How Big Pharma Works - Why Americans are Angry and Why We Should All be Fighting for Healthcare Reform

Susanna Sisson's picture
Map of World using drugs

If you live in the United States you must understand our current medical system and I do not mean the Affordable Care Act, but simply how Big Pharma works and why Americans are angry and why we should all be fighting for healthcare reform.

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"The FDA does not require a drug company to know how a drug works," says Erland Stevens, Davison College, Department of Medicinal Chemistry. "It is advantageous but not required." Stevens teaches this fact and more in his class at Edx: Medicinal Chemistry: The Molecular Basis of Drug Discovery.

The reality is that it takes about 1.2 Billion dollars to develop a drug and take it to market. In many instances, there have been no long term studies or there has been fraud covering up negative side effects. Often there are only 20 to 30 studies on a drug before a company acquired FDA approval.

Only drugs that will affect a large population such as those with high blood pressure, elevated cholesterol or diabetes, or those that affect a smaller population such as chemotherapy drugs that drug companies can charge more for are researched and developed.

Research for drugs that affect a smaller population such at HIV/AIDS or Parkinson’s, or those that are not used in long term care such as new antibiotics are often minimally funded. Only what is in the best interest of a drug company and their stock holders are typically well funded and studied.

The patent for a drug being developed is usually good for 20 years, so, companies have to make their money back quickly. If it takes a drug company 10 years to get a drug to market, they only have 10 years to begin making money before other companies can put similar drugs in the marketplace, so, on top of recouping their cost for research and development they are going to price their drugs to make an incredible profit in a shorter period of time.

Drug pricing is based on each countries per capita Gross National Income (GNI). So, because we live in the USA, the cost of 12 week treatment is $84,000, in Germany it’s $66,000, in England it’s $57,000 and in Egypt it’s $900.

This is exactly the issue with drugs such as Solvaldi, maker Gilead, with an exorbitant price tag of $1000 per pill in the US while the same drug costs only $10 per dose in Egypt and only $4 in India.

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That pricing is to support the drug maker's profit, in this case Gilead of 7 – 12 Billion dollars. If the drug Solvaldi is combined with Olysio – a new drug by Johnson & Johnson – it will increase treatment to a cost of $150,000.

The type of drug doesn't matter, so whether we're talking statins, or the drug Harvoni, which makers claim will cure Hepatitis C, the cost is still based on country.

In 2015 we saw CEO Martin Shkreli increased the cost of a life-saving drug used to treat parasitic infection from $13.50 to $750 per tablet. This is not an isolated case as other drug companies have raised prices on drugs that have been around for decades. In 2007 generic drug maker Mylan obtained the rights to sell EpiPen and has since increased the list price from $94 to $609

Who can honestly afford that kind of cost of treatment and how does that practice effect insurance and other health care costs? Even politicians are questioning the practice because higher profits from higher prices come disproportionately from low-income, minority patients, including those on the Medicaid drug program funded by the federal government and the states.

Pharmaceutical companies are in a race to research, develop and get drugs to market, because let's face it, time is money and money is what makes the world go round and stockholders happy. We understand companies need to make a profit but should there be a ceiling?

“The likely launch over the next two years of drugs similar to Sovaldi under development at companies like AbbVie, Bristol-Myers Squibb Co and Merck & Co," says Mark Schoenebaum of International Strategy & Investing Group, "could trigger cost competition. We are going to go from a monopoly to seven or eight players. In my mind that is what will drive pricing down.”

My opinion is competition is good for consumers because drug companies are already making huge profits. The reality is that it will drive profits down and that is what drug companies fear.

While this may be a simplistic comment on the tragedy that is the American health system and Big Pharma it is accurate. What people need to do is wake up, speak up and fight.

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