Free Market INEFFICIENCIES Behind High Drug Prices?

[ulTRAX]

Despite what free market fanatics believe... the free market is a
two-edged sword. Competition CAN help to lower prices as manufactures
find new ways to streamline the production process of standardized
items... but it's just as likely companies will seek to create private
monopolies within a competitive market to trap consumers in a
proprietary system to keep prices (and thus profits) high.

Case in point: the pharmaceutical industries. Because of their special
position they know that people will be willing to spend ANYTHING to
cure a disease, live a productive life, end pain, or save a life of
themselves or a love one. In classic free market style... the industry
has made a business of sucking up every available dollar it can.

The sad part is the industry that holds the promise of the above
abounds in waste NOT efficiency. Companies waste development resources
by constantly trying to reinvent each other's wheel. If one company
comes up with a profitable proton inhibiter to reduce stomach acid...
they all have to get in on the action. Such competition is supposed to
drive the price of drugs down. We typically don't see drastic drops in
prices until a drug goes generic and companies THEN are actually free
to compete to LOWER the prices. I recently bought generic Claritin at
a wholesale club for a dime a tab which must be closer to the true price of production. According to :
http://216.239.41.104/search?q=cache:aX6hwLlsgeAJ:http://www.cojoweb.com/ref-online%2520prescriptions.html
Name brand Claritin was $63 for 30 pills in the US... about 200X as
expensive as what I paid.

Companies piss away BILLIONS in direct to consumer (DTC) advertising
to lure patients into pestering their doctor for their drugs. The
strategy is not just to keep demand up so high prices can be
maintained... but that consumers will pay for those added costs of the
ads. Imagine that: paying to not only be propagandized but to be
ripped off!

In 1998... a year where I could get credible figures for the spending
habits of the pharmaceutical industry they spent $24.4 BILLION on
R&D.... and $12.7 BILLION on marketing. Sources below.

But getting back to reinventing each other's wheel. According to
Public Citizen.... "Drug industry R&D is made less risky by the fact
that only about 22 percent of the new drugs brought to market in the
last two decades were innovative drugs that represented important
therapeutic gains over existing drugs. Most were "me-too" drugs, which
often replicate existing successful drugs." Source:
http://www.citizen.org/congress/campaign/special_interest/articles.cfm?ID=6538

We saw this strategy when Prilosec was coming off patent. Rather than put resources into developing drugs to treat new diseases... AstraZenaca poured resources into protecting a cash cow. Expensive clinical trials were rigged to compare higher doses of Nexium against Prilosec to find some way to justify the new drug. A huge $500 million dollar advertising campaign was launched to get consumers to switch to Nexium... a drug with few if any new therapeutic benefits. Here's a copy of damning article from the Wall Street Journal http://home.cwru.edu/activism/READ/WSJ060602.html

Now there's no good way to determine whether the development of those
truly innovative drugs is directly proportional to their R&D budget so
let's say "only" 50% of this R&D budget is wasted on copy-cat drugs...
not 78%. What we start off with is $37.1 Billion pool of money in 1998... of which some $24.6 Billion is pissed away NOT developing new innovative drugs.... $24.6 Billion pissed away on the competitive overhead... the games corporations play. And this is supposed to represent how free markets are always efficient... bringing to market the best product at the best price? This is an example of a dysfunctional free market run amok! And to keep to prevent reform... they now spend another 262 MILLION a year trying to manipulate the federal government.
http://www.citizen.org/congress/campaign/special_interest/articles.cfm?ID=6538 This investment obviously paid off in the Medicare Drug law that protected the high profits of drug companies.

In the early days of the Republic corporations were rightfully
distrusted and only chartered to do a public good. If they failed in their goals... the company lost its charter.

It's about time we looked again how corporations are chartered... and in some special cases the charters of corporations like the drug industry should be restricted and made goal oriented as the electrical utilities once were.

We are at war with disease and death. In this war when a person can
not afford the medication they need or a drug is held up because of
wasteful use of resources, we ALL lose. The drug companies had their
chance to be socially responsible corporate citizens and they blew it. We simply can NOT literally afford to let the drug companies do business as usual.


SOURCES

http://www.aegis.com/news/wb/1999/WB990801.html

Citing the annual reports of the 15 largest pharmaceutical companies,
AIDS Action said the companies spent a collective $68.4 billion on
marketing and administration in 1998 and while they spent only $24.4
billion on research and development. They reaped a collective $224.2
billion in gross sales. The report also stresses that many AIDS drugs
are developed in part with federal funding.


http://mednews.stanford.edu/news_releases_html/2003/mayrelease/Pharmaceutical.htm

The study is based on 1998 data from IMS Health, an independent
pharmaceutical market-research company, on promotion expenditures for
the 250 most promoted medications in the United States. Researchers
analyzed the data to determine the amount of money spent marketing
these products and the principal strategies used to promote them.
The resulting estimate of $12.7 billion is high not only in absolute
terms but in relative terms, Ma noted, as the pharmaceutical industry
ranks 34th among the 200 U.S. industries with the largest advertising
expenditures.

