Socializing Risk, Privatizing Profits: Big Pharma Edition

My friend Fran Quigley has an important article in Truthout about the skyrocketing prices of lifesaving drugs. The current outrage over a steep hike in Epipen prices makes it particularly timely.

As Fran notes, We the Taxpayers provide research dollars to support drug development (socializing the risk that any particular line of research will hit a dead-end). Big Pharma spends more on marketing than on R and D, charges what the market will bear and then some for the drugs it does develop–and pockets the profits.

It is hard to overstate the level of dysfunction in the US medicines system. The headline-producing greed of “pharma bro” Martin Shkreli was just the most dramatic example of a pharmaceutical industry whose patent monopolies grant it immunity from market forces while its political clout shields it from government regulation. Taking full advantage of taxpayer-funded research, drug corporations make record profits, even by Fortune 500 standards, and pay their CEOs as much as $180 million a year. Those corporations spend far more on incessant marketing to consumers and physicians than they do on research — part of the reason they have largely failed to develop new medicines that address the most deadly illnesses and diseases.

The United States is alone among western democracies in not negotiating drug prices. Medicare and Medicaid represent huge portions of pharmaceutical company customers, but Congress has consistently defeated measures that would allow government to use its leverage to bargain on prices. As a result, as Fran points out, “One in every five US cancer patients can’t afford to fill their prescriptions, and many seniors on Medicare are forced to cut their pills in half to stretch their supply.”

Congressional reluctance to push back against inflated prices and unwarranted price hikes can be attributed to politicians’ disinclination to kill the goose that lays the golden egg: each year, Big Pharma ranks among the biggest spenders on both lobbying and campaign contributions.

A ballot initiative in California–the Drug Price Relief Act– is taking aim at this status quo.

The initiative, recently certified by the California Secretary of State as Proposition 61, calls for state agencies to be blocked from paying more for a prescription drug than the price paid by the US Department of Veterans Affairs. Unlike the Medicare program, the VA is free to negotiate the price it pays for drugs and as a result, pays as much as 42 percent less than Medicare and usually significantly lower than state Medicaid programs. The primary force behind the ballot measure, the AIDS Healthcare Foundation, says the law could save Californians hundreds of millions of dollars a year in lower government costs and lower individual co-payments. The California Legislative Analyst Office says it cannot provide an accurate estimate of the savings, concluding that it is impossible to predict how pharmaceutical companies would react to this first-ever restriction on state drug spending…A July 2016 poll conducted by the initiative campaign, Californians for Lower Drug Prices, showed over two-thirds of voters supporting the ballot measure.

Predictably, the measure is being opposed by the pharmaceutical industry, which is pouring big bucks into a campaign against it. It will be very interesting to see what happens–both in other states and nationally–if the ballot measure succeeds.

There’s an old saying that pigs get fed, but hogs get slaughtered. California voters will decide which category best fits Big Pharma.

Stay tuned….


  1. I wonder what would happen if Medicare started buying drugs from Canadian vendors.
    That would be fun to watch. Much better prices up north.

  2. If only it were just the pharmaceutical industry corrupting the practice of medicine in the United States. Alas, it is not. The entire medical industrial complex, based on profits, has been twisted and turned upon the very people it supposedly serves.
    It is the doctors prescribing unnecessary pain meds, relinquishing patient care to some anonymous nurse working for the insurance company, going along with the idea that patients need not get more than ten minutes of time per visit. It is the “not-for profit” hospitals whose founders would run screaming at the greed that drives care decisions. And most of all, it is the insurance industry that has turned the suffering of others into corporate profits.
    God! What a hell hole we have made for ourselves!

  3. It is shameful that our congress has selfishly chosen to hoard money in their own pockets while the citizens that voted them into office suffer needlessly because they cannot afford medications.

    This battle has been brought to congress before, but never at a state level. Maybe this will work. I hope so.

  4. I apologize for skepticism, but I believe if the measure passes, there probably will be a lawsuit brought by the pharmaceutical industry to block the State initiative from taking effect. Perhaps the lawsuit will be based on the Commerce Clause, or based on Article XII of the Constitution (a favorite of Donald Trump), for that matter.

