The Price of Health (II)

Subtitled “The Modern Pharmaceutical Enterprise and the Betrayal of a History of Care” the book offers more insights into drug prices.

Antibodies are a highly specialized protein that have evolved over the millennia to help the body defend itself against disease. These proteins are produced by a particular set of immune cells in the body, known as B cells, and are characterized by being both highly conserved and outrageously diverse. (page 188)

The idea behind the cocaine project faced two obstacles, however. First, a user could overwhelm the antibody by simply snorting even more cocaine. Perhaps more compellingly, monoclonal antibodies are among the few medicines that are even more expensive than high-quality powder cocaine. Nonetheless, key individuals high on such ideas championed this cause for a time, expending resources that might have been invested more intelligently. (page 202)

A confounding aspect overhanging the debate about price and benefits of new medicines revolves around the questions about the credibility and, frankly, greed, of the pharmaceutical enterprise and associates industries (i.e., investors, insurance companies, pharmacy benefits managers, hospitals, physicians, and pharmacies). According to
Gallup, the biopharmaceutical industry now ranks among the least-respected institutions in the world and the lower rated industry in the United States. (pages 204-5)

To our knowledge, the story of AZT was the first time that a perception of excessive drug pricing captured headlines around the world. Perceptions that the pharmaceutical company was taking advantage of the public at a time of a terrible pandemic were accompanies by the reality that much of the preclinical and clinical research needed to discover AZT and then demonstrate its utility had been underwritten by the American taxpayer. (page 211)

For example, industry consolidation and outsourcing facilitated the creation of “middleman” organizations, usually venture-backed startup companies, which in turn were required to generate profitability to keep the doors open and satiate their investors, who were also seeking a hefty return. (page 215)

The patient today has virtually no say in what drug they will be putting into their bodies (except of course to simply refuse to take a prescribed drug in a potentially self-defeating protest). It is likewise naive to think that the physician, who was responsible for writing the prescription, will be able to dictate what medicine is finally used. Yes, a physician can certainly influence the decision-making, but the final decision will generally be made by the institution that pays for the medicine. (page 227)

A formulary is simply the array of medicines that a particular pharmacy will provide….A formulary, as dictated by a PBM or insurer, limits the availability of medicines for which they will pay. As we have already seen, you can of course obtain any drug for which you have a prescription. However, you will have to pay full price for that medicine out of pocket unless it is included in the formulary of your insurer (or the PBM with which your insurer has contracted.) (page 231)

A pharmaceutical rebate, unlike its more conventional consumer counterpart, is not issued to the end user (i.e., the patient) but rather to the pharmaceutical benefit manager….A payer (e.g., an insurance company or organization such as Medicare) will then bargain with a PBM to establish a ‘negotiated price” that the end users (the patients) will have to pay for their medicines….With this in mind, a rebate is a discount offered, generally by pharmaceutical manufacturers, with the goal of including their medicine in the PBM’s formulary. (page 233)

This seemingly simple idea now leads to the subject of “bundling.” Let’s say you a manufacturer with a porfolio of products that you want to have included in the formulary of a large PBM (or insurance company if they are not using PBMs). A PBM may negotiate a rate for one drug that is profitable but insist on including this as part of a bundle for a rate for another drug that is not. (page 234)

The negotiated prices between a PBM with both the insurance provider and the manufacturer are strictly confidential and considered a trade secret. (page 234)

In recent years, insurance companies (i.e., payers) became increasingly aware that the middlemen (i.e., PBMs) are reaping huge profits from the approaches described above and have begun to acquire these businesses for themselves. (page 236)

At the end of the day, a study conducted by the University of Southern California (USC) in partnership with the Brookings Institute concluded that American consumers are responsible for 64-78 percent of pharmaceutical profits despite the fact they account for only 27 percent of global income….Americans pay more for medicines because they are not protected by their government from doing so. (pages 241-2)

As you may recall, the first company to file an abbreviated new drug application (ANDA) with the FDA for a generic drug is granted a six-month period of exclusivity. This provision had been included in the Hatch-Waxman legislation as an inducement to promote generic manufacturers but instead has been a persistent source of abuse, as we will now see. (page 257)

Yet vaccines have fallen out of favor, perceived by many in the pharmaceutical industry as not conveying sufficient revenues to be worth the effort….As the attraction of revenues to be earned from vaccines wanted, so did the number and capabilities of organizations that had historically participated in vaccine development. In effect, we let our guard down and thus were caught largely flat-footed for the COVID-19 calamity that began in rural China starting in late 2019. (page 262)

The chronic malady afflicting the industries involved in the discovery, distribution, and payment of pharmaceuticals seems awfully similar to “Dutch disease.” This term was apparently first applied by The Economist magazine in a 1977 article to describe how newfound wealth arising from a gas field in the northeast part of The Netherlands two decades before had effectively doomed the manufacturing capacity of the entire nation. The revenues from fossil fuels drove up the price of the Dutch guilder and theby rendered other Dutch exports uncompetitive. (page 264)

Indeed, FDA employees have quietly conveyed to us that a popular intramural conspiracy theory is that the government intentionally under-staffs the agency to prevent if froom too closely regulating the bio-pharmaceutical industry. (pages 276-7)

Medicare Part D is a well-intended program to help seniors gain access to much-needed medicines. However, the means by which it was crafted created loopholes that actively contributed to the rising prices of medicines. (page 289)

In what 46brooklyn cleverly refers to as “the Race to Catastrophic,” the ACA legislation required manufacturers of branded (but not generic) pharmaceuticals to pick up 50 percent of the costs to close the donut hole (this was later increased to 70 percent). This approach sounds reasonable enough, but the catch was that consumers could county the full 100 percent of the branded drug price in their race to reach the catastrophic phase (when the prices for most drugs would be picked up by the insurance plan). Consequently, consumers were induced to select branded pharmaceuticals, leaving the manufacturers of less expensive generic medicines discouraged and scratching their heads as to why their sales were shrinking. Worse still, these loopholes sent signals to the manufacturers of branded drugs (even those subject to generic competition) that they should raise their prices even further because it would allow consumers to reach the catastrophic phase more quickly, obviating their need to supplement costs and forcing Medicare to pay the full price. (page 290)

To be fair, the Cystic Fibrosis Foundation is not alone as many nonprofits have adopted an aggressive form of so-called “venture philanthropy.” Chief among this new generation of philanthropists is the Gates Foundation, which demands intellectual property rights for inventions developed with its funding. (page 303)

One response to this post.

  1. Posted by Rex the Wonder Dog!🐶🐶🐶🐾🐾🐾 on July 24, 2021 at 1:01 pm

    The cause of high prices is because of Big Pharma collusion with Congress. No different then Wall Street collusion with Congress. They rig the system based on, and with, their “campaign contribution$”. No different than what public unions are doing on the local and state levels.


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