It won FDA approval to treat that previously deadly disease in 2006 at about $4,500 a month; today it retails at triple that. Why? The company’s CEO explained price hikes were simply a “legitimate opportunity” to improve financial “performance.”

Since it must be taken for life to keep that cancer in check, patients who want to live (or their insurers) have had no choice but to pay. Though Revlimid’s patent protection ran out in 2022, Celgene avoided meaningful price-cutting competition by offering generic competitors “volume-limited licenses” to its patents so long as they agreed to initially produce a small share of the drug’s $12 billion monopoly market.

Par Pharmaceutical, another drugmaker, maneuvered to create a blockbuster market out of a centuries-old drug, isoproterenol, through a well-meaning FDA program that gave companies a three-year monopoly in exchange for performing formal testing on drugs in use before the agency was formed.

During those three years, Par wrapped its branded product, Vasostrict, used to maintain blood pressure in critically ill patients, with patents — including one on the compound’s pH level — extending its monopoly eight additional years. Par raised the price by 5,400% between 2010 and 2020. When the covid-19 pandemic filled intensive care units with severely ill patients, that hike cost Americans $600 million to $900 million in the first year.

And then there is AZT and its successors, which offer a full life to HIV-positive people. Pills today contain a combination of two or three medicines, the vast majority including one similar to AZT, tenofovir, made by Gilead Sciences. The individual medicines are old, off-patent. Why then do these combination pills, taken for life, sometimes cost $4,000 monthly?

It’s partly because many manufacturers of the combination pills have agreements with Gilead that they will use its expensive branded version of tenofovir in exchange for various business favors. Peter Staley, an activist with HIV, has been spearheading a class-action suit against Gilead, alleging “collusion.” The negotiated price for these pills is hundreds of dollars a month in the United Kingdom, not the thousands charged in the U.S.

Faced with such tactics, 8 in 10 Americans now support drug price negotiation, giving Congress and the Biden administration the impetus to act and to resist Big Pharma’s legal challenges, which many legal experts view as a desperate attempt to stave off the inevitable.

“I don’t think they have a good legal case,” said Aaron Kesselheim, who studies drug pricing at Harvard Medical School. “But it can delay things if they can find a judge to issue an injunction.” And even a year’s delay could translate into big money.

Yes, American patients are lucky to have first access to innovative drugs. And, sadly, patients in countries that refuse to pay up once in a while go without the latest treatment. But more sadly, polling shows, large numbers of Americans are forgoing prescribed medicines because they can’t afford them.

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  1. Eclair

    We hung out at the county fair last week with my spouse’s cousins, who run a small family dairy farm. In between watching the 4-H dairy cow judging and admiring the farm’s prize Jersey, we heard about the family health problems.
    Granddad (my spouse’s first cousin) has type 2 diabetes and was prescribed one of the new, and expensive, drugs to treat the condition. He can’t afford to pay for it, so takes it only occasionally, or not at all. He is a small, wiry man, active all his life, as you would be if you milked 80 cows twice daily. Plus planting and harvesting fields of corn and hay. Oh, and running a maple sugaring operation in February and March. So, his condition is not due to obesity and a sedentary life style.
    Their newest granddaughter, three months old, was born with a serious heart defect: apparently the upper and lower chambers of her heart did not fuse (I may have this wrong, because all this information was interspersed with comments on the conditions of the cows being shown.). Already, the baby has been helicoptered to the university hospital in Rochester, NY and gone by ambulance to another regional hospital. And, their insurer won’t pay for the transportation. Dad, of course, is taking over the farm, so has what is probably a crap individual health insurance plan. They mentioned that the baby is on some serious pharmaceuticals. Not cheap.

  2. The Rev Kev

    ‘Those provisions alone could reduce the federal deficit by $237 billion over 10 years, the Congressional Budget Office has calculated. That enormous savings would come from tamping down drug prices, which are costing an average of 3.44 times — sometimes 10 times — what the same brand-name drugs cost in other developed countries, where governments already negotiate prices.’

    While reading this, I had an idea. Big Pharma will be guaranteed to fight this development tooth and nail and the amounts of money that you can bribe a Congressperson with to support you does not appear to be that large. So how about this and I am being serious here. Have Congress pass a law that says that all such savings go direct to the Pentagon for the military budget so that they can replace all that crap sent to the Ukraine. What, you oppose this? Are you unpatriotic? Think about it. The Pentagon is going to get those rises anyway but this way it will have a more neutral effect on the Federal budget and the Pentagon may start pushing for more savings to be made so that they can get more money. At the other end American will get more medications that they may be able to even afford.

    1. James T.

      I am patriotic but would argue that would be helping the US government arm someone else to have their young men get killed but I get the point. I think it would be better spent helping people like the ones Eclair mentioned. An for that matter it would be best to cut the military budget by 75% and only create a force that is strong enough to defend our borders. Imagine all of that money going into infrastructure and helping create a structural sound economy. Someone explain to me why we need to try and control the entire world? Besides that we are not good it and continually fail.

    2. JonnyJames

      I can attest to this with an anecdote: when I lived in Europe, I could buy my allergy medication at FULL RETAIL cheaper than the “copay” back home in the US. When I asked the US pharmacy how much I would have to pay if I did not have insurance they said $187. I paid 11.62 Euros retail for the exact same brand, exact packaging. What a great extortion racket.

      They want us to think that getting ripped off and extorted is “patriotic” I guess

      1. Rubicon

        Our best friend from Italy is visiting us this coming week. We’ve told him so many horror stories about American Health care, that he is coming with a full-barreled insurance policy from France.

        We asked him detailed questions about:

        Will the policy cover In Full ALL ambulance, surgery, hospital costs, prescriptions, ER needs. YES.
        It will even cover if our friend if he is in a car accident. YES.
        The full cost of that Policy: $50.00.