  5. Theresa; thanks for your input. Primary physicians do not practice medicine other than “let me write this prescription for you”; they are over-trained and over-paid information and referral specialists. Nurses or Physician Assistants do the hands-on work in the office. Many prescription drugs can now be purchased over-the-counter at lower (but not low) prices; this change absolves our medical care coverage from paying any percentage for our medication. With prescriptions becoming OTC available, Big Pharma had to find a way to recoup their “losses” by overcharging for prescription drugs, especially controlled substances. I don’t believe we were supposed to figure that out but instead, become grateful we could buy many of our medications sans prescriptions – which also meant no physician appointment resulting in no co-pays to submit to our health care coverage who then had to raise our co-pays to make up for those losses. Did I say that right?

    The EpiPen is a life-or-death medication and is needed instantly in most cases. A friend with an allergy to peanuts suffered throat closure after kissing his girlfriend who had brushed her teeth after eating peanut butter hours earlier; his EpiPen injection sustained him till reaching the hospital. Big Pharma plays Russian Roulette with people’s lives and there is no law against their game rules.

  6. We as a nation should quit playing around, install Single Payer and gut the corrupt insurance industry. We’re the only industrialized nation that doesn’t.

  7. JoAnn, Thanks for that insight into OTC drugs. I never thought of it that way.

    Neal, Damn right!

  8. We would have to give big majorities to Democrats for years to get and sustain a single payer system. That is not likely to happen. Prop 61 seems like a reasonable way to start the movement toward reasonable pharmaceutical pricing.

    Moving drugs to the OTC designation may make the drugs cheaper, but it also has the effect of making the consumer pay the full price, instead of a co-pay. That can seriously impact the ability of a person to buy needed medication.

    Our medical care system is broken. The only organization that provides care based soley on the needs of the patient is the Department of Veterans Affairs. The problems with VA are with capacity in a time when we produce more veterans than budget dollars to care for them.

  9. I recently purchased some meds from Canada at roughly 40% of my after-insurance cost from CVS. Apparently our friends in Washington have been putting pressure on VISA and MasterCard and those are no longer acceptable modes of payment for foreign drug purchases. The entire situation is disgraceful and obscene.

    My suggestion…sharply reduce patent protection for any prescription drug advertised to the general public. Advertising falls under drug companies free speech rights, but that doesn’t mean I want to pay for it through my insurance premiums…

  10. As a Korean War veteran I enjoy the medical benefits provided by the V-A. Any drug, regardless of the market price costs me $9.00 for a 30 day supply. And I don’t think the drug companies are losing money on the deal.I was lucky to get enrolled many years ago so I think I’m safe. Really good treatment and quick appointment times. Sorry you all can’t get in. Just kidding. 🙂

  11. Another issue regarding prescription drugs becoming available over-the-counter; many of us are self-prescribing and self-medicating…how safe is this?

  12. It is actually illegal to get your medications from another country. So, if you even want to do some comparable shopping and employ competition there is a law that prevents you. Now, my husband and I did it for our dogs glaucoma meds. We were hoping we were not going to get hauled off to jail for going abroad to get our dogs medications which is the same medicine used on people.

    As a nurse who also worked on pharmaceutical drug trials and was hounded regularly by pharma reps. The money they spend on wooing healthcare professional is obscene. Dinners at Keystone Grill, Steak houses, catered lunches, etc…just give me the free samples so I can help my families with some of these prescription costs.

    Like my husband says, our government helps with the drug companies R and D costs and the other countries actually benefit by this research and negotiate so that they do not have to pay anywhere close to what Americans have to pay for the same drugs. It looks like Americans are paying for those other countries to have lower costs.

    Healthcare system is a mess, a toxic mess…like a professor said for my U.S. Healthcare systems class…it is actually not a system since that word makes is appear that it is cohesive when it isn’t any where close. Most of my friends who are doctors hate their jobs, they are forced by insurance companies and big healthcare systems doing the negotiations to only spend 10 minutes with patients. The outpatient clinics can not afford Registered Nurses because they have to hire all these Utilization Review folks to chase down the money owed and to jump through all the various hoops required by all the different types of coverage companies just for them to get paid.

