U.S. Pharmaceutical Industry: The Price Americans Pay

Table of Contents

Pharmaceutical IndustryPhoto by Michał Parzuchowski on Unsplash

The pharmaceutical industry includes some bad apples, companies who allegedly hike up prices for prescription drugs. That includes but isn’t limited to life-saving drugs.

In essence, it’s a costly matter. To our wallets, and our well-being.

This contributes to what the Zero Theft Movement has termed the ‘rigged layer’ of the economy—the unethical profits crony capitalists make by rigging an otherwise healthy and safe financial system against us, the public. 

In this second part of our exploration of high prescription drug prices, we will be looking at some common pharma schemes, as well as how the pharmaceutical industry spends millions in order to potentially get congress to sell out and manipulate regulators. 

Part one (“Drug Prices: Big Pharma’s Big Profits, Your Big Losses”) provides context on the size of the industry and details how off-patent drugs have experienced price hikes over the years.

Per the Commonwealth Fund, “the average U.S. resident paid $1,122 out-of-pocket for health care, which includes expenses like copayments for doctor’s visits and prescription drugs or health insurance deductibles.” Does the US healthcare system need to be so expensive?

Pharma Schemes: Patent System, Market Allocation, and Pay for Delay Deals

Some big players in the pharmaceutical industry have devised schemes to exploit the public and elude sanctions for price fixing. This—at least, in part—contributes to the great profitability of the sector in spite of its purported high risk.

Big pharma commonly uses tactics such as patent abuse and market allocation to fix prices. 

Patent Abuse

The patent system was established in order to safeguard an individual’s innovation, their intellectual property. Nevertheless, some pharmaceutical companies have seemingly managed to distort the patent system’s purpose in order to unethically increase profits. 

The Association for Accessible Medicines (AAM) published an article exploring how the pharmaceutical industry takes advantage of the patent system. AAM claims:

“Too often, however, some brand-name drug companies attempt to patent features of drugs that do not represent true innovation. Some attempt to bury competition from generic and biosimilar drugs indefinitely by finding ways to repackage existing inventions in later patents. These ‘patent thickets’ chill competition by discouraging competitors from entering a market because of the exorbitant cost of litigating meritless patents.”

“AbbVie Inc.’s rheumatoid arthritis drug HUMIRA® (adalimumab) is the best-selling prescription drug in the world, with over $12 billion in U.S. sales per year…The initial patent on the product expired in 2016, but within the three years before expiration, the company applied for and obtained over 75 patents that would extend its monopoly to 2034 – and keep this enormously expensive treatment inaccessible to many patients.”

In short, patent abuse comes in two main forms: claiming patents on features that do not involve “true innovation” and creating “patent thickets” where a drug company will obtain many patents for a single medication to deter competition.

Citizen Petitions and Market Allocation

Citizen petitions refer to a basic law governing the U.S. Food and Drug Administration (FDA) that any interested party can request the commissioner to “issue, amend, or revoke a regulation or order or take or refrain from taking any other form of administrative action.” (Source)

Market allocation refers to agreements in which companies divide the market amongst themselves, thus eliminating/reducing and crowding out other competitors where each operates. 

Bloomberg reported on the loopholes in the pharmaceutical industry, stating: 

“Scott Gottlieb, commissioner of the U.S. Food and Drug Administration, is so fed up with a range of different drugmakers’ machinations he delivered a sharp rebuke last month: ‘End the shenanigans.’ Among the shenanigans: Securing new patents that extend old ones. Keeping brand-name drugs under wraps so generic makers can’t copy them. Filing so-called citizen petitions that gum up the FDA approval process for rivals. Negotiating restrictive deals with drug plans that crowd out less expensive drugs.”

Pay for Delay Deals et al.

The Harvard Business Review also covered the matter in an article, raising grave concerns about how some pharmaceutical companies “game the system to keep drugs expensive.”

“One of the ways branded drug manufacturers prevent competition is simple: cash. In so-called ‘pay for delay’ agreements, a brand drug company simply pays a generic company not to launch a version of a drug. ‘Authorized generics’ are another tactic to limit competition. These aren’t really generic products at all; they are the same product sold under a generic name by the company that sells the branded drug. Why? By law, the first generic company to market a drug gets an exclusivity period of 180 days. Another way pharmaceutical firms are thwarting generics is by restricting access to samples for testing.”

