The Five Hundred Pound Gorilla

Everyone knows what a 500 lb gorilla can do. It does anything it wants to. But what about an 800 lb gorilla, viz. the pharmaceutical industry? This industrial behemoth for the last 25 years has been doing pretty much what it wants to do. And as a result it has become a $ 200 billion Fortune 500 industry ranking third in profit. How was this accomplished? Why, by raising prices of drugs so that no one can afford them let alone poor people. As the economy shrinks employers cut health care benefits so that the employee is forced to pay more and more of his drug bills. As a result, the patient does not fill the prescription given to him by the doctor or he shares a prescription with his spouse. Sometimes the patient just takes the prescribed pill less often. The doctor thinks what he gave the patient is not working so he prescribes another drug. Thus, worsening the patient’s problem.

When the complaints come in regarding the high prices of drugs, the drug companies reply that those prices are necessary because the cost of research and development (R & D) of new drugs is enormous. This excuse is, of course, corporate spin, more familiarly known as b.s. In actual fact most of the industry’s expenses go into administration and marketing. Note, for example, all the TV ads touting old drugs presented as new as well as public relation messages to offset the complaints of high drug prices. R& D is a small part of their budget. Most of the research is done by academic institutions, small biotech companies and the NIH (National Institute of Health). In reality the drug companies are not as creative as they claim. There have been very few new drugs brought to the market in the recent past. As Marcia Angell, M.D. points out most “new drugs” are not new at all but rather a variation on old drugs which she calls “me-too” drugs. For example, there are six drugs available that lower cholesterol, all variations of the first one. All that is required is to make a slight molecular change in the original drug, get a new patent after the first runs out and the drug company has another 14 years of fabulous profit with very little expenditure on “research”. The old drug is a sure fire hit so why spend tons of money looking for something new that involves huge risk.

As Dr. Angell further points out, the drug industry is not a very good example of free-enterprise as it claims in its ads. It actually has a monopoly on its drugs granted to it by government patent rights and the Food and Drug Administration both of which give it “exclusive marketing rights”. And those rights are global. However, many foreign drug companies like to present themselves as American whether they are or not because we do not regulate drug prices as do foreign countries. Also the research is practically free here since universities and the NIH provide the development at taxpayer expense.

There are a number of other ways that drug companies promote their me-too drugs that you and I pay for in increased prices. One is the old tradition of giving “free samples” to doctors to the tune of $11 billion a year. In recent years these drugs are the most expensive “me-too drugs” and the point is to ensnare the doctor and patient into using them on a continuing basis. Obviously they are not “free.” Also the drug companies send sales representatives known as detail men to visit the doctors and personally hand out the samples along with a pitch promoting the drug as well as free lunches and other gifts. There are 88,000 sales reps employed by the companies at a cost of $5.5 billion which you and I pay for.

Another hot market for promotion is “erectile dysfunction”. And the medium is sports. In order to compete with Viagra the drug company that produces Levitra made a deal with the NFL for $20 million to promote the drug. Levitra signs were posted at the stadium and one coach even gave a pitch on TV. Viagra can be seen on the Nascar circuit and even on a yacht in the America’s cup race. The cost is on you.

Then there are the so-called stealth ads. A prominent celebrity is paid to do video spots for the drug company that are supposed to be news casts and are actually drug promotions. Also Dr Angell refers to an interview of Lauren Bacall who talks of a friend with macular degeneration and mentions the name of the company and the drug used for that condition. What was not revealed was that Bacall was paid by the drug company for
that promotion. The cost was included in your drug price.

These are all marketing expenditures that far exceed the costs of research and development. Marketing expense is the largest item on the drug company ledger. It can be as high as 35% of total revenue.

Another marketing gimmick used by the drug companies is to go directly to the doctor. After all he writes the prescription. So the detail men roam the hospital corridors looking to buttonhole doctors and provide technical information about the drugs they represent. They also visit the doctors in their offices. Many visit the doctor several times a month and the doctors look forward to these visits to keep up with the new drugs. Along with the drug information comes the free samples and many other goodies distributed to the doctor’s staff as well. Many doctors are invited to dinner at first class restaurants, given tickets to athletic events and invited to champagne receptions. Family vacations in expensive resorts are not infrequent and even gifts of cash have been reported. And the doctors for the most part do not hesitate to accept these lavish gifts. In other industries gifts of this magnitude would be considered bribes but many doctors have no problem accepting them.

Another marketing device is to use the doctor himself to market the drug. The pharmaceutical company invites a large number of doctors to come to a week-end symposium to learn about a new drug. The company pays their expenses and gives each doctor $500 to attend. If any are willing to give talks about the drug to other doctors, they receive another $500 each time they talk. Sometimes competitors will pay as much as $1000 to each doctor who attends. Obviously conflict of interest is endemic. But no one seems to care. The physicians deny that they are being influenced by the endless gifts and meals. But it must pay off since the drug manufacturers continue to pour money into this kind of influence peddling. The drug reps maintain that what they do educates doctors to prescribe knowledgably. And the reps push the newest and the most expensive drugs on the doctors.

Let’s now look at the latest sham perpetrated by the 800 pound gorilla. In the late 1990’s Prozac, a widely used anti-depressant was about to lose its patent and the drug company in this case, Lilly, would lose millions of dollars. So Lilly invented a new mental illness called PMDD (premenstrual dysphoric disorder) that could be treated with Prozac. It turns out that this sham illness is nothing but normal premenstrual difficulties with some symptoms of mild depression. Outside this country it is not accepted as a disease. Even in this country it is not fully listed in the “psychiatrists’ manual of diseases” (DSM) despite the efforts of Lilly and the FDA. In its ads Lilly is attempting to convince young women that the mood swings associated with normal premenstrual cycles is actually a mental illness that requires treatment with an anti-depressant, viz. Prozac. Unfortunately the FDA after much delay and discussion has approved the use of this drug for this “disease”. Lilly is now off and running once again toward huge profits. Advertising a disorder that does not exist in order to promote the use of a drug which can have serious side effects for some people is a very risky business

One more example of the powerful influence that drug companies have on the federal government was the passage in 2003 of the “prescription drug benefit” to be included in Medicare. Ostensibly it was done to assist seniors who were taking multiple drugs daily at a huge personal cost. But Medicare owing to the powerful lobby of the drug companies was not allowed to contract for lower prices. The Veterans Administration, insurance companies, auto manufacturers and many other large employers, for example, are allowed to bargain for lower prices but Medicare by far the largest buyer cannot under the new law influence drug prices. This means that costs will go up and seniors will get very little benefit from the law. In fact it will cost seniors more because monthly premiums and deductibles will increase to pay for the rise in drug costs. The total cost was estimated before the bill was passed at $550 billion. And the taxpayer will pay the bill with huge profits going to the drug companies.


References:

Angell, Marcia, MD. The Truth About The Drug Companies. Random House. 2004.
Kassirer, Jerome, M.D. On The Take. Oxford. 2005.
Nation Magazine. Oct. 17, 2005. Moynihan & Cassels. A Disease For Every Pill.