Originally published with the headline: Dispatches from the drug war: Or, why are Americans subsidizing the Europeans? Given all the ads trying to scare voters into paying more for lifesaving drugs lately, we’ve retitled this story along with some of big pharma’s propaganda for readers to contrast and compare. – Editor
By Susan Grigsby / Daily Kos
Let’s talk about other drug war: The one being waged against the American consumer by the pharmaceutical companies who benefit from our tax dollars that fund basic scientific research and make up the difference in the tax relief they receive for their own research and development.
By now, everyone is aware of the controversy over the price hike of the EpiPen, that indispensable, life-saving, self-injecting delivery system of epinephrine, which can counteract the deadly allergic reaction known as anaphylaxis. Mylan Pharmaceuticals, headed by Heather Bresch, the daughter of Sen. Joe Manchin of West Virginia, made the serious mistake of putting children at risk in the company’s never-ending pursuit of higher profits. You should not mess with the parents of school-age children, and yet that is exactly what Mylan did when it increased the price of its EpiPen by 400 percent, triggering a grassroots movement in response.
In late 2013, the School Access to Emergency Epinephrine Act was signed into law, offering grants to states that mandated a supply of epinephrine be kept in schools. That probably had nothing to do with Mylan’s increase in spending on lobbying, which went from $270,000 in 2008 to almost $1.8 million in 2012 before dropping down to $1.5 million in 2013.
In 2014, the company moved its headquarters to the Netherlands, where it has seen its tax rate fall from 14 percent to its current 7 percent. Oh, by the way, Heather Bresch saw her annual compensation rise by 671 percent between 2007 and 2015, from $2.4 million to $18.9 million.
The mechanical device in the EpiPen to deliver epinephrine was developed in the 1970s by a NASA engineer. It was designed for the rapid self-injection of antidotes to chemical warfare agents in battle, and in 1987 it was approved by the FDA for use with epinephrine. Epinephrine itself is a human hormone, first isolated by Japanese scientists in 1901. So the drug couldn’t be patented, although the device itself, the same one created by a government employee, was. The logical assumption, of course, is that a technology developed by a NASA engineer would be owned by all Americans. But it is not.
Mylan is not the only pharmaceutical company waging a war against American patients who rely on medications.
Daraprim was approved by the FDA in 1953 to treat toxoplasmosis, a rare, infectious disease that can be dangerous to pregnant women and people with compromised immune systems. In August 2015, after acquiring the rights to the drug from Impax Laboratories, Turing Pharmaceuticals raised the price from $13.50 a tablet to $750 a tablet, a 5,000 percent increase. Turing, a start-up led by Martin Shkreli, did no research or development of the drug, but raised the price because it could. It needed no further reason.
Naloxone, the drug that can reverse a heroin overdose, and is becoming widely used throughout the country, is also rapidly increasing in cost.
Baltimore currently pays around $40 for a single dose of naloxone, compared to $20 a dose it was paying in July 2015. An analysis conducted by Truven Health Analytics found the price for the injectable version of naloxone rose from $0.92 a dose to more than $15 a dose over the last decade.
The rights to manufacture cycloserine, a medication that is used to fight drug-resistant tuberculosis, were purchased by Rodelis Therapeutics in August 2015. The price of 30 capsules went from $500 to $10,800 overnight. Following outrage from physicians as well as the media, Rodelis returned the rights to the nonprofit Chao Center. The price of 30 pills did not return to $500, but it did go down to $1,050, only 200 percent of the original price instead of 2,000 percent. (Chao Center, affiliated with Purdue University, says that the increase will reduce the amount it loses to manufacture the drug.)
Cardiac patients have been hit by increasing costs of drugs. When Valeant purchased the rights to the blood pressure medication Nitropress, its price tripled. And that pales in comparison to the price of Isuprel, which helps restore heart rhythms, which went up more than 700 percent to $1,472 a vial. And although the manufacturer has promised to reduce its price by 30 percent to qualifying hospitals, after a Senate hearing, apparently few hospitals have been able to qualify.
The use of digoxin to treat rapid heart rhythm has been part of medical literature since 1785. So it was a surprise when the cost of this almost ancient, but still effective, generic drug went up 50 fold, from six cents per pill to $3.36, forcing some seniors on fixed incomes to choose between eating or getting their prescriptions filled. No research or development was done by the companies that are increasing their bottom lines.
