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Drug Manufacturers Up to Old Tricks

By July 21, 2009November 2nd, 2009Commentary

After we recently had kind words to say about the overall decline in the growth of pharmaceutical spending, brand drug manufacturers have again been revealed reinforcing their image as price gouging, insensitive behemoths.  Lets be clear; a corporation’s primary obligation is to maximize profits for its shareholders.  But health care, especially in these times, might be viewed as a little different and one can wonder if these companies are really acting in their shareholders long-run interest if their conduct leads to price and utilization controls.

In one article, the Wall Street Journal (article)  revealed that drug companies have increased their programs to subsidize the copays of patients prescribed brand medications.  This may seem to be a generous and selfless act, but it has the effect of increasing utilization of expensive branded drugs where generics usually work just as well.  Those overall cost increases are paid by everyone.  In addition, the higher copays are often due to the rapid price increase tactics which manufacturers are employing in selling brand medications. 

Another Journal article reports on price increases on brand medications, primarily biologics, in the context of Biogen’s earnings report.  (article)  Some examples are astounding.  Biogen has raised the price of Avonex, an MS product, by 22% in the last year and 53% in the last two years.  This for a drug that already costs tens of thousands of dollars a year.  Numerous other examples of double-digit price increases  are cited.  These products are very profitable and it is difficult to understand the rationale for the increases as anything other than “because we can.”

The final Journal report talks about pharmaceutical industry successes in the negotiations around health reform.  (article) Proposals such as drug reimportation from Canada and price negotiations for drugs in the Medicare Part D program have largely been taken off the table and other provisions favorable to the industry are being included.  It appears that money talks, as the industry is the largest single health sector campaign contributor and lobbyist.  The industry’s political power is an example of why it will be difficult to get rational reform that includes appropriate cost control measures.

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