the other drug war [home]
homeanalysisinterviewsfaqsdiscussion
photo of pillsjoin the discussion - What are your views on the efforts of states like Maine and Oregon to control the escalating cost of prescription drugs?  Are you worried that controlling prices could threaten new drug discoveries?

Dear FRONTLINE,

There are a few points I would like to make:

I was deeply disturbed by Ms. Angell's ignorance of the drug discovery process, given her background, concerning "me too" drugs. It is very true that there are many drugs on the market that are quite similar, eg the statins Lipitor, Zocor etc, and the antihistamines Claritin, Allegra, Zyrtec. The point that is missed here is that those drugs were introduced to the market approximately the same time, which means that the companies that discovered them started early discovery research approximately the same time close to a decade before they were introduced. Therefore, nobody is trying to copy anobody, those products represent different solutions to the same problem and they were pursued simultaneously. If after a decade of R&D and clinical trials it turns out that those products are very similar, that was nobody's original intention or desire. I can say with lots of certainty that there isn't a single company currently trying to make a new statin, what for?

Lots of people were complaining about pharmaceutical CEOs' salaries. Even though I strongly agree that those salaries are outrageous, they are no different from CEOs' salaries in other industries. At least the pharmaceutical industry is actually providing the world with life-saving products, plenty of other industries produce absolutely nothing. Why not complain about the multimillion dollar salaries of big-name actors, musicians or athletes?

Another fact that most people don't realize is that prescription drugs are in fact extremely CHEAP relative to the benefit they provide, and compared to ALL other types of medical services. For instance, a general physician's visit (the average time spent with a patient is no more than 5 minutes) costs about $80. If it's a specialist it is a lot more. An ER visit which includes waiting in a room by yourself for 5 hours, maybe some minor blood test, X-ray and talking to a doctor and a nurse for 10 minutes is close to $1000. Occupying a hospital bed for one day alone is several thousand dollars. So, $80-$100 for a month's supply of a prescription drug is not that bad. I do agree though that the elderly, which typically need those drugs more, may have a harder time paying for them than the general population, however, it is still not an unfair price relatively speaking.

Finally, one other main point that is missed is that the per capita income in the US is substantially higher than in any other country in the world. In addition Americans enjoy some of the lowest direct and indirect taxation. Visit Europe, see their 15% to 35% sales tax and you'll know what I mean. Canadians spend close to 50% of their income on taxes. So, as a percent of our aftertax income we are still getting a bargain with our drug prices. The governments in those countries use price caps on prescription drugs as socialist policy tools and to save money so that they can support their expanding and ineffective public sectors. They do not have a substantial domestic pharmaceutical industry like the US has, so it's easy to create policy at anothers' expense. Countries like Germany and France that 50 years ago were pharmaceutical meccas are now essentially off the pharmaceutical discovery map. Canada never was on the map. And one final point: A financed average brand new car nowadays costs approximately $500-$600 a month if you figure in the calculation the cost of insurance, maintainance, and gas. My point again: $80-$100 a month for a few pills that can improve or potentially save you life is not that bad of a deal.

indianapolis, indiana


Dear FRONTLINE,

In your excellent piece on the prescription drug wars, you appear to have succumbed to a rhetorical sleight of hand favored by pharmaceutical interests. Solutions such as Maine Rx are not "price controls." A price control is when the government mandates the sales price for all market participants. State governments have simply woken up to the fact that they have substantial market power as the largest purchasers of prescription drugs. In seeking to extract heavy discounts from the pharmaceutical companies, they are acting as any rational consumer would in the same circumstances.

When Ms. Powell from PhRMA argues that drug prices should be set by market forces, she apparently thinks that governments should not be allowed to use market forces to their advantage. But why not? If the pharmaceutical companies cannot make new products at prices that consumers -- including governments -- are willing to pay, they need to go back to the drawing board.

washington, dc


Dear FRONTLINE,

I agree with the thoughts expressed by a few other writers, that the issue of drug pricing is only one part of the overall issue of healthcare provision in this country. There are layers of "middle-men" that participate between the consumer/patient and the product/provider, that are all basically motivated by profit.

I think it's ludicrous to suggest that the "sole desire is for profit" on the part of drug companies, or any of the middle-men. There are easier and less costly ways to make a profit than in the pharmaceutical industry. The "ordinary American" is often a share-holder, either directly, or through mutual funds, or some pension plan and is a beneficiary, in this respect, of the profits of most of the big pharmas.