Dollars for Doctors

The pharmaceutical industry also uses its money to help sustain its influence on the medical profession and community.

“Excess in the pharmaceutical industry,” a study published in the Candian Medical Association Journal (CMAJ), details how drug companies involve themselves in the medical field.

“Drug companies now support most continuing medical education, medical conferences and meetings of professional associations. Although they call it education, the billions of dollars they put into it comes out of their marketing budgets. The industry also provides students, house officers and physicians in practice with meals, trips to exotic locations and many other blandishments. Although medical and industry associations have issued guidelines that would limit these gifts, codes of conduct are entirely voluntary and full of loopholes…[I]t is self-evidently absurd for medical professionals to look to an investor-owned company for an impartial, critical evaluation of its own products, there is ample evidence that marketing masquerading as education does increase the use of a drug.”

As it stands, the U.S. government cannot negotiate drug prices for Medicare Part D due to a non-interference clause. If the government were allowed to negotiate, would that reduce drug prices? Join the debate on the Zero Theft voting platform…

Big Pharma Lobbying

Returning to the CMAJ study cited above, it asserts that lobbyists for the pharmaceutical and health products industries together spend more than any of their constituents. The study states, “The pharmaceutical industry has the largest lobby in Washington, DC—there are more pharmaceutical lobbyists there than members of Congress—and it gives copiously to political campaigns. As a result, the prescription drug legislation and policies that come out of Washington are usually made to order for the industry.” FIVE BIGGEST SPENDER
IndustryTotal Spend
Pharmaceuticals/Health Products$4,519,330,657
Insurance$3,010,300,385
Electric Utilities$2,587,377,753
Electronics Mfq & Equip$2,534,629,311
Business Associations$2,479,021,087

Statistics from OpenSecret.org, Center for Responsive Politics

The Center for Responsive Politics has taken a comprehensive look into the pharmaceutical industry’s lobbying spend, providing much needed data and context on the matter. In an article outlining the background information on the industry, the organization writes:

“[I]ndustry spending levels have fluctuated, though they have usually hovered around the $30 million range, including during the 2014 cycle when that number was nearly $32 million. 2012 was the cycle when the industry contributed the most—over $50.7 million.”

“In terms of lobbying, key players in 2014 included the Pharmaceutical Research and Manufacturers of America (over $16.6 million), Amgen Inc (nearly $8.6 million), Pfizer Inc (nearly $8.5 million), the Biotechnology Industry Organization (almost $8.3 million) and Eli Lilly & Co (around $8.2 million). Lobbying efforts focus on the patent system, research funding and Medicare. While lobbying totals were fairly high at over $229.1 million in 2014, the industry hit a record in spending nearly 272.8 million on lobbying activities 2009—around the time when the Affordable Care Act was being debated in Congress.”

With the hundreds of millions that the pharmaceutical and health products industries spend on lobbying each year, you start to wonder what exactly is that money funding. 

Influence on Pharmaceutical Laws

A document published by the American Retiree Education Foundation (AREF) and National Retiree Legislative Network (NRLN) adds further depth and evidence for pharma’s ability to block legislation that goes against its interests. 

“According to reports in…[the] Center for Responsive Politics, the pharmaceuticals and health products industry contributed $25.6 million in campaign and leadership PAC contributions to House and Senate incumbents and challengers in the 2018 mid-term election cycle. The industry also spent $216.1 million lobbying in Washington, DC in 2018. Drug companies seek to maintain their influence and access in the Capitol with campaign contributions and platoons of lobbyists recruited from both parties…”

“Drug companies have been in such a strong position, and they have contributed so generously to people in both parties, they’ve been pretty well able to block anything.” 

Representative Lloyd Doggett (TX-35), from a New York Times article.

Nitrofurantoin is an antibiotic used to treat urinary tract infections (UTIs). About 6 to 8 million Americans contract the infection per year. The drug appears on the World Health Organization’s List of Essential medicines, and has been on the market since 1953. According to a Financial Times report, pharmaceutical company Nostrum Laboratories increased the price of a bottle of the drug from $474.75 to $2,392. Join the Zero Theft Movement to find out if long-standing antibiotics are experiencing price hikes…

Are you, the American public, actually spending more on medicines than citizens in other countries? 

