Insidious Greed: How Big Pharma Rips You Off on Drugs

Insidious Greed: How Big Pharma Rips You Off on Drugs

Recently, through the launch of a new online database last week the U.S. government revealed that in 2013, doctors were paid roughly $380 million by medical device and pharmaceutical corporations for speeches and consultations, all within a five-month time frame. Big Pharma spends almost $20 billion annually marketing their products to doctors, which yields profits upwards of $300 billion per year in drug sales. A handful of these doctors were paid more than $500,000 apiece. Others were paid millions for the drugs and devices they helped to create. Doctors insist that this money doesn’t influence what they recommend to their patients. However, it’s extremely difficult to imagine what purpose the payments would serve if not to increase product sales through prescriptions. eDrugSearch.com has been warning the American people about these unethical issues and conflict of interests for years.

Drugs Come at a Price

In the United States, we spend vast amounts of money on medications. In fact, on a per-person basis, we spend the most out of every industrialized country in the world despite the fact that we’re no better off as far as our health. It’s estimated that Americans spend about $2.7 trillion every year on medical care, and medications take up about ten percent of that cost. A portion of this cost is paid by the Government via the ACA, Medicaid and Medicare. Unfortunately, that part is funded by the taxpayers. The remainder of the cost is funded by skyrocketing deductibles, expensive co-payments and high premiums.

According to the World Health Organization (WHO), Big Pharma globally rakes in $300 billion a year, and its expected to increase to $400 billion within a few years. As a result of this pressure to keep up with sales, WHO has officially stated, “an inherent conflict of interest between the legitimate business goals of manufacturers and the social, medical and economic needs of providers and the public to select and use drugs in the most rational way“.

The Bigger Picture

The payments doctors are receiving are just a small piece of a much larger, and more profitable, puzzle for drug companies. Big Pharma also uses a marketing strategy called “product hopping”. This involves taking an existing product with a patent up for expiration and making small changes to it. According to the law, this makes it an entirely new product. Namenda, for instance, is commonly prescribed for Alzheimer’s, but its maker, Forest Labs, recently said it would stop offering the drug. Instead, it would release Namenda XR, the same drug slightly modified to make it extended-release. In the process, the company ensured that there could be no generic substitutes. This means Forest Labs sees more profits while patients are stuck paying the inflated costs. Drug companies have another trick up their sleeves. Even though a drug’s twenty-year patent is long expired, Big Pharma will still advertise their brand aggressively, leading patients to request prescriptions from their doctors.

The United States is one of only two countries in the world that lets pharmaceutical companies do direct-to-consumer advertising. According to John Mack at Pharma Marketing News in 2013 Big Pharma spent $3.8 Billion in dtc advertising and “The rich pharma companies got richer and spent more“. Another scheme called “Pay-for-Delay” costs us an estimated 3.5 Billion a year involves Big Pharma paying the makers of generic versions to hold off on their development, raking in huge amounts of money for both parties. Yet again, patients are stuck with obscene prices. In Europe, this is illegal. In the U.S., however, Big Pharma has successfully lobbied against legislation that would ban the practice.

Lack of Government Controls

Other countries have wholesale pricing for medications, but in America, the government isn’t allowed to negotiate for lower prices under Medicaid and Medicare. Indeed, this was one of Big Pharma’s support criteria for the Affordable Care Act. Their excuse? They needed the money for research and development. However, most of this research is done by the government through the National Institutes of Health (NIH).

Meanwhile, pharmaceutical companies actually spend millions more on advertising than on research and development. For every $1 spent on basic research, Big Pharma spends $19 on promotions and advertising. That’s to say nothing of the millions these companies spend on government lobbying. Just last year, that figure stood at $226 million, considerably more than military contractors spent on lobbying. In addition, drug firms use politics to gain an advantage. The industry gave more than $50 million on political candidates in 2012, earning it the title of the largest contributor to political campaigns.

The Crux of the Problem

At this point, you’re probably wondering why the American public tolerates this stunningly predatory business model. It would be a gross oversimplification to claim that nobody has a say in these matters due to Big Pharma’s impressive spending power and influence over government policy. If Americans were to become fed up enough with the status quo, the government couldn’t allow the companies to continue their price-gouging. Unfortunately, we haven’t gotten fed up yet. Most people don’t even realize some of Big Pharma’s marketing schemes are going on because they’re done behind the scenes, and it doesn’t make the news. That said, it may also be a misconception that drug prices are simply the “free market” in action. It’s commonly believed that the market is separated from the government. Furthermore, people believe that the core principles of the free market mean that drug firms are able to sell their property for any price they see fit.

Few people understand that government and the free market can’t be separate. The government creates the rules, including deciding what products receive patents, how long they last, which payoffs aren’t allowed, the research that gets paid for and under which circumstances the government can ask for reduced prices. It’s not important to ask if the government should be making these decisions. If not for them, there wouldn’t be a market or any medications. The big problem is the way the market is set up. As long as Big Pharma is allowed to have a say in these decisions, the American public will continue getting ripped off.