The Oregan solution is a good start. Informed decisions are superior every time.

I also agree that the situation with drug patents needs to re-examined. Is there much argument that drug companies invest significant gross amounts of money into research and development (irrespective of arguements about ratio to profit, etc.)? When patents on successful products run out so quickly, relative to the time spent in R&D, the companies seemingly do have to move fast to recoup investment. And, the rate of successful R&D to unsuccessful, so to speak, is high, so there is a lot cost to recoup. While no generic drug producers are apparently in the Fortune 500 (or the top 10), most of these companies are certainly making a good profit, especially compared to their cost of R&D, which is comparitively miniscule (often, if not usually, these companies use the very same studies that have already been conducted and paid for by someone else -gov't and private- to get their generic products approved for market by the FDA). This predation is certainly a factor in the pharmaceutical marketplace, and must be accounted for in any plan for remedy. (So does the ridiculous expense incurred for liability insurance when lawyers run unchecked in many states, filing numerous and spurious suits, knowing that most insurance companies will settle regardless of culpability, and knowing that one large decision will more than pay them for any of their expenses. When the losing side is required to pay the expenses of the winning side, the number of suits will decline. California has an effective plan in place to address this growing problem. This is or will be a major issue in the provision of healthcare, and will ultimately affect the cost, as well.)

Yes, managed care plans negotiate with pharmaceutical companies for a best price, and pharmaceutical companies try to get a preferred status on managed care plans, so patients get some prescription products at lower co-pays than some other products. Rarely, if ever, is a product absolutely not available on a managed care plan. This is a cost-driven relationship, not some weird ploy to force a product down the throats of patients.

Information is the key; if Celebrex is available at a low co-pay, but Tylenol is as effective (and perhaps cheaper), it's up to the patient and doctor to have that discussion. It's ultimately up to the patient to be an educated consumer. Oregon's plan makes that education available.

If my doctor prescribed one product over another just because a sales rep gave him a clock, I'd be furious. I'm confident that this is not the case, and my experience in the field leads me to believe that this marketing hardware is a waste of money; it does not influence prescribing decisions. With the threat of legislation staring them in the face, many physician organizations and pharmaceutical companies have adopted voluntary guidelines that restrict the types of marketing that can occur between a rep and a prescriber. Physicians don't have the time that they used to allot years ago, to talk to a sales rep to get "detailed" on a product. A physician doesn't make money talking to a rep; he or she makes money seeing patients. Further restrictions, quite drastic I suspect, will be implemented through compliance measures with the HIPPA (Health Information Privacy and Portability Act) rules, that can affect sales rep access to the office, and expose the office to liability in the case of non-compliance. There are web-based pharmaceutical detail sites where prescribers can get information specific products, request a contact, and request samples. The suggestion of the influence of sales reps is probably over-blown, and as the show said, the cost-benefit ratio of having sales reps is declining. If a physician is getting most of his or her information (education) about a particular drug or class of drugs from sales reps, then I'd suggest going to a different physician.

As someone said, I don't recall the show mentioning Canadian drug companies involved in world-class R&D. Government regulation of business, per se, doesn't have the best track record, and has in some cases has led to unexpected and undesired effects. Other than a plan such as what exists in Oregon, which is based simply on ready access to objective information, I hope to keep the government out of it.

Jeff S
st. louis, missouri


Dear FRONTLINE,

I thought your representation of the prescription drug war was right on target and did a great job of showing the debate from both sides.

One thing that did annoy me, though, was that the drug companies continued touting the free market model to prevent price ceilings. However, the free market model does not represent the issues in the prescription drug market. In the free market model, there are many assumptions made in order for it to work like the "invisible hand". One of the most important of these assumptions is perfect information. This is why Oregon's move to make unbiased information available to consumers and doctors is incredibly important. This is the ultimate solution for better drugs in the future, because then a drug's performance will have a larger impact on its price. This will give drug companies incentives to produce drugs that are more effective. As it is now they can market drugs that have statiscally insignificant benefits to consumers and still sell them at a higher price because of the brand identity and the inadequate information about it.

Unfortunately, Maine has gone the wrong way on this. Putting a price ceiling on drugs is not an ideal solution for anybody. If this is done nationwide it does not necessarily mean that drug companies will spend less on R&D, just that the money will be spent on lower risk concepts.

