While walking through the duty-free at Dulles International Airport in Washington, DC, I happened upon the price tag of an imported French purse. Looking around, I wondered how many travelers could afford a $2,000 handbag.At the gate, I found a seat and logged on to the internet, where I happened upon a story about the CEO of Nostrum Laboratories, Nirmal Mulye. In an interview, Mr. Mulye explained why he raised the price of an antibiotic by more than 400 percent, from under $500 to over $2,000.
“I think it’s a moral requirement to make money when you can … to sell the product for the highest price,” said the CEO. He went on to compare his pricing strategy to that of an art dealer who sells a painting for “half a billion dollars.”
I don’t know anyone who spends half-a-billion on canvases, and I’m uncertain who, exactly, purchases luxury handbags at the airport, but I know precisely who buys Mr. Mulye’s antibiotic: families with sick children who usually can’t afford $2,000 a bottle.
When I was an intern, I prescribed this same drug, Nitrofurantoin, to patients with severe bladder infections. It was one of the most inexpensive and effective medications available. But that was a different time in American medicine, an era filled with remarkable discoveries, advances in treatment and saner pricing.
The current era of medicine is all about profit generation. So, you can be certain Mr. Mulye’s quote doesn’t merely reflect the misguided morals of one greedy CEO. His words underpin the mentality of an entire industry.
Pharmaceutical companies spend big on lobbying and profit handsomely in return for campaign contributions. Over the past decade, drug makers have doled out nearly $2.5 billion to U.S. legislators – dollars that have led to reduced competition, beefed up patent protections and skyrocketing prices. Long implicit in this quid pro quo has been the assumption that companies will justify their semi-monopolistic prerogatives by investing in research and development (R&D), thereby improving their current medications and ushering in the next generation of breakthrough drugs.
Then again, you know what they say about assumptions. Nitrofurantoin, for one, has been around since 1953 and, other than cleaning up the drug’s liquid contents to meet new FDA rules, there have been no major improvements, no new breakthroughs, nothing of substance that would justify a 400 percent price hike.
Of the $3.4 trillion Americans now spend on health care each year, more than 10 percent goes to prescription drugs. Patients are getting sick of these rapidly escalating costs, especially after all the political promises made during the 2016 national elections.
A new poll shows just 23 percent of voters approve of President Donald Trump’s handling of prescription drug costs, and even fewer are pleased with Congress, which has been responsible for (a) preventing the federal government from negotiating drug prices the on behalf of the beneficiaries they insure and (b) outlawing the purchase of prescription drugs from other countries. Even though European pharmacies sell Nitrofurantoin, the exact same medication, for a quarter of the price, patients in the U.S. are prohibited from buying it from them.
The way U.S. drug makers price their products is legal, but it’s not moral.
Handbag makers and art auctioneers are entitled to “sell the products for the highest price” because the people who buy them have a choice. Patients in need often don’t. Already, many Americans are suffering the consequences of rising drug prices.
According to one recent survey, 45 percent of patients with diabetes have skipped doses of insulin because they can’t afford the going rate. Between 2002 and 2013, the price of insulin jumped from about $40 a vial to $130. There are equally safe and effective alternatives being sold at a fraction of the price in other countries, but these biosimilars are prohibited from being marketed or sold in the U.S.
The time has come for Congress and President Trump to act. Their actions must be equal in consequence to the egregious, and predatory pricing strategies drug companies impose on patients.
Some of the cost-curtailing proposals now being discussed would constitute a good start. They include full-disclosure pricing, eliminating more of the middlemen, and lifting the ban that prevents our government from negotiating drug prices for Medicare recipients. Although these actions would not have major impact on overall drug costs, they would communicate the federal government’s concern (and willingness to stand up) for its citizens.
The best solution: federal legislation that requires drug companies to justify their pricing, based either on how much they invest in R&D or the relative effectiveness of their product compared to existing alternatives. Today neither of these solutions are on the table.
Perhaps that will change now that Mr. Mulye has informed the American public of what he and his industry brethren truly believe. Thanks to his recent interview, the federal government has no excuse for looking the other way. We need common-sense pricing laws that recognize there is a difference between life-saving drugs and luxury handbags.
Robert Pearl is a physician and CEO, Permanente Medical Groups. He is the author of Mistreated: Why We Think We’re Getting Good Health Care–And Why We’re Usually Wrong and can be reached on Twitter @RobertPearlMD. This article originally appeared in Forbes.
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