In 2019, the Bloomberg School of Public Health at Johns Hopkins University published a news release, announcing the findings of their study on drug prices in the U.S. 

They assert: “The United States, on a per capita basis, spends much more on health care than other developed countries; the chief reason is not greater health care utilization, but higher prices…”

The news release then elaborates what has accounted for these “higher prices”:

“The researchers determined that the higher overall health care spending in the U.S. was due mainly to higher prices—including higher drug prices, higher salaries for doctors and nurses, higher hospital administration costs and higher prices for many medical services.

The paper finds that the U.S. remains an outlier in terms of per capita health care spending, which was $9,892 in 2016. That amount was about 25 percent higher than second-place Switzerland’s $7,919. It was also 108 percent higher than Canada’s $4,753, and 145 percent higher than the Organization for Economic Cooperation and Development (OECD) median of $4,033. And it was more than double the $4,559 the U.S. spent per capita on health care in 2000—the year whose data the researchers analyzed for a 2003 study.”

Statistics

PharmacyChecker, a website dedicated to helping American citizens find affordable prescription medications, released an article in 2017 entitled “70% of Popular Brand Name Drugs Sold in U.S. Pharmacies Are Imported; Cost Up to 87% Less in Canada.

The website tracked prices for drugs between May 1st and June 30th, 2017, and can be seen in full in the article linked above. We strongly encourage you to look at their findings. Below are just a few examples of different kinds of countries, manufactured in different countries, in order to give you an idea of U.S. prices vs. prices for other countries. The cost is in price per pill.

Brand Name
(Condition
Treated)
Production
Country
US
Cost
Canada
Cost
UK/AUS/NZ
Cost
India
Cost
Turkey
Cost
Abilify (psychosis, depression)Japan$34.51$4.65$6.23N/A$2.25
Crestor (cholesterol)Germany$11.37$2.04$1.82$0.39$0.40
Januvia (diabetes)UK$14.88$4.35$3.04$2.00$1.17
Symbicort (asthma)*France$1,446N/A$319.11$73.01$227
Viagra (erectile dysfunction)Ireland$58.72$10.77$8.31$4.44$9.27

*price per four inhalers

It is important to realize that those figures are cost per pill. That means, for example, you are paying close to $30 more each time you take Abilify than they do just across the border, in Canada. Psychosis, if you don’t know, is a mental disorder that causes “some loss of contact with reality.” 

Drug Lawsuit Settlements

“Global health care giant GlaxoSmithKline LLC (GSK) agreed to plead guilty and to pay $3 billion to resolve its criminal and civil liability arising from the company’s unlawful promotion of certain prescription drugs, its failure to report certain safety data, and its civil liability for alleged false price reporting practices…”

(Source)

“American pharmaceutical giant Pfizer Inc. and its subsidiary Pharmacia & Upjohn Company Inc. (hereinafter together “Pfizer”) have agreed to pay $2.3 billion, the largest health care fraud settlement in the history of the Department of Justice, to resolve criminal and civil liability arising from the illegal promotion of certain pharmaceutical products…”

(Source)

“Global health care giant Johnson & Johnson (J&J) and its subsidiaries will pay more than $2.2 billion to resolve criminal and civil liability arising from allegations relating to the prescription drugs Risperdal, Invega and Natrecor, including promotion for uses not approved as safe and effective by the Food and Drug Administration (FDA) and payment of kickbacks to physicians and to the nation’s largest long-term care pharmacy provider.  The global resolution is one of the largest health care fraud settlements in U.S. history, including criminal fines and forfeiture totaling $485 million and civil settlements with the federal government and states totaling $1.72 billion.”

(Source)

Check out a long list of the most expensive drug lawsuit settlements here 

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The ZeroTheft Movement does not have any interest in partisan politics/competition or attacking/defending one side. We seek to eradicate theft from the U.S economy. In other words, how the wealthy and powerful rig the system to steal money from us, the everyday citizen. We need to collectively fight against crony capitalism in order for us to all profit from an ethical economy.   

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