David Callan
champaign, il


Dear FRONTLINE,

Although your program was very good, there is one EXTREMELY important aspect that it didn't even touch - and one must wonder why and whose interests were served by its avoidance.

In an in-depth study of 30 innovative and important drugs approved between 1987 and 1991 half of these were developed with help from the federal government - for 11 of them, the government was involved at EVERY stage of development from discovery to human trials. Interestingly, the government funded drugs were among the highest priced. In 1998 the Boston Globe looked at 35 important and top selling drugs approved by the FDA over the previous 5 years. All but 2 had been brought through the pipeline with the help of NIH or FDA funds. Why didn't your program examine the amount of taxpayer dollars that help fund the profits of the drug companies and what the taxpayers get in return besides higher prices?

Frank Dutton
many, la

FRONTLINE's editors respond:
Producer Jon Palfreman addressed this question in his live chat on Washingtonpost.com following the program. This was his response:

"Clearly, drug development depends totally on the state of biological knowledge. Since much medical research is funded by the taxpayer, this has led some to argue that consumers are "paying twice." The problem with this argument is as follows --

While universities, the NIH, produce most of the scientific ideas which lead to new drugs -- in other words they find the disease targets, the molecules which are the targets of drug research -- in most cases this is just the start of a long process. While there are exceptions--drugs like Taxol were largely developed in the public research system--virtually all commercial drugs are developed by the Rx industry. The reason is that the process of turning an idea into an FDA approved drug is long, tedious,boring, expensive and error prone. Almost everything that Rx companies try to do fails. Tens of thousands of molecules might yield one that is tested in rats. Fifty tests on rats might yield one tried on humans. Ten tried on humans might yield two that make it to market. Ten that make it to market might yield three that make a profit. My point is not that this is just expensive, but very tedious and not something that the NIH would do. The only ones willing are drug companies and the reason is making a large profit.

An interesting sidenote is that no communist country ever produced a Rx industry."


Dear FRONTLINE,

A very obvious question went unanswered in The Other Drug War:

if the drug companies are so concerned about maintaining their R&D budgets, why in the world should the US customers foot more than their fair portion of the bill?

Canadians, Japanese, and Europeans are all in our economic peer group and can afford to pay for R&D as much as we can, but under the present system it appears that Americans pay for innovation and the rest of the world gets a free ride (or at least a far less expensive ride).

I would have liked to hear the drug companies address the question as to why if Americans paid less, they couldn't just charge other countries more. After all, no one is forcing the companies to make bagain-basement deals with other governments. Foreigners would pay somewhat more, Americans would pay less, and the companies could maintain their R&D with all users sharing the costs of innovation. Why isn't that a fair--and rather obvious--solution?

Daniel Simon
new york, ny


Dear FRONTLINE,

Many U.S. exports require an Export License issued by the U.S. Department of Commerce. Why can't the drug companies set a "world price" - the same for all countries? This would recoup their costs while lowering U.S. prices since the burden would be spread worldwide rather than being loaded on the U.S. If other countries would not pay the 'world price' why would the drug companies feel compelled to sell any to them?

Apparently the drug companies have taken the path of least resistance and sell to the 'regulated' countries as long as the price is above their cost of manufacture; the entire R&D burden, which we concede to be high, is thrown on U.S. consumers. The drug companies who refuse to sell at a 'world price' should be denied an export license. This move wouldn't solve all our medical problems but would merely lower some prices. I suppose this would encourage 'pirating' and ignoring of patents by foreign drug companies - is any of that going on now?

James Bradley
allentown, pennsylvania


Dear FRONTLINE,

Frontline:

I found the program on the other drug war very interesting. The rationale of the representatives of the drug companies was unintentionally funny. If the makers of Cipro, Prozac, Coumadin and Zocor can make money in Europe and Canada selling those products at less than half and sometimes 1/5 of the cost in the U.S. why can't they make money here? One other correspondent mentioned the salaries and bonuses and otherperks that CEOs of drug companies. This was not a questionthat was asked on the program.

Also the amount of money spent on marketing was mentioned,but not really pursued. I would have liked to see moreon this aspect.

Thank you for producing quality television worth watching.

sebastopol, california


Dear FRONTLINE,

I watched your show last night and would like to thank you for bringing this issue to light. Unfortunately, you missed several HUGE issues!

