Drug Down

I used to defend pharmaceutical companies.  \”What companies out there have contributed more good?  Should care manufacturers make more when all they do is make transportation that breaks after a few years?\”  It made sense to me that you should put a pot of gold at the end of the rainbow so that companies are motivated to invent more drugs and innovate.  We throw a lot of money to athletes and movie stars who simply entertain us, shouldn\’t we do better to those who heal us?

I used to say that.  I don\’t any more.

No, I don\’t think the drug companies are \”evil.\”  People who say that are thinking way to simplistic.  These companies are doing exactly what their shareholders want them to do: make as much money as possible for as long as possible.  That\’s what all companies do, right?  They are simply working within the system as it is and trying to accomplish the goal of making money.  To say that they should \”sacrifice\” is foolish.  They are simply playing by the rules that have been set out there.  Those rules are the thing that has to change.

The system that allows them to charge $200 per month for a drug that does the same thing as 5 other drugs on the market is the real villain here.  The system that does not obey the rules of free-market is what is at fault.  Those drug prices are absolutely killing us – literally at times.  The entire healthcare system operates under a stealth billing system that allows for exorbitant charges.  Why can hospitals charge $10 for a dose of Tylenol?  Because nobody sees it unless they read the fine print, and because it gets paid for.  Why can a company charge $100 for a hemorrhoid cream that has the same things in it that over-the-counter drugs have?  Because insurance pays for it and nobody complains.

It\’s crazy.  It\’s how our system works.

Here are my top gripes about drugs and what they cost:

1.  All the drugs in a class always cost about the same. Why do all of the blood pressure, reflux, or antidepressant medications in a class always go for about the same price?  I have never in my 16 years of practice seen two drug companies go head-to-head in a price war.  Isn\’t that what the free-market system encourages?  Shouldn\’t competition drive the price down?  It doesn\’t in our healthcare system.

2.  Drug rebates. Most folks don\’t realize it, but drug companies pay insurance companies \”rebates\” if their drugs are chosen for their formulary.  This means that it is often not the real price for the drug or its superiority to the competition that determines formulary status, it is the \”rebate\” that the drug companies agree to pay.  In other circles this is called \”extortion.\”  \”I promise that my friend Vinny won\’t beat you up if you pay me $10 per week.\”  And do you think the \”rebate\” is sent back to the policy-holders of the insurance company in the form of lower rates?  Do I have to ask that question?

3.  Drug Marketing. Yes, the direct-to-consumer marketing nauseates me.  The plethora of drug reps pounding us to use their drug instead of their competitors makes me tired.  I am all for education and for companies being allowed to market.  How could a product be sold if it isn\’t marketed?  But when the marketing budget exceeds the R and D budget for a drug, something is way off.  The goal is to make a \”blockbuster\” drug that they can milk for a long time, and so they get docs to prescribe and patients to demand the drugs with the best profit-margins.  This happens because there is no competition between manufacturers on price, it is instead a marketing war.

4.  Patent Extensions. The patent process is supposed to protect the inventor of a product from having the idea stolen and used by someone else.  What the process has become, however, is a game to give companies exclusivity on a drug and hence higher-margins for as long as possible.  The system doesn\’t protect, it endows.  It turns drug development into a Vegas game with a chance to hit the jackpot if all of the columns line up.

5.  Generics. It used to be simple with generics: since there was no R and D involved, the drugs would be lots cheaper and so would reduce cost.  This isn\’t the case now.  When Effexor XR and Adderal XR went generic, the companies who made the drugs were granted the exclusive right to make the generic for 6 months.  Yes, the drugs were still made by one manufacturer, and that manufacturer had no motivation to lower the price at all.  There are also a bunch of generics that are priced suspiciously close to the price of the brand-name drug.  Why is that?  How can they be allowed to charge so much when they have no marketing or R and D?  The profit margins must be staggering.  Yes, that is the case.  Check out the generic drug companies\’ stock prices.  They are very successful.

