Just Say No to Negotiation?

Okay, Dear Readers, it's blood-boiling time again.

Over the past few weeks, among the television and print ads castigating Republicans as fascists and Democrats as wild-eyed socialists, is another set of competing ads targeting a proposed change to federal law that would help control the enormous cost of prescription drugs by allowing Medicare to negotiate the cost of such drugs with the nation's pharmaceutical companies. The competing ads are carefully crafted to appeal to emotion and fear rather than economic argument: those favoring Medicare's ability to negotiate show frail elderly people sitting at the kitchen table, wondering fearfully if they should eat, pay the rent, or pay for their prescription meds; those opposing it predict the utter collapse of the world's finest, safest, and most productive drug industry, which will be starved of the money it needs to develop the drugs that those elderly folks at the kitchen table so desperately need.

As one of those elderly folks at the kitchen table, I tend to think that allowing Medicare to negotiate is a good idea.

The "Pharmaceutical Research and Manufacturers of America" published a full-page ad on page A13 of today's Washington Post titled "An Open Letter from America's Biopharmaceutical Companies," signed by 34 CEOs of major drug companies. The letter stridently beats the drum on the evils of allowing Medicare to negotiate drug prices on behalf of patients. Here are a few excerpts:

"Unfortunately, our ability to remain global leaders in innovation and patient care is under attack."

"In the coming weeks, Congress will consider policies that, under the guise of 'Medicare negotiation,' would threaten patients' access to medicines and sacrifice future medical advances."

"One of the proposals alone would cut $1.5 trillion from innovative research companies in just the next 10 years, threatening investment in small, cutting-edge biotech startups and forcing established companies to make difficult choices about which promising medicines to pursue or abandon. This same proposal could mean a 90%+ reduction in new medicines developed by small and emerging biotechs and disproportionately impact new treatments into rare diseases, cancer, and neurological diseases."

"We agree with leaders in Washington that Americans need help with their health care costs, but these dangerous policy experiments are not the answer. Let's work together to advance bipartisan solutions that lower out-of-pocket costs for patients at the pharmacy counter without sacrificing future treatments or cures or American leadership in scientific discovery ... through continued dialogue and innovative thinking we can achieve our shared goals."

You will, of course, pardon my skepticism about these claims, and particularly the pleas to "work together to advance bipartisan solutions" and "(conduct) continued dialog and innovative thinking." These remind me about the classic description of a "committee" as a dark alley down which promising ideas are lured and then quietly strangled.

You may also notice that the ad mentions one proposal that would both cut $1.5 trillion from "innovative research companies" and reduce the development of new medicines and treatments by more than 90%. It does not, however, explain where those numbers came from or how the impact was estimated. It also doesn't mention that pharmaceutical companies already are reluctant to invest in new medicines and "treatments into rare diseases, cancer, and neurological diseases" which do not have enough patients to return a profit on their development.

It is no secret that prescription drug prices in this country are the highest in the world. The pharmaceutical industry defends these prices as necessary to fund research and development, although they fail to mention the enormous overall profits earned by the industry. A study published in the Journal of the American Medical Association in March, 2020, titled "Profitability of Large Pharmaceutical Companies Compared With Other Large Public Companies" found that 

"In this cross-sectional study that compared the profits of 35 large pharmaceutical companies with those of 357 large, nonpharmaceutical companies from 2000 to 2018, the median net income (earnings) expressed as a fraction of revenue was significantly greater for pharmaceutical companies compared with nonpharmaceutical companies (13.8% vs 7.7%)."

It interpreted this as meaning that

"Large pharmaceutical companies were more profitable than other large companies, although the difference was smaller when controlling for differences in company size, research and development expense, and time trends."  

The conclusion was:

"From 2000 to 2018, the profitability of large pharmaceutical companies was significantly greater than other large, public companies, but the difference was less pronounced when considering company size, year, or research and development expense. Data on the profitability of large pharmaceutical companies may be relevant to formulating evidence-based policies to make medicines more affordable."

So ...

We desperately need a calm, rational, well-designed study that examines the calculation of drug prices. Because our economy worships at the festooned altar of corporate profits, any company operating in a capitalist system must demonstrate earnings over and above expenses that makes it worthwhile to stay in business and deliver acceptable returns to the shareholders. These earnings are what we call "profit," and are the grease in the corporate machine. A case can be made, though, that some profits may be considered "excessive," either as a percentage in excess of some undefined "normal" profit level for similar entities or as a gratuitous grab for earnings otherwise unjustified by consideration of expenses and return. Examples of this include Mylan Pharmaceuticals'* 2016 decision to increase the price of lifesaving epinephrine injectors (Epi-Pens) used by persons (like me) subject to severe allergic reactions more than 500% for a package of two pens, and the arbitrary increase by Turing Pharmaceuticals CEO Martin "Pharma Bro" Shkreli of the price of the drug Daraprim from $17.50 to $ 750 per pill.

Dear Big Pharma: stop with the scaremongering and explain - with data, not emotional appeals - why you need to keep drug prices so high. Instead of running ads that piously tell us that "if you cannot afford your medications, (insert company name here) may be able to help," just bring the cost down to something real people suffering from real conditions can afford.

We don't all have enough money to buy our own rocket trips into space ... much less eat, live indoors, and afford medical treatment.

Have a good day. More thoughts coming.

Bilbo

* By the way, the CEO of Mylan was (until November of 2020) Heather Bresch, who happens to be the daughter of West Virginia Senator Joe Manchin. I guess West Virginia residents don't have any problems with high drug prices.