There is a publication that does provide unbiased drug information and has for many years. It is called the Pharmacist's Letter. Look it up. Also, there are thousands of qualified personel that could easily provide info to consumers and doctors alike about less expensive drug alternatives. They are called pharmacists. We studied chemistry and drugs for years, yet rarely get to impart this info on anyone who cares.

An easy way to solve this issue would be to simply include asking your pharmacist if there is a less expensive alternative to the brand name drug the doctor has written for. Not only a generic for the brand but another drug in the same chemical class or one that would have the same effect in the body. Pharmacist receive 5-6 times the information on drugs as compared to doctors. By the way pharmacies make a much higher profit on generic drugs as compared to brand name drugs and have no bias towards those manufacturers.

eric pharmacist
henderson, nv


Dear FRONTLINE,

This is as much an economics debate as it is a political, legal or healthcare debate. What was lacking from the Frontline episode was a real economist discussing the simple issues of supply and demand.

...The main argument posed by drug company CEOs (and even the bipartisan pharmaceutical industry analyst interviewed by Frontline) is that high prices are warranted for any business or investment facing such monumental risk. If the drug company is forced to reduce prices artificially through price controls, investment in R&D will fall (as it reportedly did in Europe) and even fewer new and improved drugs will make it to market. The consumer/patient loses again.

Here's the flaw in that argument: If across-the-board price controls were mandated, why would any one of the ten drug companies in the Fortune 500 take the lead by reducing its budget on R&D in order to maintain profit margins? Drug discovery is the major market driver at work here, and presumably the main source of all the risk. Why wouldn't the other nine drug companies maintain their R&D investment levels, bring a new drug or two to market, and within a couple of years swallow the leader whole? As soon as investors and Wall Street found out that the leader had reduced its R&D efforts, its stock would collapse. With even fewer competitors, you take capacity out of the market and reduce price pressures even further -- left to the forces of a free market economy, prices should increase for the surviving companies!

Ironically, this same reasoning was posited as the single reason no one drug company would take the lead in reducing its astronomical sales and marketing budget. The thinking was that if all ten Fortune 500 drug companies would just agree to cut their sales force by 10% and reduce advertising costs by 10%, we could pass the savings back to the consumer. The drug companies would still average 8-9% in profits -- almost three times the average of the remaining Fortune 500 companies over the past several years. These same experts argued that it would be impossible for drug companies to "unilaterally disarm" because the first mover would be wiped out when the remaining nine companies did not follow suit. If it would be impossible for one drug company to take the lead on reducing its sales and marketing budget, why would it be any more likely that a drug company would take the lead in reducing its investment on R&D? Again, Macroeconomics 101. The fact of the matter is, with open competition in the U.S. markets, none of the drug companies will significantly reduce its R&D budget. They may cut back on executive pay, scale back on TV ads and billboards, and maybe eliminate some of the sales giveaways and boondoggles for physicians -- but they're not going to reduce R&D.

Governor Kitzhaber hit the nail on the head: the single most important factor missing from this dynamic is information. When the consumer has control over the buying decision and is armed with comparative data, value decisions can be made and market forces will dictate prices. I can assure you that if a major non-profit (or state or federal entity, for that matter) launched a web site where every drug was compared side-by-side on performance and price, prices would fall into balance within a matter of days or weeks (as the price of Nexium did once Oregon established its own comparison)! Of course, the flaw in this logic is that the drug companies and PhRMA would file an injunction to have the site shut down long before we had an opportunity to see what the market would do when really left to its own devices.

Bob W
cary, nc


Dear FRONTLINE,

It response to what these CEO's make one can check it out at aflcio.org and under quick find got to executive paywatch. I surveyed seven drug companies and found the total compensation to those seven totaled only $148,866,871 in 2001 and $156,149,485 in 2002. That makes the average just over $22,000,000 a year, come on people lighten up how can you expect these poor guys to live on that!?

Sure most of it is in the form of Stock Options etc. but in my book compensation is compensation. It all cost the company money. In fact I once saw an article about how in some cases these other forms of compensation actually cost companies more money. I'm wondering will these guys get free drugs for life as part of there retirement packages?

Combine that with what they spend on marketing and one can see why drug are so expensive, at least in America.

As for high risk and R&D cost? What are they talking about. Aren't we paying twice for it: once as a business expense (even for those drugs that don't make it to market) which reduces there income and of course there tax liablility, this of course effects every citizen of that country in which they pay taxes. And then again form of these high prices, which of course affects only the user. How many times they expect to recoup there cost?

