Soaring Prices of Drugs Squeeze Workers, Pharmacists

The drug industry--the legitimate one--grossed about $70 billion last year, and a congressional hearing will be held in Washington today to ask: Is the public getting its money’s worth?

Like many others, Sen. David Pryor (D-Ark.) already knows the answer: No.

But as chairman of the Senate Special Committee on Aging, which will conduct the hearing, Pryor and his co-investigators want to see what, if anything, can be done about prescription drug price hikes, at least for the oldest and poorest Americans who have been hurt most by them.

Prices have gone up astronomically--some say obscenely--in recent years. They are rising so dramatically that Sen. Lloyd Bentsen (D-Tex.) said last week that Congress may have to drop prescription drugs from the benefits of the Medicare catastrophic care program. And taking away that benefit would be a catastrophe for millions of people.

General medical care costs have been going up more than twice as fast as consumer prices overall. That has triggered a near-crisis in employee health-care benefits, forcing workers to shoulder an increasing share of the costs.

Compounding the problem are the drug price hikes, which have far surpassed even those soaring medical cost increases.

In fact, the only thing that seems to be keeping pace with drug price hikes are the profits of drug manufacturers. Pryor pins the blame for skyrocketing drug costs on what he calls “the sins of the drug manufacturers.”

Few challenge the need for most prescription drugs. But their prices cannot be justified no matter how the very contented brand-name manufacturers massage the data.

And the pipers who are paying for the manufacturers’ happiness are employers and taxpayers, too, since the drug makers get handsome income tax writeoffs for a large part of the huge amounts of money they spend on research and development.

Also, millions of workers and other consumers who are not covered by prescription drug insurance are paying the higher-than-ever retail prices. And millions who are insured are hit indirectly because they have to help employers pay higher insurance costs.

Even the drugstores and pharmacists who are presumably an integral part of the drug business are being squeezed financially.

That can be seen in Southern California in contract negotiations between the Thrifty and Clark drugstore chains and their pharmacists.

The pharmacists, who need seven years of education and training to get their licenses to practice, have long been dissatisfied with their salaries and job pressures. As a result, more than half have rejected a rich but tentative contract proposal that would boost wages and benefits by about 30% over three years and put their top scale at $30 an hour.

All of the officers of eight locals of the United Food & Commercial Workers representing the pharmacists had urged acceptance of the pact, which was worked out with company officials led by Thrifty’s senior vice president, Chris Bement.

A second vote began last week to determine whether the pharmacists are willing to strike for a better deal. That voting, which will be completed today, requires a two-thirds majority under union rules to call a strike.

If the strike is voted down, the pharmacists will be left in limbo and they may have to live with a contract they don’t want.

The drugstores argue that they are paying as much as they can since their prescription profits are minimal these days because of a drug retailing system that has become widespread.

The system, started in 1970, today covers an estimated 65 million Americans, who are spared the distress of direct contact with those enormous drug bills since they pay a relatively small co-payment fee for their prescriptions.

These people use plastic cards that allow the pharmacies to pass along the rest of the drug’s price to employers or employers’ insurance companies.

Firms such as Pharmaceutical Card System (PCS), based in Scottsdale, Ariz., supply the plastic cards. Workers then use them to get prescriptions from drugstores that, in turn, are paid only the wholesale price of the drugs, plus a dispensing fee.

In other words, the pharmacies don’t get the regular retail price. They accept the less profitable wholesale price so they can get in on the huge volume of business from customers who use the plastic card system.

But, squeezed by this system, the pharmacists and the drugstores now have joined the increasing ranks of critics of drug manufacturers.

Retail prices are contained to some degree by the plastic card system of payment. But uncontrolled and apparently uncontrollable are the prices charged by the manufacturers.

When a manufacturer comes up with a new drug, it can charge any price it wants, no matter how high. The patent on that drug lasts for 17 years, plus up to another five years in certain circumstances.

That prevents competition from producers of generic drugs that are just as good and far cheaper than the well-protected brand names.

Permitting such drug monopolies for companies that discover a useful new product makes sense. But it is ridiculous to protect them for up to 22 years so they can make unlimited profits on drugs that are needed for sick people.

Perhaps Congress should reduce the patent life of the drugs. If that isn’t enough, then Congress must devise other proposals that will inspire the inventiveness of chemists in the drug manufacturing business and still do something to contain the outrageous costs of their products.