Against the backdrop of an historic congressional debate on legislation to add long-promised prescription drug coverage to Medicare, FRONTLINE examines the battle between major pharmaceutical companies and American consumers fed up with paying the highest drug prices in the world.
Through interviews with consumers, legislators, scientists, top industry leaders and analysts, "The Other Drug War" examines the efforts of states like Maine and Oregon to control escalating drug costs in the face of strong opposition from the pharmaceutical industry. The program also explores the tension between the high cost of scientific innovation and society's need to keep drugs and health care affordable.
The launching point for this report is the story of how a group of frustrated senior citizens led the state of Maine into battle with the powerful pharmaceutical industry. Frustrated by the skyrocketing cost of their prescription drugs, hundreds of Maine seniors began organizing bus trips across the Canadian border, where they found they could purchase the exact same prescription drugs for a fraction of what they were paying in the United States. Having to make the journey was inconvenient enough, the seniors said; but it was when they learned that people in Mexico, Japan, Germany, and most other developed nations were also paying much lower prices for drugs invented in the U.S., that their frustration turned to outrage.
"I think it's disgusting," Maine senior Carleen Simpson says. "Every country practically in the world gets drugs cheaper than we do.
The seniors' activism eventually led to proposed legislation that would force pharmaceutical companies to sell their drugs in Maine for the same price they were charging in Canada.
The pharmaceutical industry reacted quickly. PhRMA, the industry's trade organization, dispatched lobbyists to Maine in an attempt to kill the bill, which came to be known as Maine Rx. When that failed and the bill passed, the industry won a court injunction barring the state from implementing Maine Rx.
Maine senior activists like John Moran called it "pure and simple greed." Not so, say key industry leaders. Admitting that price controls keep drug prices lower in most other countries, they say it is America's free-market system that makes drug innovation possible.
"Thirty years ago, because of the quality of its scientists, France was number two in pharmaceutical innovation in the world, and today, after 30 years of price controls, it's number nine." says Sidney Taurel, CEO of pharmaceutical giant Eli Lilly.
At the heart of the pricing debate, industry leaders say, is the enormous cost of developing new drugs -- a process that can take up to 15 years. For most drug candidates, the many years of research will lead to nothing. Thus, when a blockbuster drug like Zoloft or Viagra emerges, the company must not only recoup the cost for developing that drug, but also the costs for all the unsuccessful drugs that never made it to market.
"When you drill for oil, you drill a lot of dry holes ... and eventually you hit a gusher," says Princeton economist Uwe Reinhardt, an expert on the U.S. health system. "And all the costs of the dry holes have to be recovered from the oil in the gusher. The same is true in the pharmaceutical industry."
It is for this reason, industry leaders say -- to fund the expensive research and development phase -- that they must charge so much for their drugs. It's also why the industry says it strongly opposes price control legislation such as Maine Rx.
"If the Maine program was adopted by other states, it could have very dire consequences for the pharmaceutical industry," says Taurel.
But Marcia Angell, former editor of The New England Journal of Medicine, and other critics, note that for all their talk of innovation, drug companies have in recent years turned out fewer and fewer new drugs. Angell also points out that many of the recently released drugs are not new compounds but simply "me too" drugs that duplicate existing medications already on the market.
It was this point, in part, that led the state of Oregon to take a different approach to the problem of prescription drug costs—one that emphasized not just cost but quality. According to former Governor John Kitzhaber, the drug market was highly inefficient. While consumers could find objective information to help them make smart choices for virtually every other product, he says, there was no Consumer Reports-style independent information for drugs. Instead, doctors and consumers got their data and education from the drug companies. This led to wasteful practices that squandered Oregon's precious Medicaid dollars for the poor, Kitzhaber says.
"I have a young man who works for me, he had pain in his wrist and he went to see his doctor and came back with a prescription for Celebrex ... which costs about $75 a month," Kitzhaber, a physician, tells FRONTLINE. "There's no clinical evidence to suggest that Celebrex is any more effective than across-the-counter ibuprofen ... at $7 a month for an otherwise healthy young man with no history of gastrointestinal problems."
To help physicians -- and consumers -- make wiser drug choices, Oregon decided to create its own version of Consumer Reports, charging scientific committees with comparing drug against drug in terms of safety, efficacy, and price. The information was then used to develop a preferred drug list. But despite the fact that Oregon's plan involved no price controls, the pharmaceutical industry fought vociferously against its passage, bill proponents say.
"PhRMA had 26 lobbyists in the building trying to stop this bill," recalls Dr. Alan Bates, a physician and member of the Oregon state legislature.
Despite the lobbying blitz, the bill passed. Yet few states have been able to withstand the pharmaceutical industry onslaught, Kitzhaber says.
"I think a lot of states have tried things like this, but very few states have actually got anything through their legislature," he says. "And many of the states that have immediately are sued by the drug companies. Maine was sued, Michigan was sued, and they're deciding whether to sue us here in Oregon."
Back in Maine, the state fought PhRMA all the way to the U.S. Supreme Court, which in May 2003 issued a decision allowing the Maine Rx program to take effect. As many as 20 other states say they, too, may enact programs to control drug prices. Meanwhile, in Washington, passage of a new Medicare prescription benefit for seniors seems closer than ever before. President Bush is pushing for a compromise between Republican and Democratic plans, and congressional leaders have promised a vote before the July 4 recess.
The consumer movement that started with those bus trips to Canada is poised for a possible major victory over the pharmaceutical industry. But the question remains: How much will that potential victory benefit the pocketbooks of consumers? And what will be the bottom-line impact on drug companies and their incentive to develop new innovative drugs in the future?