The hard truths about pharma, drug prices, and healthcare

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The media loves to stir the flames of division with articles on everything from politics to healthcare. However, the truth about healthcare and pharma is often hard to digest for many of us. We would rather blame everyone for our healthcare problems but also need to look inward. Here are some inconvenient truths.

1ne: Pharmaceutical companies justify high drug prices by saying that the money is needed to fund research and development for new drugs. However, studies have shown that the revenue from the price difference on just 20 drugs is enough to cover all the research costs for those drugs and still have extra money for profits. Lower drug prices could still fund research and development while reducing excessive profits and other expenses.

2wo: Pharmaceutical companies in the United States can charge high prices for their drugs because there are not many regulations that control how they set their prices. They claim that they need to charge a lot to fund research for new drugs, but the government supports a lot of research. In other countries, the government negotiates with the companies to determine the price of drugs, but in the US, private insurance policies negotiate the prices. This, along with patent abuse and lobbying by pharmaceutical companies, keeps drug prices high.

3hree: A recent study found that many young adults in America are suffering from chronic health conditions like obesity, depression, high blood pressure, and asthma. The most common conditions were obesity, depression, and high blood pressure. People with chronic conditions were more likely to engage in risky behaviors like binge drinking, smoking, or not exercising. The study suggests that preventing these conditions and addressing their risk factors early is vital to ensure good health.

4our: Being overweight or obese for a long time, especially if it starts at a young age, can increase the risk of getting certain types of cancer. Some types of cancer that are more likely to happen in people who are overweight or obese include breast, bowel, kidney, pancreatic, leukemia, non-Hodgkin lymphoma, head and neck cancers, and bladder cancer.

5ive: A new analysis predicts that by 2030, almost half of adults in the United States will be obese, and one-fourth will be severely obese. Severe obesity will particularly affect women, low-income adults, non-Hispanic black adults, and states near the Mississippi River. The state with the lowest obesity rate will be Colorado, while Arkansas is projected to have the highest rate of severe obesity. Individuals with obesity incur significantly higher medical costs than individuals without obesity, both overall and for most significant categories of health expenditures. Illnesses, injuries, or disabilities related to obesity can also affect an individual’s finances through work-related expenses.

6ix: The eight biggest US pharmaceutical companies reported profits of $10 billion domestically on revenue of $214 billion and paid taxes only on that portion.

7even: The pharmaceutical industry is enormously profitable, with companies like Johnson &
Johnson, Merck, and Bristol Myers Squibb are raking massive sums of money.

-In 2022, Johnson & Johnson made $17.9 billion in profits, and its CEO received $27.6 million in compensation. That year, the company spent $17.8 billion on stock buybacks, dividends, and executive compensation, compared to just $14.6 billion on research and development (R&D). In other words, the company spent $3.2 billion more enriching executives and stockholders than finding new cures.

In 2022, Bristol Myers Squibb made $6.3 billion in profits, and its former CEO made $41.4 million in compensation. That year, the company spent $12.7 billion on stock buybacks, dividends, and executive compensation, compared to just $9.5 billion on R&D. Just like Johnson & Johnson, Bristol Myers Squibb spent $3.2 billion more enriching executives and stockholders than finding new cures.

-In 2022, Merck made $14.5 billion in profits, and its CEO made $52.5 million in compensation. That year, the company spent over $7 billion on dividends and executive compensation and $13.6 billion on R&D. If Merck’s cancer drug Keytruda was its own company. Its 2022 sales would rival McDonald’s annual
revenue and exceed the revenue of the hotel chain Marriott.

8ight: Millennials with common chronic medical conditions and their children are “high utilizers” of the health care system compared to Generation X, the research found. This includes 106% more hospital admissions for millennials with diabetes and 55% more emergency room (ER) and urgent care (UC) visits for hypertension.

9ine: Prescription drugs have become accepted as an integral part of life in the U.S. Approximately 85% of adults aged 60 years and older reported taking at least one prescription drug in the previous month; about 45.8% of all Americans said the same.

10en: In the first three months of 2024, investors injected $5.1bn into biotech startups, the most in seven quarters. Eight companies have launched initial public offerings (IPOs) since January, raising a combined $1.5bn, compared with $2.5bn for all those listed in 2023. Another nine have sold themselves to larger drugmakers for $1bn or more—the busiest start to a year in a decade. In February, Novartis, a Swiss pharmaceutical titan, said it intended to buy MorphoSys, a German cancer specialist, for $2.9bn. AstraZeneca, a British-Swedish giant, acquired two biotech firms for over $3bn the following month. IQVIA, a research firm, expects $180bn-200bn in biotech and pharma deals this year, up from $85bn in 2022.

11leven: Big pharma has been sticking to marketing and distribution and outsourcing much of its innovation to the biotechnology sector. In 2023, 57% of all new drugs approved in America originated at small companies, up from 40% eight years earlier. The upstarts are responsible for more than three in four new clinical trials in the early stages and two in three late-stage ones (see chart 3). Kasim Kutay, chief executive of Novo Holdings, which owns a controlling stake in Novo Nordisk and interests in other healthcare firms of all sizes, believes that nimbler biotech firms’ singular focus on a particular disease area may give them better odds of success in drug development compared with sprawling big pharma.