Truths and fiction within the drug market

  • Drugs are more expensive in America than anywhere else.
  • The president’s plan, which he called the “most sweeping action in history to lower the price of prescription drugs”, lacks potency.
  • The price of drugs is based on what the market will bear.
  • The argument that  nine out of 10 big pharmaceutical companies spend more on marketing than on research is flawed as most of this marketing money is directed at the physicians who do the prescribing, rather than consumers and includes everything from medical journals to expenses for sales people.

I’m the first person to say that drug pricing is out of control in this country, but the other side of this story is that we really have no idea what is actually being paid for the drugs we receive because of our complicated layers between patients and prescription drugs.

According to the Economist, “the president’s plan, which he called the “most sweeping action in history to lower the price of prescription drugs”, lacks potency. A few ideas are welcome, including the proposal to hinder pharmaceutical firms that try to delay the arrival of generic versions of their drugs after patents expire. But many of Mr Trump’s suggestions need legislation, which is unlikely just now. No wonder his speech triggered a rise in the share prices of pharma firms”.

Unlike other countries, America does a bad job of negotiating down the prices of new drugs. If America really wanted cheaper drugs, it would copy what European countries do, and refuse to buy drugs that do not offer good clinical value for money.

Last week John Oliver used his show as a soapbox to say that drug companies are spending more on marketing than R&D.  This argument is flawed.  First, medical marketing has a lot of buckets including expenses for salepeople, medical liaison people and medical journal marketing.

The other flaw in Mr Oliver’s argument is that today physicians aren’t necessarily buying what pharma companies are selling.  Sales reps often don’t get to see doctors and the use of the Internet among physicians continues to grow as they seek new data on new and existing prescription drugs.

I foresee a time in the future when drug companies will greatly reduce the number of drug reps and replace them with people who have medical degrees so they can add real value to physicians rather than just a “rehearsed pitch”.

According to IQVIA™ Institute for Human Data Science Study: Spending on Cancer Meds in the U.S. Doubled from 2012-2017 and is expected to double again by 2022 to $100 billion.  Insurers are not likely to deny cancer patients drugs which could prolong life by week or months, but they are likely to move to a model of “pay for performance”.  This would ensure that the drugs prescribed are efficacious.

Now what about R&D?

A recent paper said that “pharma company mergers are reducing the number of new medicines coming to market”. The paper went on to say that ” 5% more drugs would become available each year if not for what they refer to as “killer acquisitions.”

The truth is a little bit more complicated.  There are already a lot of generic drugs on the market fro the most common health problems.  “New and improved” drugs may not be possible.  Some biotech companies have given up research on Alzheimer’s because the disease is just too complicated to solve right now.  As the drop in cancer related mortality indicates we are having an effect on the war on cancer, but there is no “moon shot” to treat all the different types of cancers.

Drug pricing is going to remain a hot issue, but we need to beware that anger is not always based in fact but rather in sensational media headlines.  Don’t expect politicians to dig into the real reason for high health care costs, but rather they are going to jump on the populist bandwagon.  It’s up to each of us to read and understand that drug prices are just a small part of the reason our healthcare costs are so high.