The study also found that drug promotion efforts were concentrated on
a relatively small number of medications. Promotion of the top 50
drugs, for example, accounted for 51.6 percent of total drug-promotion
spending in 1998.

The study found that the most dominant drug-promotion strategies in
1998 were traditional, time-tested methods. Free samples given to
physicians totaled $6.6 billion of retail value, representing 51.9
percent of the drug promotion expenditures. Pitches by drug-industry
reps to in-office physicians - a practice known as detailing - totaled
$3.5 billion, accounting for 27.8 percent of the total. Ads in medical
journals totaled $540 million, representing a modest 4.3 percent of
total drug-promotion expenditures.

(Note: I posted this to Usenet a few months ago. I hope the links are still vaild.)

[worldgonekrazy]

1. i will have none of your commie propaganda

even if you do have a good point and something like universal single payer would lower health care costs. that is because i love freedom and liberty, goddamn it. don't you?

edited for spelling errors

[ulTRAX]

3. uh?

I have no idea WTF you're babbling about. Next time try also editing for logic.

Corporations exist because they are chartered by the government. The government also has a right to break up or regulate monopolies.

There is no reason why the public should tolerate such waste on an immense scale as there is in the industry that holds the key to life and death. I believe they have already demonstrated that they are NOT socially responsible. Yet it's also fair to say they are acting as corporations should given the bizarre incorporation rules and the "laws" of the market.

The ONLY way to break down this vicious cycle is for government to step in. But that will never happen unless the public realizes just how dysfunctional our pharmaceutical sector has become. In light of such dysfunctionality and abuse of the public... why not look at other business models?

I'd prefer that resources be diverted TO research not FROM it. I'd prefer that the pharmaceuticals have their research coordinated to avoid costly duplication of each other's efforts. If there are multiple drugs that deal with the same medical condition I'd prefer that the better one get used and not let companies use direct consumer manipulation to drag out the life of obsolete drugs. Generally I'd like to see drugs go generic MUCH faster than they do currently so competition can become a force for driving prices DOWN instead of up.

[worldgonekrazy]

5. great response

that is, if i was being serious. guess i didn't make the sarcasm obvious enough

[ulTRAX]

8. nope ;-)

worldgonekrazy wrote: "great response that is, if i was being serious. guess i didn't make the sarcasm obvious enough"

Nope... I really wondered what you were getting at. You had enough posts here so I tried to give you the benefit of the doubt but I could not find enough humor to think you meant it that way. Sorry!

[worldgonekrazy]

9. my sarcasm is of the bitter type

and as such, isn't really that funny. its sort of "the whole god damn world is going to hell in a handbasket and there isn't a god damn thing we can do about it" humor, which many find a tad too dark. :)

[KG]

2. nope, simple greed is behind high drug prices

[ulTRAX]

4. thanks.........

Thanks for your thoughtful and well documented opinion.

[sweetheart]

6. Drugs prices ARE too high, end the drugs war

Without the subsidy of criminalization, cannabis and other drugs
that are today illegal will cost 1/5th to 1/10th of their current
street value under legalization.

That is a very good point!

[ulTRAX]

10. drugs and 9th amendment

I have some thoughts on recreational drug use and the 9th amendment... I'll dig them out if you want. Not that it matters... I hoped to post on this side issue soon.

[sweetheart]

11. be interested to hear

Myself i see them covered by the first amendment, as indeed, cannabis
peyote, mushrooms, lysergic acid amides and coca are all natural
plant remedies used by cultures and religions older than the united
states for sacrament.

Also, to have freedom of speech, there must be the freedom to listen,
to take in to your body the experiences of life, and to make of them
what you will. Is not taking drugs just another form of listening
to the world around you.

The non-enumerated right to eat, would probably cover it, but this
9th issue has been swept to the side.

Then again, we're talking about a constitution that hasn't been in
force for years.

Time to make a new one.

[camero]

7. Funny

The day I had to go to the doctors is also one of the best days to see good posts on DU. Congratulations, you just showed the systemic gouging of the American public by the drug companies.

[ulTRAX]

12. subsidies

And I don't think I even brought up the issue of how much subsidies the drug companies get... from free government funded research to tax breaks.

[FeebMaster]

13. I don't know if I'd call

the drug industry a free market. Maybe the illegal drug industry.

[ulTRAX]

14. drug industry

Sure the drug industry gets subsidies from the government and drugs are regulated by the FDA. So technically it's not operating in a free market... although the industry is pushing for it to be consumer driven.

I only wanted to debunk the claim that any additional regulation of the pharmaceutical industry would be killing the goose that laid the golden egg. What's killing the goose is the industry's own waste. Add that to the cost of the added pain, suffering, and deaths that COULD have been avoided if new drugs were introduced sooner but were delayed because resources were diverted to duplicative research, ads, and other games corporations play.