Paying for pills

Melody Petersen is the author of "Our Daily Meds." She covered the pharmaceutical industry for the New York Times from 1999 to 2003.

In the debate on healthcare reform, one remedy for skyrocketing medical costs rarely gets mentioned: allowing the government to use its substantial buying power to negotiate lower prices for medicines.

The drug companies, with the help of hundreds of hired lobbyists, have succeeded in keeping this proposal off the table, even though studies have shown it would save billions of dollars a year.

If healthcare legislation is signed into law with no controls on drug prices, the pharmaceutical industry will have won a financial bonanza. Drug companies will get millions of new customers while continuing a system that leaves the United States as the only country in the developed world that lets the industry charge more or less what it wishes. All other countries either limit medicine prices or the industry’s profits.


The United States spends $300 billion a year on prescription drugs -- twice as much as we spend on higher education. We spend more on medicines than do all the people of Japan, Germany, France, Italy, Spain, Britain, Canada, Australia and New Zealand combined.

Drug executives have long argued that Americans should eagerly fork over this money. They say we shouldn’t think twice about paying an average of $120 for each brand-name drug we pick up at the pharmacy -- up from an average price of $65 in 2000.

If prices were limited, the executives warn, companies would be forced to cut back on scientific research and Americans would get far fewer new medicines. Discovering a drug can take more than a decade, they say, and run up a research bill approaching $1 billion.

But do their arguments hold up? No. It’s painfully clear that we’re not getting our money’s worth from what we pay for medicines.

It’s true that discovering a new lifesaving drug is expensive. Whether the cost is as high as the industry claims continues to be a matter of fierce debate. The drug companies have refused to allow outside scrutiny of what they spend in their labs. In fact, the companies’ actual research costs are one of the industry’s most closely guarded secrets. In the 1970s and 1980s, pharmaceutical companies waged a decade-long legal battle to keep even government auditors from reviewing those costs, leaving it unclear whether they include non- scientific costs such as promotion.

But there’s a bigger issue that has largely escaped public scrutiny. Over the last 30 years, the industry hasn’t focused its efforts on discovering those truly amazing innovations that can change the practice of medicine. Those are the projects that are risky and expensive. Instead, the companies have taken the easy path, ordering their scientists to turn out mostly rehashes of medicines already being sold. It’s far cheaper to copy a medicine -- tweaking a molecule just enough so it gets its own patent -- than it is to do the years of work needed to find new and better cures.


This focus on copycat medicines is apparent in the list of drugs approved by the Food and Drug Administration. Of the medicines approved between 1990 and 2004, only 16% were what government reviewers deemed to be actually new and significant. The rest were medicines we were already using in a slightly different form. This explains why our pharmacies our stocked with a multitude of medicines that reduce cholesterol in the same exact way.

With no price controls, the industry gets away with charging exorbitant amounts -- even for drugs that barely work. Take Erbitux, a cancer drug sold by Bristol-Myers Squibb. An 18-week course of the drug can cost the price of two BMWs. Yet that course of Erbitux has been shown to extend the lives of lung cancer patients by little more than a month. It’s hard to see how this is anything other than executives taking advantage of patients desperate for a ray of hope.

As other countries limit prices, the drug companies have looked to Americans to pay more. Medicine prices elsewhere are 35% to 55% lower, according to the Congressional Budget Office. A logical outcome of this: Americans are paying for pharmaceutical research that people all over the world benefit from. Yet the story is more complicated than that.

Donald W. Light, a visiting professor at Stanford University, found in a study published this summer that despite the far lower prices in Europe, drug scientists in those countries continue to discover more medicines than their American colleagues. “Lower European prices seem to be no deterrent to strong research productivity,” he wrote.

But perhaps the best measure of whether we’re making a smart choice by spending more on medicines than anyone else on the planet is to look at global life-expectancy rankings. And the news is not good. According to the CIA World Factbook, we live shorter lives than people in Canada, France, Britain and 46 other countries. Our expected lifetimes are now about the same as those in Cuba.

Congress must pass legislation to ensure that every American has access to medical care. And study after study has shown we can do that without breaking the bank -- if only we reform the system to hold down costs. But the drug companies, which are spending more on lobbying than any other industry, are determined to make sure that doesn’t happen.

When Congress expanded Medicare in 2003 to cover the cost of prescriptions, the industry’s lobbyists got language into the bill that made it illegal for the government to negotiate prices and act like a savvy medicine shopper. That bill was written behind closed doors, passed in the dead of night and shepherded through Congress by Rep. Billy Tauzin of Louisiana. Tauzin then quickly retired from Congress to take a $2-million-a-year job with the drug industry’s trade group.

Since 2003, our annual prescription bill has soared by $100 billion. Overall, we spend more on healthcare than we do on food, housing, transportation or anything else. Nearly one of every five dollars that we spend each year goes to the drug companies, doctors, hospitals and the rest of the medical system.

We can’t stand by while the majority in Congress gives the drug industry everything it asks for. We simply can’t afford to.