        1. JBird4049

          Sometimes, they make it too easy to hate one’s own country although the hatred really should be for the ruling class of lampreys, leeches, and vultures.

      2. Thomas Schmidt

        You should look on this as funding your trips to Europe. I’ve driven to Canada to pay 1/10th on needed medications.

  3. Lexx

    ‘During those three years, Par wrapped its branded product, Vasostrict, used to maintain blood pressure in critically ill patients, with patents — including one on the compound’s pH level — extending its monopoly eight additional years. Par raised the price by 5,400% between 2010 and 2020.’

    From the article:

    ‘Par said the pH of Eagle’s generic tends to drift upwards and that its proposal outlines a drug that is just below the patented range, making it likely to infringe.’

    ‘Drift?’… ffs. The warnings have been out there for decades that these companies were trying to get a lock on patenting nature, or ‘life’, and everything about it. Do you think they see the irony at all in their efforts to secure profit, while clearly in need of a therapy for their own pathology?

    I make my own kombucha, a drink growing in popularity and profit… the pH “drifts”. The SCOBY and yeasts have their own agenda; I just hope we can come to an agreement before bottling time.

  4. KLG

    First week of medical school. My initial biochemistry/cell biology presentation to 60 students on one campus included a section on cystic fibrosis as an example of a disease caused by abnormal protein folding. Subversive that I am, I found this paper to summarize the practice of modern medicine and as an example of how to read the biomedical literature: Current prices versus minimum costs of production for CFTR modulators. I expect to get yelled at for going off script.

    From the Abstract:
    Results: Costs of production for elexacaftor/tezacaftor/ivacaftor are estimated at $5,676 [$4,628-6,723] per year, over 90% lower than the US list price. Analysis of chemical structure and published synthetic pathways for elexacaftor/tezacaftor/ivacaftor revealed relatively straightforward routes of synthesis related to currently available products. Total cost of triple therapy for all eligible diagnosed CF patients worldwide would be $489 million per year. Comparatively, the annual cost at US list price would be $31.2 billion.

    Conclusions: Elexacaftor/tezacaftor/ivacaftor could be produced via generic companies for a fraction of the list price. The current pricing model restricts access to the best available therapy, thereby exacerbating existing inequalities in CF care. Urgent action is needed to increase the availability of triple combination treatment worldwide. One strategy based on previous success is originator-issued voluntary licenses.”

    These drugs were developed about 10 years ago by Vertex Pharmaceuticals. They do result in improvement in outcomes for CF patients with the most common mutation in the most common genetic disease in the Global North, and with other therapies to deal with symptoms of CF they, represent a real, if incremental, advance. Virtually all biomedical advances are incremental, but that word is the kiss of death in a grant proposal review. I digress, again. At first the cost was reckoned to vitiate any benefit in Great Britain, but I’m not sure about current approval there.

    Anyway, a few of the new medical students learned a lesson they will remember, early in their journey to becoming primary care physicians. This is an old story, often covered at NC. Another chapter could be written about Pharmacy Benefit Managers…this is a target-rich environment, but all the targets are encased in Kevlar and coated with Teflon.

    1. earthling

      Good for you. Although it is so strange to contemplate that doctors consider themselves so powerless against big Pharma. We would be looking at a different environment if doctors had ever decided as a group that this state of affairs is intolerable.

      1. JonnyJames

        Exactly, the AMA case in point. They are not helpless, they are shareholders. Most MDs have a vested interest in maintaining the status quo. That’s why we can’t rely on them do fix the mess

  5. scott s.

    I think the entire “intellectual property” regime needs to be reviewed. The Constitution, drawing from law in England, provides government-authorized monopolies for “limited times”. We’ve been trained to view these monopolies as “property”.

  6. JonnyJames

    More important evidence of the kleptocratic oligarchy extorting us. Then, when ‘murkans can’t afford BigPharma products and health insurance extortion costs, the loan sharks mire us in debt. That’s what is called “freedom and democracy” – you are free to die young, bankrupt and in debt due to basic health costs. “Only in murka”.

    This is especially outrageous since much of BigPharma R&D is subsidized, directly or indirectly, with public funds. Yet they still extort us. We are getting ripped off in multiple ways.

    After reading this, my blood pressure must be through the roof, I might need medication and have to pay more extortion ;-)

    (I am very lucky and grateful I don’t really have hypertension, at least for now)

    1. John Hacker

      Thanks Jonny, i think this is the point. If they received no public money, laissez faire.

  7. Charger01

    A country that allows Martin Shkreli to juice a anti parasitic drug to $750 per dose, or fresh from “fierce pharmaceutical” – “From bluebird’s thalassemia therapy Zynteglo at $2.8 million for a one-time dose to CSL and uniQure’s $3.5 million hemophilia B treatment Hemgenix, the three newest gene therapies to land in the U.S. have quickly skyrocketed to top of the list of the industry’s most expensive products.” Imagine the business pitch of asking $3.5 million annually for hemophilia treatment….only the 0.1% can afford the treatment, let alone a non-cure.
    Vampire squids, just like Matt Taibbi labelled Goldman Sachs many moons ago.

  8. Felix_47

    The root problem is campaign finance reform and there is no medical treatment for that. And minorities that have tremendous political influence are insulated because the bulk of them are covered by the government so those insane prices hit the taxpayer. The middle class, self employed or small employers are the ones getting hit. And when you think about it they largely do not vote Democrat.

    1. q7

      The kleptocracy is weeded into the DNA of this country even our most sacred document is a thinly veiled promulgation of the supremacy of private property.

      But, there most definitely is a certain pampered class minority with tremendous influence at the root :^]

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