Of all of the drugs that Medicare Part D paid for in 2014, at the top of the list was Sovaldi, the name brand drug that can cure Hepatitis C in 99 percent of cases. Medicare paid more than $3 billion for this drug, compared to the second most prescribed medication, Nexium, which cost Medicare $2.6 billion. There were 7.5 million claims for Nexium, and only 109,543 claims for Sovaldi.
Sovaldi, the name brand of sofosbuvir, was developed by Pharmasset, a company founded by Dr. Raymond Schinazi, who made $400 million when he sold the company to Gilead for $11 billion in 2012. Since 1983, he has worked for the Department of Veterans Affairs (VA) which cannot afford to buy the drug to treat veterans. The 12-week treatment costs $84,000. The price to produce it is $1,400. According to a CBS News report, Chairman of the House Committee on Veterans Affairs Jeff Miller called a hearing to determine why the VA cannot afford the drug that its own doctor helped develop, even with a 50 percent discount.
The VA approved Schinazi’s arrangement and told us federal employees are allowed to invest in private companies, provided all conflict of interest rules are followed. But Miller wants to know if there was a conflict, and why the drug costs $42,000 for veterans, but only $900 in dozens of developing countries.
“It’s a slap in the face to the veterans,” Miller said.
A US senate investigation completed in 2015 found the company didn’t base the price of the drug on its research investments or manufacturing costs; instead, they set the price based on what they determined was the most they could charge while still avoiding bad publicity. Meanwhile, they were preparing for an even more expensive next-generation anti-HVC drug…
“While publicly saying it prioritized patient access, Gilead set Sovaldi’s price at a level where ultimately many patients would not receive treatment,” the Senate investigation (pdf) concluded.
An even more outrageous aspect of the Quartz report detailed the tax avoidance schemes that Gilead used:
Americans for Tax Fairness, a non-profit watchdog group, published a report noting a suspicious pattern: In 2013, the year that Sovaldi was approved, Gilead transferred its intellectual property to an Irish subsidiary. As the drug took off in 2014 and 2015, Gilead’s revenues grew by $20 billion, driven primarily by US sales. In that same time period, the company’s offshore profits rose $17 billion. In both years, the company’s non-US profits far exceeded its non-US revenue—in 2015, for example, Gilead reported $13.7 billion in foreign profit on just $11.4 billion in foreign revenue.
Xtandi is a prostate cancer drug developed at UCLA with taxpayer-funded grants. Currently owned by Japan’s Astellas Pharma Inc., and Medivation Inc, it sells for $129,000 a year in the United States, more than three times what it would cost in Japan or Sweden, and four times what it would cost in Canada.
Because we paid for the research that led to this drug, the federal government could have revoked the patent on this medication under the 1980 Bayh-Dole Act which grants it the authority to revoke the patent if the drug manufacturer fails to make the drug available to U.S. residents on reasonable terms. Apparently, the National Institutes of Health (NIH) felt that it was reasonable for Americans to pay three to four time what other residents pay for drugs whose development we funded, as it refused to revoke the patent.
It now looks like Pfizer has reached a deal to buy Medivation for somewhere in the neighborhood of $14 billion, leaving Medivation’s CEO with a $35 million golden parachute as part of his $354 million package.
That last one is personal for me. When my husband was diagnosed with prostate cancer in 1996, the cancer had already spread to the abdominal lymph nodes, making surgery or radiation pointless. I asked his urologist, who was the head of the Urology Department at the Naval Medical Center in San Diego, what could be done. He admitted that there wasn’t much that they could do other than hormone manipulation therapy for cancer that had reached the stage of my husband’s. There were no new treatments in the pipeline, although the Navy was participating in an effort to accumulate data on the disease. When I asked him what I could do, thinking maybe I could enter data into a computer, he told me that I could demand that Congress fund more research.
So that is what my husband and I did. We attended patient conferences and joined a local support group. When the National Prostate Cancer Coalition formed, we were charter members and attended all of their activist training and lobbying conferences. Learning that the Department of Defense (DOD) had funded research into breast cancer, we pushed our representatives and senators to fund prostate cancer research through a special DOD earmark. They did. Millions of dollars started to flow into research on this cancer that impacts millions of families. And we all went out into the community to raise awareness and to encourage men to get regular check-ups, including a PSA blood test.
