IN SUMMARY: Novartis will price its new Mayzent multiple sclerosis drug at 88,000 dollars per year which is more proof that pharma companies could care less about the heated debate around drug pricing.

I’ve done a lot of research with MS patients. They are among the most connected patients on social media, comparing notes and talking about new treatments in the pipeline. The buzz this morning around the new Novartis drug is not good but then again for pharma it’s not about patients; it’s about investors and Wall Street.

In order to justify high prices big pharma like to lie to themselves and say they need the money for R&D but that’s not true. The pharma industry is responsible for the development of medicines that save lives and alleviate suffering but they profit handsomely.

Last year, US giant Pfizer, the world’s largest drug company by pharmaceutical revenue, made an eye-watering 42% profit margin. Last year, five pharmaceutical companies made a profit margin of 20% or more – Pfizer, Hoffmann-La Roche, AbbVie, GlaxoSmithKline (GSK) and Eli Lilly.

Invoking high research costs to justify high drug prices is deceptive.

According to The Atlantic ” Peter Bach, a researcher at the Memorial Sloan Kettering Cancer Center, and his colleagues compared the prices of the top 20 best-selling drugs in the United States with the prices in Europe and Canada. They found that the cumulative revenue from the price difference on just these 20 drugs more than covers all the drug research and development costs conducted by all the drug companies throughout the world—and then some”.

After accounting for the costs of all research—about $80 billion a year—drug companies had $40 billion more from the top 20 drugs alone, all of which went straight to profits, not research. More excess profit comes from the next 100 or 200 brand-name drugs.

In November 2017, a study published in JAMA Internal Medicineexamined the costs of developing 10 cancer drugs approved by the FDA from 2006 to 2015 and provided a strong contrast to the Tufts study from a year before. Its authors, from Memorial Sloan Kettering and the Oregon Health and Science University, used annual financial disclosures from the Securities and Exchange Commission for companies that had only one cancer drug approved but had on average three or four other drugs in development. They found that companies took an average of 7.3 years to win FDA approval, at a median cost of $648 million. Only two drugs had research costs over $1 billion. Adding in the cost of capital at 7 percent increased the median research and development cost to $757 million.

Pharmaceutical companies often claim that the research costs of unsuccessful drugs also have to be taken into account. After all, 90 percent of all drugs that enter human testing fail. But most of these failures occur early and at relatively low costs. About 40 percent of drugs fail in preliminary Phase I studies, which assess a drug’s safety in humans and typically cost just $25 million a drug. Of the drugs that clear this first phase of testing, about 70 percent fail during Phase II studies, which assess whether a drug does what it is supposed to do. The research costs of these studies are still relatively low compared with overall R&D costs—on average, under $60 million a study.

Raymond Gilmartin, a former Merck CEO, once said to The Wall Street Journal: “The price of medicines is not determined by their research costs. Instead, it is determined by their value in preventing and treating disease.”

With the Justice Department trying to void the ACA the Republicans are guaranteeing that healthcare is going to be a primary campaign topic. There is no doubt that we are moving closer to a single payer system that’s going to have an effect on the drug industry that has never been seen before. The drg industr is the mode of “get what we can while we can”.