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Drugmakers Hike Prices As New Year Begins

H.R. 3, The Lower Drug Costs Now Act of 2019, would remove a prohibition against negotiating maximum prices for insulin products and at least 25 other brand name drugs.
H.R. 3, The Lower Drug Costs Now Act of 2019, would remove a prohibition against negotiating maximum prices for insulin products and at least 25 other brand name drugs. (Photo:www.ccPixs.com)

“It’s no surprise that drug prices continue to skyrocket on the Trump administration’s watch. Trump and Secretary Azar have talked a big game about lowering drug prices, but they simply haven’t delivered. Trump’s pharma hires into key positions are one reason why.”

Reuters reported on Wednesday that major pharmaceutical companies hiked prices on more than 250 drugs as the new year began, drawing attention to President Trump’s failure to bring down costs despite promising to negotiate better prices as a core pledge of his 2016 campaign.

“Drugmakers including Bristol-Myers Squibb Co (BMY.N), Gilead Sciences Inc (GILD.O), and Biogen Inc (BIIB.O) hiked U.S. list prices on more than 50 drugs on Wednesday,” reported Reuters, “bringing total New Year’s Day drug price increases to more than 250, according to data analyzed by healthcare research firm 3 Axis Advisors.”

Axis notes that almost all of the price increases were below 10% with a median price hike of around 5%. Reuters notes that more early year price increases could still be announced.

U.S. Drug Cost Crisis

As Citizen Truth reported earlier this week, a record 25% of Americans told Gallup last month that they or a family member had deferred treatment for a serious medical condition because they couldn’t afford care.

Harvard study last year found that “prices of labor and goods, including pharmaceuticals and devices, and administrative costs appeared to be the main drivers of the differences in spending,” between the U.S. healthcare system and the systems of other rich nations.

At around 18% of GDP, American per capita health care expenditures are more than twice the average of the 35 advanced countries in the Organization for Economic Cooperation and Development (OECD). Yet despite outspending these countries, the U.S. “has the lowest life expectancy, the greatest incidence of chronic illnesses, and the highest infant, child, and maternal mortality rates” in the OECD, according to economist Robert H. Frank.

Frank told Evonomics that “no developed country other than the United States relies largely unregulated insurance companies for the provision of health care,” blaming America’s weakly regulated profit-driven health care model as the reason for higher costs and worse outcomes.

Economist Dean Baker also points to government-granted monopoly patents as a central driver of high drug prices. Both economists cite the health care industry’s control over regulators and lawmakers as a major barrier to reform.

Trump Backs Off Drug Pricing Promise

During his campaign, Trump promised to use the government to negotiate lower drug prices.

“When it comes time to negotiate the cost of drugs, we are going to negotiate like crazy,” Trump said in New Hampshire in early 2016.

“They’re getting away with murder,” Trump told reporters in January 2017. “Pharma has a lot of lobbies and a lot of lobbyists and a lot of power.”

Shortly into his presidency, however, Trump abandoned his pledge after meeting with pharma lobbyists. House Democrats passed a bill in December that would allow the government to negotiate some of the costliest essential drugs, but Trump slammed the bill with the traditional Republican argument that negotiation would impede development of new drugs.

“Pelosi and her Do Nothing Democrats drug pricing bill doesn’t do the trick. FEWER cures! FEWER treatments!” Trump tweeted last month. “Time for the Democrats to get serious about bipartisan solutions to lowering prescription drug prices for families.”

Economist Mariana Mazzucato challenges the notion that negotiating prices would hamper innovation. Mazzucato notes that “78 percent of patents approved by the U.S. Food and Drug Administration correspond to medications already on the market,” with industry gaming the patent regime to extend patents on what are essentially the same drugs, and argues that the U.S.’ current model is “incentivised to set high prices and deliver short-term returns to shareholders, rather than focus on riskier, longer-term research.”

Further, Mazzucato points out that much innovation is publicly funded. “While taxpayers are largely footing the bill for drug research, pharmaceuticals are reaping all the gains:”

“Sofosbuvir, which treats hepatitis C, emerged from over 10 years of U.S. taxpayer-funded research — through the Department of Veterans Affairs and the National Institutes of Health. But when the private biotech company Gilead Sciences later acquired the drug, it priced a 12-week course of pills at $84,000 in the U.S. market. By the end of 2017, Sofosbuvir had generated over $50 billion in sales.

“Sofosbuvir is not an exception. The U.S. taxpayer has funded research for every single one of the 210 new drugs that the FDA approved between 2010-16. Yet the companies that have access to this research are increasingly viewing pharmaceuticals in the same way that banks view their financial product — opportunities for short-term returns.”

In total, the industry collected around $440 billion from sales in the U.S. alone in 2018, spending only about $70 billion on research, one-sixth of the money it took in. Mazzucato notes that the industry spends more on stock buybacks than research and development: “Pfizer, for example, spent $139 billion on share buybacks and dividends in the past decade — and just $82 billion on research and development in the same period.”

Instead of supporting legislation to stop American drug companies from price gouging, the Trump administration proposed last month to import drugs from Canada, a country with universal healthcare that regulates its drug costs. However, the administration has not said how or when the plan would go into effect, and Canada’s acting ambassador to the United States Kirsten Hillman warns that “that Canada’s market for pharmaceuticals is too small to have any real impact on U.S. drug prices.”

“The Canadian government has fiercely pushed back against importation proposals,” reported the Washington Post, “warning that the drug supply for Canada’s 37 million residents cannot possibly fulfill the demands of the much larger U.S. market and that allowing importation would cause severe drug shortages for Canadians.”

Critics question the president’s sincerity in his promises to lower drug costs by pointing to his administration’s deep ties to the pharmaceutical industry, with former lobbyists and employees holding key positions in his cabinet.

Alex Azar, who became the Trump administration’s Secretary of Health and Human Services after former secretary Tom Price resigned amid ethics scandals, previously served as CEO of the drug company Eli Lilly during a period when the company more than doubled the cost of its version of insulin.

“The price of insulin has tripled in the last decade,” said Senator Amy Klobuchar of Azar’s nomination. “If you want to bring down drug prices, you don’t put a former pharmaceutical company executive in charge of health care policy for our country.”

Athough Trump has so far filled his cabinet with more corporate lobbyists in three years than the Obama and Bush administrations did in two full terms, the health care industry’s control over lawmakers and regulators long precedes his administration.

Nine out of the last ten FDA commissioners joined the pharmaceutical industry after their public service. Scott Gottlieb, for example, was Trump’s FDA commissioner until March before joining Pfizer’s board of directors in June. As the New York Times reported in 2012, the industry bias is so extreme that the FDA even conducted a “wide-ranging surveillance operation” on its own scientists to suppress unfavorable drug safety opinions.

“It’s no surprise that drug prices continue to skyrocket on the Trump administration’s watch,” said Restore Public Trust spokeswoman Lizzy Price. “Trump and Secretary Azar have talked a big game about lowering drug prices, but they simply haven’t delivered. Trump’s pharma hires into key positions are one reason why.”

Peter Castagno

Peter Castagno is a co-owner Citizen Truth.

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