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Comments (7)

Cary,

I just wanted to say ‘thank you’. Your efforts are much appreciated as I attempt to assist my 87 year-old mother afford her prescriptions, including using Canadian pharmacies.

Mother lives in Midlothian, TX and I too am a native Texan as well. About 30 years ago, I had to leave the state I grew up in and love, though…I couldn’t handle the state’s relentless move to the right.(but that’s a different story…although I truly think not).

What I really couldn’t handle was the knee-jerk reactionism and proud know-nothingness that prevails. There are things called facts, and it’s a citizen’s duty to ascertain them to the greatest extent possible, without ideological blinders on. People matter more than any ideology ever possibly can.

You, sir, give me hope that reason and humanity can prevail once again. Again, thank you.

Cary,

While I appreciate the tack you are taking, and agree with much of what you have to say, I disagree with where you are placing most of the blame. Pharmaceutical companies are following the exact same business practices that every other business in America practices, but due to the nature of their business (health) many, including yourself, seem to think that they are obligated in some way to operate in a different manner.

Lets go point by point:

Changing products to extend patents: Apple constantly comes out with new models and makes previous versions obsolete. This not only insures patent protection, it allows them to maintain market share. While they can certainly claim technological advances require them to produce new models to keep up with the competition, pharmaceutical companies can make the same claim.

Lobbying to maintain a financial advantage: Tobacco companies spend millions each year to ensure they are not regulated by the FDA. The banking industry spent millions to limit the regulatory power of new agencies and laws established after the most recent financial crises. (BTW, the no negotiating on drug prices was put in place as part of Medicare Part D. Only continued in the ACA.)

Money spent on marketing versus R&D: You have to go no further that the energy field to see this in practice. Energy companies spend a small, small fraction of dollars on R&D and a very large fraction on advertising. As a matter of fact, the US government gives them money to support R&D even though they have more than enough profits to support it on their own dime. From a moral standpoint, you could claim that their refusal to investigate cleaner energy technologies is every bit as concerning as to what is taking place in the drug world considering the environmental impacts.

Incentivizing clients: This goes on in every single industry. Influence makers and decision makers are constantly being rewarded by companies to use, sell, purchase, market their product.

Charging what the market will bear: Too many examples to list, but lets go with jewelry where the mark-up can be as high as 1,000%. (And they don’t even need to develop the product) It is simple supply and demand.

What is the point of my argument, pharmaceutical companies are for profit companies designed, built, maintained, and managed to produce a profit. They use all the same tactics and tools available as every other company in an effort to increase that profit and reward investors. They have no obligation under current law to behave in any other manner no matter our assumptions.

So, where does the fault lie – with our government. You started down that road, but let them off the hook. Ultimately, it is our elected officials who establish all the business practices you are decrying. The government should be allowed to negotiate prices, patents on drugs or medical devices should not be allowed to be extended unless an increase of efficacy is demonstrated, pharmaceutical companies should not be allowed to advertise directly to the public, money should be removed from politics through public financing of elections and/or reasonable campaign finance laws, increased limits should be placed on lobbying or at the very least there should be more transparency, there should be intelligent regulations put in place regarding the price of drugs, the list goes on and on.

Again, those faults all fall at the feet of elected officials and expecting for-profit companies to somehow make the decision not to use every tool at their disposal to increase market share and profit is naive.

Sincerely,

David LeDuc

David,

I agree wholeheartedly with your analysis. It is truly a macro/systemic thing. Allowing the pharmaceutical companies to author the federal prescription drug act in 2004 leads to exactly what has happened. No surprises there!

This is true of all legislation that is controlled by industry, which as you note, owes its only allegiance to its shareholders. One would hope that this would not be true of health care and other vital market segments…but until we all get a mad enough to insist on a government that is whole lot more oriented towards human values rather than share values, it won’t happen. And, as you also note, this cannot be done until monied interests and finance are driven from the election process and campaign contributions are not judged to be free speech. It begins with degrading the language, eliminating critical thought, and proceeds through the clown show that passes for public life in the 21st century. Corporations are not a person!

However, within the smaller context of eDrug Search and Cary’s work, I still want to express a big thank you to Cary for really pointing all this out in his own way and in this blog…especially originating from my home state. It ALL leads to the octopus. The issues are obviously much larger, but I am heartened by the fact statements and the effort here!

Sorry for the delay everyone.

Hey Ken, thank you so much for your support — I can’t thank you enough for your kind words . . . it really made my day!

Nice to meet you David and I appreciate your thoughtful comments as well. And I do agree with you that our government is equally to blame for allowing this level of corruption to occur.

However, I disagree with your statement: “Pharmaceutical companies are following the exact same business practices that every other business in America practices…”

You make it seem as though there is no corruption and every tool they use at their disposal to promote their products is in accordance with U.S. law.

On the surface it may appear to be that simple but in reality its a little more complicated than that – I can’t even capture it in a 1,000 word article and the details are far more horrific than most people know.