6.  The FDA. The FDA has been the subject of much ire – some deserved, and some not.  But the presence of people from the drug industry in the FDA, as well as some of their decisions, has made their trustworthiness hard to hold on to.  Why is the generic drug Colchicine (a drug for gout that cost under $10 per month) being taken off the market leaving only Colcrys, a drug that costs $4.50 PER TABLET??  The reason is that colchicine is a very old drug, and so didn\’t have to go through the rigors of approval for use in gout.  But it works great, and was a very cheap way to relieve gout sufferers\’ pain quickly.  Now the company who makes Colcrys got its version of colchicine approved for use in gout, making the rest of the drugs \”illegal.\”  They are being forced off of the market by the FDA, leaving a drug that costs 50 times more.  Surely it doesn\’t cost the manufacturer 50-times more than it did for the generics.  This isn\’t the first time this has happened, and with the jackpot won by the manufacturer of Colcrys, it will probably not be the last.  What\’s the FDA\’s role in this?  They hand out the golden tickets and take away a great medication for people who need it.


If we are going to fix our system, we need to become more transparent in our charges.  We need to make it so we know when we are being gouged, and when something actually costs a lot.  We still need to reward those who do great things.  We still need to motivate companies to innovate and to improve products.  But the nature of the current system turns our healthcare system into a source of quick money for many companies.

We can\’t expect things to improve until we change this.

7 thoughts on “Drug Down”

  1. #5 .. when I was dx’d w/MG 18 years ago, Mestinon had no generic. It was about $35 for a months supply (and I took significantly more than I do now! I took 600 mgs of the regular (and 360 of the time span ..which cost me $40 /mo) so 10 a day.I now take 3 a day (and no timespan) and it’s generic and costs $180 (which was $240 just a year ago when I was taking 6 a day … I know I’m bad at math but that doesn’t seem to add up to me!)

    I know costs have gone up in 18 years, but not *that* much!

  2. You are a brilliant person and, I’m confident, an excellent physician. However, there are numerous holes in your argument. I’m not a fan of the pharmaceuticals. They don’t play by the rules at all. They aren’t the only game in town and people are voting with their feet and their dollars. The AMA doesn’t care about protecting the public unless it is in the interest of their pocketbook and their “shareholders” pocketbook. No physician should accept so much as a pen or pad of paper from a pharm rep. The research demonstrates that acceptance of any gift, regardless of value, influences prescription habits. If physicians and other prescribing healthcare professionals just stopped accepting the gifts, things would begin to change. Also, there needs to be a paradigm shift as to how we study and evaluate disease, treatment, and cure. Western medicine helps a lot of people, but it is also limited and harmful in many ways. It is now overly influenced by corporate interests. Conflicts of interest have come to permeate medicine and the public is shut out because they are deemed unqualified to question the experts, which is nonsense.

  3. The “trinkets” given by drug companies are a great example. They were accepted practice and rampant in HC. Then laws changed and behaviors followed. To tell a company or group of people that they should forego a legal thing for the sake of others is to misunderstand human nature. The point of this post is that the drug companies and the docs are doing something natural and legal that is hurting the system. That means that the system needs changing, not that they are immoral for doing so. Now, many (if not most) docs don’t accept stuff from drug companies any more, but that hasn’t changed the profits of the drug companies. The problem is the law, not the behavior of physicians and drug companies.

  4. I take Keppra for seizures. A few years ago, under my old employer, I could only get it refilled monthly, and only at my local pharmacy. I was charged $300/mo. When I switched employers and got new insurance, I was able to get Keppra via mail-order. Suddenly it was $40/3 mos. And I’m not even talking about the difference between generic levetiracetam versus brand-name Keppra. At the time I paid $300/mo, Keppra was a new drug and thus had no generic equivalents. When I changed jobs, the brand-name Keppra went to $40/mo. Now that I’m on generic levetiracetam, the price has dropped even further. Drug companies need to stop playing shell games with their products, and consumers need to be better-informed. Thanks for this post!

