US sound and fury over drug prices

The US Senate is outraged by the rapacious pricing policy of drug firms but will it act to reform the system?

By Latha Jishnu
Published: Friday 29 March 2019
Pharma industry
Illustration: Tarique Aziz Illustration: Tarique Aziz

Pharma giants are increasingly being made to realise that no one likes them. Not even US lawmakers today, even though some of whom earlier acted as lobbyists for drug companies. The reason is the industry’s predatory pricing of new life-saving drugs which means even the US and other rich nations are unable to include the latest medicines in public health programmes. There is outrage across Europe and the US over the exorbitant cost to patients and health systems.

At a recent US Senate Finance Committee hearing on the high cost of prescription medicines, lawmakers told a clutch of pharma companies that their pricing practices were “morally repugnant”. The hearing is said to be the first time when lawmakers had called top industry representatives on the price issue. Earlier, individual players such as the infamous hedge fund manager and pharma executive Martin Shkreli had been summoned for Congressional hearings for his predatory pricing of an old drug used to treat parasitic infections. Shkreli had bought the rights to pyrimethamine, sold as Daraprim, and then hiked its price from around US $13.50 a tablet to US $750.

Called to the 26 February meeting were top executives of AbbVie, AstraZeneca, Bristol-Myers Squibb, Johnson & Johnson, Merck, Pfizer and Sanofi, all manufacturers of blockbuster drugs that have earned them tens of billions of dollars from government programmes in recent years. Senators used strong words to paint the firms in an unflattering light, targeting each of them individually for “profiteering and two-faced scheming”. Senator Ron Wyden, the committee’s senior Democrat was quoted as saying that “drugmakers behave as if patients and taxpayers are unlocked ATMs full of cash to be extracted”.

AbbVie’s chief executive Richard Gonzalez came in for special opprobrium because his bonus is partially tied to the sales of Humira, the world’s top-selling prescription drug (2018 sales: nearly $20 billion) that’s used to treat rheumatoid arthritis. Republican Senator John Cornyn highlighted a crucial fact: AbbVie held more than 130 patents to protect Humira’s market monopoly.

But will the Congressional outrage amount to anything? Predictably, the industry used a standard defence to justify high prices: US firms are leading the next wave of biomedical innovation and that such investments need to be rewarded. Cornyn said while he agreed that drug companies need profits to recover their costs on research and development, there should be a limit to the exclusivity and profiteering. He wanted an overhaul of the US patent system which enables drug firms to protect their monopoly inordinately. The senator could do well to look at India’s patent law which specifically bars the evergreening of patents with well-defined criteria.

What did the hearing achieve? The drug firms promised to support reform of the industry-wide system of rebates given to pharmacies and health insurers in exchange for preferential coverage of their medicines which is said to be the main reason for high prices. But sceptics say the hearing was a dog and pony show that would change nothing since Big Pharma calls the shots on Capitol Hill. They must be right. Three years after his headline-hitting hearing, Shkreli is in jail for securities fraud but Daraprim is still selling at US $750 a tablet.

(This article was first published in Down To Earth's print edition dated March 16-31, 2019)

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