It was during this time that we were invited to attend a conference at UCLA where, in addition to other research on prostate cancer, work was being done on the impact of diet and supplements like soy protein and Vitamin E. One of the major pharmaceuticals hosted a luncheon and promised a big announcement on a prostate cancer treatment breakthrough. As the dining room filled with activists, you could feel the excitement build. The striking innovation that the drug company came up with, and for which they wanted our help in pushing the FDA to fast track approval? It was a pill that combined the effects of two earlier pills into one. That was it. A single pill instead of two. And a brand new patent for the manufacturer.
That was the last day that I participated as a patient advocate/activist. It was the day I realized that we were all being played by the pharmaceutical industry. All of our work and all of our tax dollars were not going into finding a cure for prostate cancer, or even into finding its cause, but rather to enriching the bottom line of an industry that did not want a cure. It wanted a chronic condition for which it could supply a stream of drugs that would generate a profit that would enhance its quarterly reports for Wall Street.
Patents for Xtandi were granted to UCLA based on research that was funded by grants from the National Institutes of Health and the Department of Defense. Grants that our efforts may well have enabled.
If that weren’t bad enough, the pharmaceutical industry tells us that they need to charge higher prices to Americans in order to retain enough funding to pay for research and development of new drugs. That is probably why Amgen is charging Americans $14,000 for a year’s supply of its new cholesterol drug Repatha:
In the U.S., Amgen will sell Repatha at more than $14,000 for a year’s supply. An Amgen spokeswoman said the listed price for the same drug and same dosage will total $6,249 annually in Britain. In Austria, an annual supply costs around $7,619, while in Finland the price is $8,175.
A report issued in 2004 by the Department of Commerce in response to a Congressional request was titled: Pharmaceutical Price Controls in OECD Countries: Implications for U.S. Consumers, Pricing, Research and Development, and Innovation.
Naturally, the report found that the industry needed to charge higher prices in the U.S. to fund R&D that they were unable to do on the income produced by those nations that controlled pricing. The report only focused on how Americans would benefit if the OECD nations would eliminate their price controls, not how we could benefit if we would institute our own. Apparently, because those nations refuse to pay inflated drug prices, Americans must subsidize their lower cost in order to protect the financial health of the industry.
It doesn’t have to be this way. The Bayh-Dole Act provides the tools that are needed to reign in the price gouging that is being done on drugs that we have paid to develop. In November, we need to elect a government that will use that authority, since the NIH does not seem to be willing to do so today.
Perhaps the greater insult from the industry in defense of these outrageous price hikes is that the average consumer will never feel the increase as insurance or the government picks up the tab. And then they offer coupons or discounts to help offset the cost to those with high deductibles.
But here is the thing—when an insurance company pays for the medication, it does not absorb the huge cost: it passes it on to everyone else who purchases insurance. That is the way insurance works. That is the way it is supposed to work. And if the government pays the inflated prices, our tax dollars pick up the tab. Since we are paying the piper, should we not be calling the tune?
The Republicans don’t think so. That’s why they prohibited Medicare from negotiating prices with pharmaceuticals under Medicare Part D. The bill was shepherded through Congress by former Republican Congressman Billy Tauzin of Louisiana, and according to 60 Minutes:
After serving out his congressional term, he accepted a $2 million-a-year job as president of PhRMA — Pharmaceutical Research and Manufacturers of America.
He wasn’t the only one who cashed in. Medicare boss Tom Scully threatened to fire Medicare Chief Actuary Richard Foster if he reported on the true cost of the bill before the vote:
Scully was the administration’s lead negotiator on the prescription drug bill, and at the time was also negotiating a job for himself with a high-powered Washington law firm, where he became a lobbyist with the pharmaceutical industry.
People should be reminded that it was Republicans that opened this can of worms that led to their personal enrichment and is known as Medicare Part D. Yes, seniors need a reliable insurance program that covers medication. But there is no reason that Medicare should not be able to negotiate prices just as the VA and the DOD do. Well, except for the Republicans in Congress that will not allow a change in the plan. And the influence of pharmaceutical money on representatives and senators of both parties.
Hillary Clinton’s new drug plan calls for this negotiating tool to be given to Medicare and goes even further in calling for an end to the subsidies that drug companies receive for direct-to-consumer advertising. The plan also calls for an end to “pay to delay” schemes, whereby a patent holder is able to prevent a competing generic from entering the market. The FDA has a multi-year backlog of generic drugs waiting for approval—Clinton wants to fully fund this office within the FDA. There are lots of other good ideas in her plan, but she will need a Democratic Congress to implement most of them. And pressure from the public.