  5. thank you for the article…………. well, the blog.. i am wondering something, often in our system change , real change , happens from the bottom up, not the other way around. a few people start doing something, then others start it, then more………… then it is the norm in a few years………….. i dont see laws changing things until medical people on the inside of the system, such as yourself dr rob, that want change…………… and then modeling that change…………… but i dont know how that would be for your own practice to just post things in your own office. maybe the other good doctors will notice and do the same………. or you could ask around and see who would do this with you? i dont know if this is asking too much of the good doctors or if it would make you outcasts or what……….. but i dont see it happening from the outside from patients or from the top down from lawmakers, they are too busy with the lobbyists and special interests to really be bold………….. i mean, i cant really demand that my doc post things, he will jsut tell me to go get a new doctor and im not going to risk that when it took me two years to find him even tho i get minimal care……………. at least he gives me the meds i need to get out of bed. what do you think of this? is it impossible to even think about? this is such a hard problem all around………………….

  6. Thank you for writing this!! I just had a huge fight with my husband about the same topic when I heard that oral Flupirtine is in trials in the US and being marketed for fibromyalgia. “Effirma” is seeking a world wide patent for a drug that has been is use in Europe since the early ’80’s for pain. A world wide patent?? For a pain med?? And why don’t we already have this since it is supposed to be non-addictive, easily tolerated and you don’t have to increase the dosage?If the FDA is so concerned about the potential abuse of pain medications, this, if it’s as good as “they” say, seems like a no brainer… read the european studies and approve it, right?! But there’s no money in helping people and we are the land of the free and the home of the “free enterprise”.

  7. There are some things you don”t have complete understanding with regard to retail, hospital & drug pricing in general. I’ll try to help clarify some parts. My 30+ years as a pharmacy have been as a hospital pharmacist who had the privilege of being on the drug formulary committee for my hospital system as well as on the IRB committee which was involved in approving drug trials which took place in our hospital. I was involved in the decisions of which drugs were but on the formulary, but had to understand the pharmacy budget in light of the total hospital budget to really gain understanding.
    1. All drugs in a class don’t all cost the same in an institution because of a concept called “bundling”. The drugs are “bundled” into a contract to get a better price on all the drugs from one company. A good example of this is purchasing ARB’s. You might think losaartan would make the most financial sense. But, if the drugs are bundled & you have a hospital with an oncology & ID service, the cost of Diovan becomes equal to losaartan when you can bring the price of Gleevec & Cubicin down by guaranteeing a certain product purchase point. You may not notice the difference in your field of medicine, but when we have to make pricing decisions which cover all possible drugs – it makes a huge difference. We also have to throw in a extra factor in case something new comes on the market to allow it to be used.

    Finally, there are only so many “cost centers” within a hospital. The hospital cannot charge for the bed, nurse, food nor linens – those are all expected to be absorbed in the daily room fee. The OR lights, the L&D warmers, NICU pumps & monitors & the adminstrators desk nor the doctors lounge can be charged. All these expenses need to come from someplace. They are called operating expenses. So, annually, each “cost center” (pharmacy, radiology, physical therapy, radiation oncology off the top of my head) all get together with representatives from the various units – cardiovascular, L&D, ED, etc to find out how much does a CABG, C section, a trauma will cost in terms of labor, materials & time. That is then distributed among the cost centers & that is how one aspirin goes from $0.02 to $4.00. Its paying so the sofa in your lounge gets recovered every 10 years.

    2. Drug rebates are not so much rebates as they are one arm extending a cookie to another arm on the same person. When Merck (a drug company) owns Medco (an insurance company) who just recently combined with CVS (a pharmacy)/Caremark (another insurance company) – is it any surprise most drugs on the formulary are made by Merck?

