Over the last few weeks, as the administration has begun to implement that portion of the Inflation Reduction Act that allows Medicare to negotiate prices on 10 high-cost drugs, you have heard loud cries from the pharmaceutical industry.
They and their allies on the right claim that allowing Medicare to cut into their profits will harm consumers by reducing their incentive to develop new drugs. Does this argument have merit?
The claim that the industry should be allowed to gouge the U.S. consumer has numerous problems.
First, why should U.S. consumers be the ones to support pharmaceutical company research when their products are sold world-wide? They should establish a defensible price that covers developmental costs and a fair profit and use this in all advanced countries. Lowering prices on product sold in less-developed countries can be a humanitarian offer.
Second, and more important, the major pharmaceutical companies spend more on marketing than they do on research and could easily shift money from marketing to research should they choose to do so.
Third, they consistently exaggerate the money actually spent on research [see: JAMA Internal Medicine 2017;177(11):1575]. They also fail to credit the NIH (i.e. the U.S. taxpayer)-funded basic research that often precedes their own.
While Big Pharma does spend the lion’s share of the money needed for clinical trials, these are only done on products expected to generate big sales and profits. The basic research that is behind most truly new drugs is usually done by academic researchers with government funding or by start-ups that are bought by a major pharmaceutical company after they develop a novel product.
Finally, much of their research budgets are spent not on truly novel life-changing drugs but on "me too" copycat drugs. When a truly new drug is developed, the other companies turn their research efforts to tweaking the molecule to develop their own similar product on which they then spend money marketing it as better, with no real clinical benefit to patients. [If they sold their product at a lower price, this would be a useful addition, but this is rarely/never done. Instead, they charge a similar or higher price and bombard doctors with marketing.]
The sky will not fall if Americans do not pay 3 times what the Swiss, Germans or French do for pharmaceuticals. Write your representatives in Congress and tell them not to cave to the pharmaceutical industry.
(In the meantime, try to lower your own costs of drugs by checking out Mark Cuban’s Cost Plus pharmacy or by using websites such as GoodRx for medicines you take regularly.
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