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Why Big Pharma is killing it

Apr 17, 2017 | Blog | 0 comments

Why Big Pharma is killing it according to Marcia Angell MD, former Editor of the New England Journal of Medicine

The top multinational drug companies–like the Swiss giant, Novartis, or the British giant, GlaxoSmithKline, or the American giant, Pfizer–have annual sales of tens of billions of dollars, exceeding the GDPs of many whole countries. And an astonishing percentage of these revenues are pure profit. The pharmaceutical industry is consistently among the most profitable in the US. And no surprise, it has the largest lobby in Washington. It uses its wealth to co-opt the institutions that might an any way curb its drive for profits–including Congress, the Food and Drug Administration, and the medical profession.

  1. The astonishing commercial ‘success’ of the pharmaceutical industry depends upon three conditions:
    The government grants drug companies very long and easily stretched monopoly rights for their new drugs, during which they can price them as high as they want;
  2. Drugs don’t have to be new at all, but can be slight variations of drugs already on the market–called ‘me-too’ drugs. Me-too drugs are now the main product of Big Pharma, and drug companies don’t have to show that these ‘me-too’ drugs are any better than the drugs already on the market.
  3. Since 1980 drug companies no longer have to do their own innovative research, but can feed off research done by investigators funded by the National Institutes of Health (NIH) at academic medical centers and small biotech companies.

With their vast public relations apparatus, big drug companies are always trying to convince us that their astounding prices are necessary to fuel innovation and R&D. That is clearly not true. . .Drug prices are now rising at an annual rate of 16%.

Here are a few specific examples of how Big Pharma is taking advantage of its lobbying/PR power:

Sovaldi is a drug that in just three months can cure hepatitis C-a chronic life-threatening disease that affects more than 3 million Americans. Sovaldi is owned and sold by a large company called Gilead Sciences, but the company had nothing to do with the research that created it. Instead, it was patented and developed by a small company called Pharmasset, which in turn was a start-up of researchers at Emory University. Gilead bought Pharmasset for $11 billion five years ago and price3d Sovaldi at $84,000 for a three month course–a price that clearly had nothing to do with its costs. Because of the expense, Solvadi is now restricted by Medicaid and private insurers to only the sickest patients, even though other patients could also be cured. In the UK, the National Health Servie has de3cide3d not to make it available at all. This is rationing of life-saving treatment simply through price gouging. But look at the benefits to Gilead. Last year, the company had sales of $32.5 billion, of which 55% was pure profit. 11% went for marketing and administration, and on 9% for R&D. This picture is fairly typical of the big drug companies that have essentially won the lottery by acquiring a winning drug.

When Novartis brought Gleevec to market–a drug that stops a form of leukemia in its tracks–the company priced it at $27,000 per year, even thought the research and most of the development was done by an NIH-funded investigator at the Oregon Health Sciences University. It cost Novartis very little. This was in 2001; Gleevec is now priced at $120,000 for a year’s supply. Last year, Novartis had sales of $49.5 billion; profits were 36% of sales, 29% was spent on marketing and administration, and only 18% on R&D.

My comment: What matters most to you? Profits or patients?