    3. Direct to patient advertising – it sucks! You might hate the reps, but we get multiple requests all day long from patients who want us to call drs to change drugs to something they saw advertised. Ever wonder why we’ve become a society of people who take drugs for every ill? The same mentality that led to popularity of tobacco – if that great, handsome man on that horse looked that healthy & smoked, nothing would happen to me, right?

    4 & 5. The patent process for drugs is not designed to keep someone from stealing the idea or product. In fact, so many people, labs & hospitals are involved in drug design, it is easy & frequently done to have a “me too” drug come on the market within a few years. The patent process is 17 years for most drugs. However, there are many variations & incentives, particularly for drugs used in children & small populations. Companies who design & market these drugs have a difficult time since there are HUGE limits of how to trial a drug on a child. Also, remember, the company must make enough money not just to design & test a drug (there are 4 phases of drug testing & more than 50% never make it to the third phase, which is human testing), but the company also must have enough coverage for anything that results from that drug for the rest of the reciepients LIFE – for a child, that could be 70 years.

    We lost about 20 drug companies in the 70’s because of liability claims. We almost lost vaccines entirely until the government stepped in with VAERS, which has an independent court system to hear just vaccine liability claims. Wyeth, one of the largest manufacturers of vaccines & many other drugs went bankrupt & out of business due to the vaccine debacle of the 70s & 80s.

    You smirk about how it is a BIG business, but it is a big business. Do you realize that some of the drugs that are coming off patent were in development when you were finishing residency? So…..you know how much it cost to educate you, from kindergarten to the end of your residency? It took A LOT OF MONEY & much of it was spent by the government & your parents neighbors when they paid their property taxes, or perhaps paid your private tuition. How much income is too much to make in your lifetime to pay off that education, raise your family, educate your own children & hopefully enjoy a retirement?

    It normally takes 20 years from new entity drug development to final marketing & more than half never make it to market. Those 20 years is about the same time it took to educate you.

    Patent extensions are in place normally to compensate for generic firms that enter the marketplace before the patent has expired. Generics are ready to go the day a patent is expired & will often push the edge. This occurred when Oxycontin went generic. After a court battle, the generic was removed from the market place & received a patent extension for the time the generic infringed on the patent (3 years).

    Finally, many generic houses are owned by the original entity company. Novartis owns Sandoz, etc… More of living in the same house – they know how to market. They may not have the research part, but they do have the development part. They have to show all the pharmcokinetic data in all the age groups that show they are the same as the original drug entity. As a matter of fact, when Dilantin was coming off patent, generic houses were doing their best to make the drug, but they could not match the dose/response nor the dose/blood level curve of the original product. That’s when it was discovered Dilantin was manufactured originally as a sustained release product, although not intentionally (which is why you can give 300mg qd rather than 100mg tid as with generics).

    6 – Finally – the FDA. Well, I feel I can speak to this because my dean was one of the FDA Commissioners. I knew Jere Goyan and there was never a more trustworthy pharmacist than he was, but he could take a politician down to his underwear in a minute with scathing conversation. The FDA is there to administer our laws & to protect the population. It is not there to keep people happy nor to keep old, crappy drugs on the market. Colchicine is/was an old crappy drug with nasty side effects & no reliable data to show it worked (yes – they tried). People have made those same complaints about the old albuterol inhalers – but that change was in response to the Montreal Protocol from 1989 which the US has been slow to comply with.

    The FDA is getting rid of old drugs with no data on efficacy or safety & trying to keep difficult drugs (like vaccines) & wildly expensive drugs (like the biologicals) on the market. I could go on and on, but it comes down to …….. how many times do you want to repeat the thalidomide tragedy you may have read about?

    If you want to know what the actual cost of having that healthy baby in the hospital is, you would be astounded. But, you would also be grateful most of what was there you never needed to use. I’ve known more than one family bankrupt by the cost of medical care, so I’m good to share the parts of it I’m not using. I don’t need that much transparency.

    Its a bit more complicated than just the rants you hear on TV, isn’t it????

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