Rick Bresee
edmonds , wa


Dear FRONTLINE,

I think many people would be happy to subsitute less expensive drugs for the more espensive ones perscribed by our doctors if we knew what they were. How can we get a copy of the list Oregon has? Can it be put on the web?

escalon, california

FRONTLINE's editors respond:
Go to the section of this web site "The Battlefield in the States" - a link to the Oregon List is on the upper right of the page.


Dear FRONTLINE,

Great beginning...please consider a series of reports on this subject. The American consumer is hungry for reliable and accurate sources of information regarding this issue. Access to affordable prescription drugs is going to continue to be major issue not just for those without coverage. It's an issue for all of us.

I'm curious as to why we are prohibited from getting medications from Caanda, but we can get everything else. Why is this exculded from our free trade agreement? I can buy all the cosmetics I want from Canada and have them absorbed through my skin and no one seems concerned, but if I want prescription cream I can't get it. I can eat all the fruit I want from Canada, but I should not take prescription drugs because it's suddenly a third world country when it comes to medications.

The American consumer needs to take control of this situation...don't believe for a minute that a prescription drug benefit under Medicare will address the issue. If costs are not controled before you put a bebfit in, the whole Medicare program will be in danger of collapsing.

Pay attention to what is going on in the commercial insurance market. Prescription drugs have been the fastest growing costs for them, resulting in lower benefits, higher costs for consumers and employers and now we are going to put Medicare beneficiaries in this system by privatizing it and do nothing to contol the pricing before by negotiating for the all of the Medicare recipients up front. What's wrong with this picture?

manchester, vermont


Dear FRONTLINE,

I really resent the drug companies threatening to reduce R&D if cost restraints are put on their products. The claim that this will also reduce innovation is misinformation. Having worked in the medical field all my life I have found restraints more often encourage and foster innovation.

The Oregon plan is truly the best Iíve seen. Education is the key for both patients and especially doctors as they are the true consumers in the health industry.

Kenneth Croteau
chicopee, ma


Dear FRONTLINE,

I am a policy analyst who focuses on pharmaceutical policy and I'd like to share a few points with your audience:

$1 of increased prescription spending substitutes for about $4 of hospital spending, according to Professor Frank Lichtenberg of Columbia University.

Models by economists such as Henry Grabowski of Duke University and colleagues show that a $100 reduction in free cash flow to the research-based drug industry is associated with a reduction of R&D investment of between $12 and $31. Dr. Angell's criticism of marketing and administrative spending is a red herring. When direct-to-consumer advertising was deregulated in 1997, R&D spending increased because the drug makers were more able to communicate the value of their products.

Nor does Dr. Angell appears to understand the cost of a head-to-head clinical trial. It is a multiple of the cost of a placebo trial, for statistical reasons too complicated to explain in this posting.

Dr. Angell just wants to impose more costs on the drug makers, which must be passed on to patients, governments, and insurers. Economic research going back to the 1970s shows that the FDA's increasing regulatory burden (especially the Kefauver amendments) drastically increased the costs of clinical research, and correspondingly reduced its productivity.

As for wining and dining physicians: the physicians are completely in charge of this because they have a legislated, self-regulated monopoly over prescribing medicines. If they are unable to manage the responsibility of this monopoly, it is time to rethink how prescription drugs are distributed to patients.

As well, there has been a law in the US since 1990 that forces drug makers to give their biggest discounts to government agencies. The US General Accounting Office showed that this caused drug makers to increase prices to private insurers since the early 1990s. It also means that drug makers cannot discount to the uninsured more than the state.

Finally, there are no laws that force you to take a brand new patented medicine (with the exeption of extreme cases of mental illness). However, please don't allow the government to take the choice away from others though misguided legisltaion and regulation.

John R. Graham
vancouver, bc


Dear FRONTLINE,

Maybe you should add how the pharmaceutical industry gives rebates and kickback incentives to the insurance companies to have their products on formulary lists at OUR expense by spending millions on switching patients to their product.(I know, I own a pharmacy.)

monroe twp, nj

more

 

home + introduction + analysis + interviews + frequently asked questions
discussion + battlefield in the states + producer's chat
tapes & transcripts + press reaction + credits + privacy policy
FRONTLINE + wgbh + pbsi

posted june 19, 2003

photo copyright © bill varie/corbis
web site copyright 1995-2014 WGBH educational foundation

Ý

SUPPORT PROVIDED BY

FRONTLINE on

ShopPBS