However, dig a little deeper and you will find the level of corruption and political influence Big Pharma yields is UNPRECEDENTED and undermines EVERYTHING . . . American’s health (patients are harmed in HUGE numbers), our political system, economy, etc . . .

Here are just a few examples that can be found here: http://www.drugwatch.com/manufacturer/

– In 2009, Pfizer faced both criminal and civil allegations over illegal marketing of drugs like Bextra, Geodon, Zyvox, Lyrica, Neurontin, Detrol and Lipitor. Pfizer was accused of telling doctors that certain drugs could be used for unapproved uses, and defrauding the Medicaid program. The case ended with Pfizer agreeing to a $2.3 billion settlement and a five-year integrity agreement with the Department of Health and Human Services.

Additionally, Pfizer is responsible for selling drugs that can have serious side effects. For example, Effexor, the best-selling antidepressant of 2007 that was used by 17.2 million people that year, and Zoloft, an antidepressant used by 35.7 million people in 2011, have led to birth defects when taken during pregnancy. As a result, many families have sued the pharmaceutical giant.

– Big Pharma employs around 1,100-plus paid lobbyists and from 1998 – 2013 has spent almost $2.7 billion on lobbying efforts — this is more than and other industry; 42% more than the 2nd highest . . . insurance.

– The trade group PhRMA has more than 50 current or former staff members who once served in the political arena, including:

36 who worked for a member of Congress
13 who worked for a federal agency
12 who worked for a congressional committee
Two who worked for the White House
One who worked in the courts system

Using these connections to pursue industry goals, Big Pharma has a significant competitive advantage over the public interest.

– Doctors may be persuaded to allow ghostwriting, which involves Big Pharma paying physicians to attach their names to positive articles about a particular drug with the goal of seeing it published in a reputable medical journal.

– In a 2011 investigation into conflicts of interest in medical literature, an international team of researchers reviewed the funding sources of 29 meta-analyses, or studies of past studies, that involved 509 individual drug trials. Researchers identified seven meta-analyses in which all studies mentioned were funded completely or in part by the manufacturer of the drug being evaluated — or where the study authors had direct financial ties to the drugmaker. In six out of the seven meta-analyses, investigators did not disclose the source of funding.

These slanted studies appear in medical journals that are widely hailed as collections of unbiased scientific evaluation and separated from the long financial arm of pharmaceutical industry influence. Yet Richard Smith, former editor of the British Medical Journal, says, “All journals are bought – or at least cleverly used – by the pharmaceutical industry.”

Big Pharma tends to weaken the objectivity of even the most honest health professionals while encouraging them to overprescribe medications.

– Indeed, many medical journals, including the esteemed Journal of the American Medical Association, actively vie for the attention of Big Pharma advertising dollars, billing themselves as the best way for drug companies to reach their professional readership.

-Drug companies have discovered ways to stage-manage trials to produce predetermined outcomes that will put their products in the best light.

Bad drugs can be made to look good by:

Comparing them with a placebo
Comparing them to a competitor’s medication in the wrong strength
Pairing them with a drug that is known to work well
Shortening a trial before any bad results surface
Testing in groups too small to provide valid evidence

Cary,

As you know, we are on the same side here. It’s great to see more coverage on this topic. Many good comments from readers here as well!

The problem with the health industry in the U.S. is multifaceted, and I agree with their comments as well.

I think 60 Minutes did a great piece on exposing the high cost of cancer drugs in the U.S. in particular. Until it becomes illegal for Big Pharma to arbitrarily set their price in this country, sadly, much of this will keep going on.

In a piece I wrote on the same topic (http://www.drugwatch.com/2014/10/15/americans-pay-higher-prices-prescription-drugs/), it was most disheartening for me to see that 1 in 5 Americans goes with medicine they need because of the cost. Whereas, in other developed countries this is more like 1 in 10.

Of course, the practice of Big Pharma putting out drugs that are fast-tracked and not properly tested until they hit the market is a whole other ball of wax. Side effects lead to more drugs sales, pile on lawsuits, etc. It’s a pretty insidious model.

Keep up your good work, as fellow advocates, we appreciate what you do!

Thank you so much Michelle for you kind words and helping shine the light within the dark side of this industry . . . I tip my hat to you.

If you ever need anything or if I can help the cause in anyway please let me know.

Michelle,

Thank you so much for your work as well. The corruption is indeed endemic, and your fact-based summary and other work on DrugWatch.com are eyeopeners and much needed.

I can (and at the same time cannot) believe how out in the open the corruption is, and how little known it actually is as well.

There is a contempt for the intelligence of the American public on the part of industry and government (actually, the differentiation between the two is undetectable to me…wasn’t this how, I believe, Benito Mussolini defined Fascism?) that never ceases to surprise, amaze, and anger me.

However, like so many other aspects of public life, the bigger the Lie, the easier the sell.

Keep up the good work. It is appreciated more than I can say.

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