Take two of these and call me in the morning

The pharmaceutical industry has been taking a shellacking lately. Industry leaders complain like Rodney Dangerfields: They don’t get no respect, no respect at all.

Pharma and biotech people see themselves as noble crusaders against disease and infirmity, but lately they are perceived by the public as some kind of robber-barons. Recent Harris polls have shown the pharmaceutical industry ranks down there with tobacco companies in public opinion.

The problem is the money: the money that moves from the pockets of consumers to the pockets of companies for their products. The sums involved have escalated rapidly in the past few years. Prices for some prominent drugs (often the ones you see advertised on TV) have jumped 25% and even 35% in the past year. To quote a NY Times article last week:

The cost of the drugs needed to treat colon cancer, for instance, has soared to $250,000 from $500 for the regimen of 1999. Prices for the most commonly used branded drugs rose 28 percent from 2000 to 2003, nearly three times the rate of inflation, according to AARP.

Not good. The industry maintains that the high cost of development; the high cost of the many failures on the way to one success; and the promise of fat gains to stockholders that companies need to make to get them to invest, all contribute to these costs. They threaten: “If we don’t get the money we won’t be able to invest in scientific research and development of new drugs.”

That threat has been the shield behind which the industry has avoided interference for decades. But the public doesn’t seem to be buying it. They seem to be willing to call the industry’s bluff. They’re pissed and they’re demanding that the politicians do something, and, in this election year, the politicians are listening. Laws to enable importation of drugs from Canada and elsewhere are in Congress and many state legislatures. Congress—which, in the past, has retreated in the face of industry threats to stop development—may allow those laws to go forward. Worse, there’s talk of legislated price controls, something that sends chills down the spines of industry people. Even Republican traditional defenders are turning against the industry.

Representative Gil Gutknecht, a conservative Republican from Minnesota, has called the drug
industry greedy and has been pushing to legalize imports. “The pharmaceutical companies are living in a fool’s paradise,” Mr. Gutknecht said recently. “They cannot continue to expect to enjoy free market pricing in what is, in reality, a captive market.” (NY Times)

That’s the problem: health care is not a market like markets for cars and other things from the consumer’s standpoint, but the only drug development route in the US is the free market. The mix isn’t working well.

It’s interesting to hear executives from pharmaceutical and bio companies talk about the pricing issue. At BIO 2004 I heard some say, in effect, the little guy doesn’t really have to pay, it’s their insurance company that pays. Whoa! That’s not an attitude that payers want to hear! Another said the pharmaceutical industry isn’t to blame for the social problems that leave disparities of income and access to insurance and health care services in the US and the pharmaceutical companies can’t solve those problems. But some execs owned-up to the high price problem to a degree and said they have to cut costs of development.

The industry’s response to their woes is a PR initiative. Pfizer started a program last week to give drug discounts to the working poor and the uninsured. That puts them between a rock and a hard place. While announcing the little discount plan they’re trying to say, “See, we’re good guys.” At the same time they had to assure stockholders that it wouldn’t hurt profits. What sounds good to consumers sounds bad to investors. The investors don’t care about opinion polls; they only read the numbers in the companies’ financial reports.

Another thing that’s not helping the drug companies is an investigation that’s going on of marketing practices by Schering-Plough that smacks of payola. A few years ago after doctors got visits from the face-to-face salesmen (the so-called “detail men,” and, I presume, detail-women these days), they started getting checks from Schering-Plough when they prescribed the company’s drugs. The checks were unsolicited and the doctors claim the money didn’t affect their prescribing practices. S-P doesn’t do it anymore, but the whole idea stinks and evidently is under investigation by the FDA.

Indeed, critics of the pharmaceutical industry are particularly harsh about marketing expenses and practices. There are claims the companies spend more on marketing than they do on R&D. The consumer ultimately has to pay for pushing the product.

To me the whole debate takes place within a larger issue: How do you want to pay the cost of developing complex therapeutics to beat the so-called “complex, polygenic” diseases? I think of it as The Trillion Dollar Conundrum. (Off the top of my head, I’d guess the biology that still needs to be learned and the process of developing safe, effective therapeutics to fully defeat cancer and other tough diseases might be—ballpark—a trillion bucks. Future generations—worldwide—will look back and say, “Chump change!”) Charity? No way! Fundraising will never get enough out of people to do it. Government? Get serious! We’re not going to take a tax hike to pay government agencies to produce consumables. And why should it be American taxpayers who do it anyway? Investor dollars? Ah, there’s a deep pocket! Problem is, it’s a Faustian bargain: the investors pay the upfront costs but extract a hefty premium in the end.

Maybe it’s all happening too fast. We keep trying to find shortcuts to cancer cures—for obvious reasons. Despite not knowing the basic biology of life in all its fullness, we expect effective ways to defeat resilient, adaptive cell processes. We’ll get there some day, but there’s still going to be a lot of cost and disappointment along the way. Biology is like the old saying, “You can pay me now, or you can pay me later, but you’re going to pay!”

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