Recently a 32 year old punk named Martin Shkreli called the nation’s attention to persistent and blatant price gouging by pharmaceutical companies. Shkreli, an ex-hedge fund manager and CEO of Turing Pharmaceuticals – a company he formed in February of 2015 – took drug price gauging to a whole new level. In August he bought the rights manufacture Daraprin, a 62 year old drug use to treat Toxoplasmosis that no other company markets. The drug is used to cure a parasitic infection which usually doesn’t bother healthy people, but is a dangerous problem for people with compromised immune systems resulting for diseases such as AIDS and cancer. In September Shkreli abruptly raised price of the medication by 5,455 percent (from $13.50 to $750 per tablet). Those who most affected by this blatant act of medical thievery are generally in very poor health and often unable to afford expensive medication.
If you would like to read about the details of this outrageous crime against the public good, I would refer you to this excellent article: Drug Company CEOs Acting More Like Drug Dealing Thugs
Among those who have publicly criticized Shkreli are several medical organizations; the HIV Medicine Association and the Infectious Diseases Society of America both issued statements condemning the price increase. I found it most interesting that the Pharmaceutical Research and Manufactures of America also joined in on the attack on Shkreli. They are a lobbying group representing the major pharmaceutical companies. I suspect that that they were afraid that Shkreli’s actions will bring a lot of unwanted attention to similar, though perhaps not quite as blatant, price gauging by the major pharmaceutical companies the trade association represents.
Big pharmaceutical companies have a great deal they would not want brought to the attention of the American public. They don’t want anyone else to notice that they generally charge much more for their products here in the United States than they charge for the same medications in other countries. On average in the US we pay 40% more for the same medications than do the Canadians, 75% more than the Japanese, and 300% more than the Danes. This is one the prime reasons that medical care is so much more expensive here in the US than in most of the other advance countries around the world without a comparable increase in the quality of care.
Why do patients in other countries get better deals from the big drug companies? Most of the other countries have government run single payer medical systems which allow them to buy all of the drugs for their citizens giving them the leverage to negotiate big discounts with the drug companies. The many individual insurance companies in this country don’t have that kind of leverage. However, the differences don’t end there. One would think that a huge system like Medicare would be able to negotiate similar discounts, but it is forbidden by law from doing so. You read that right; the way Medicare was set up by Congress, the Department of Health and Human Services, which runs the Medicare system, is barred from negotiating with pharmaceutical companies to bring down the prices of drugs the system buys for patients.
Fortunately, the Veterans Administration system was not set up in that manner and the VA does have that negotiating power which it uses to great advantage. I found the following chart on the Managed Care Magazine website comparing the prices paid by the VA and those paid by Medicare Part D (the prescription drug Medicare plan).
As you see from the examples of five commonly used prescriptions shown, Medicare is paying from 50% to 1070% more than the VA for the same medications.
Now if you were to ask the representatives of the major drug companies why they charge so much for there drugs, they would tell you that they need those profits in order to be able to do the research necessary to develop new miracle drugs. It’s a great line, but unfortunately it isn’t true. Half of the innovative new drugs which come to market each year are developed by universities and small biotech firms, not the big drug companies. In addition, big pharmaceutical companies spend 19 times as much on marketing (you have seen their advertisements on TV) then they do on research. Consider that again carefully; they spent 19 times as much money trying to sell their existing drug products than they spent on doing the research necessary to find new cures.
How do the pharmaceutical companies get away with this kind of price gouging you may ask? The answer is an easy one: The drug companies spend huge amounts of money to keep Congress in their back pockets. According the Open Secrets website, from 1998 to 2012 the big drug companies spent $2.6 Billion on their lobbying efforts making them the biggest government lobbyists in Washington DC. To put that amount in perspective consider that over the same period big pharmaceutical companies spent $1.2 Billion more on their lobbying efforts than all of the oil and gas companies combined and $1.9 Billion more than all of the defense and aerospace companies combined. As you can guess, that kind of money buys the big drug companies a lot of protection for their interests.
The bottom line is that this country we are getting ripped off by the big pharmaceutical companies, many of which are American companies. But what can we do about it? The solutions are not easy ones because the way big drug companies operate in this country is woven into the fabric of our medical care system and they have enormous political power. However, we can support and vote for candidates for President and members of Congress who are committed to rolling back the power of the big Pharmaceutical companies by for instance allowing the Department Health and Human Services to negotiate drug prices across the entire Medicare system and by shortening the period before new medications can be produced as generics. Only an extensive grass roots effort can defeat the reduce the power that big pharmaceutical companies wield in this country.