    I just read an article where the Mylan executives (makers of epi pens) also gave themselves an 18 million pay increase.

  13. It would be interesting to find out if the push for privitizing the VA is related to their ability to negotiate their prices for drugs.
    If anyone here is a fan of The Big Bang Theory, the character Bernadette works for a drug company. It’s fun the listen to the little digs the show’s writers get in to Big Pharma. Go California!

  14. I’m sure there are greedy doctors, always have been. But I have been fortunate to have met only 1 or 2 over my lifetime, and as a person with an autoimmune disease that requires a lot of management, I have spent lots of time in hospitals and doctor’s offices. I think most of them are victims, just as much as we are.

    They’re also our natural allies re: doing battle with insurance companies, trying to find affordable trearments for their patients, and backing single-payer and other reforms to our health care non-system.

    We need to find ways to work with them, not bash them, otherwise the best and brightest students will choose fields other than medicine, same as we’ve seen happen to school teachers.

  15. Make more money regardless of the impact on others only works in a highly regulating democracy. That’s why those are the only conditions you find in the world today in actual practice.

  16. JoAnn said ‘Primary physicians do not practice medicine other than “let me write this prescription for you”; they are over-trained and over-paid information and referral specialists. ‘ I’m afraid this is a major generalization, to the point of being only occasionally true. Two doctors ago I learned that I had a heart arythemia. My doc at the time had me go around with a portable recording monitor for 24 hours, and then had to review 24 house of my heartbeat. And just to add insult to injury, my insurance paid her next to nothing for ding that review. That doctor, and the ones since then have been attentive, thoughtful and caring, and all three spent as much time with me as was needed to be thorough. Admittedly I am likely to wait a while, especially for a late afternoon appointment. But that’s OK, as I know he is giving all of his patients the same careful attention he gives me.

  17. JoAnn said ‘Primary physicians do not practice medicine other than “let me write this prescription for you”; they are over-trained and over-paid information and referral specialists. ‘ I’m afraid this is a major generalization, to the point of being only occasionally true. Two doctors ago I learned that I had a heart arythemia. My doc at the time had me go around with a portable recording monitor for 24 hours, and then had to review 24 house of my heartbeat. And just to add insult to injury, my insurance paid her next to nothing for ding that review. That doctor, and the ones since then have been attentive, thoughtful and caring, and all three spent as much time with me as was needed to be thorough. Admittedly I am likely to wait a while, especially for a late afternoon appointment. But that’s OK, as I know he is giving all of his patients the same careful attention he gives me.

  18. Keep in mind also that most of the not for profit hospitals’ fundraisers are more publicity stunts than fundraisers. Hospitals are highly profitable businesses.

  19. Galjohnson; how long ago was “two doctors ago”? My doctor used to practice medicine; took good care of me for years with only a rare referral to specialists for ear disease which eventually deafened and disabled me and for major cardio-vascular surgery. A few years ago Clarian took over the former Metro Health Medicare supplemental, and then I.U. Health and it became worse. This is probably not the doctor’s decision but the current health care provider rules and regulations. Medical care is now big business; one of the biggest, working hand-in-hand with Big Pharma.

  20. If we didn’t have health insurance, the cost of everything would go down and quickly because the money simply wouldn’t be there. No one, except the very wealthy, could afford even regular checkups. So long as there is health insurance, costs and dissatisfaction will continue to rise as the various hogs–hospitals, doctors, Big Pharma, CEOs, etc., push each other trying to belly up to the trough to see who can get the most. A single-payer system, with negotiated prices for everything, would stop this. We don’t need insurance company and Big Pharma CEOs getting rich for doing nothing. They don’t provide treatment, research diseases or new drugs, and that is the business of health care, not conniving on how to keep charging more. Health care does not belong in the for-profit realm, but should be treated like public education, fire and police protection–a basic societal need.

    Insurers aren’t the only bad guys. Every hospital has a new building program. Gotta get rid of those pesky profits, if you’re going to take advantage of being a “non profit”, so rip down the old building and construct a new one. Gotta get rid of equipment, beds, etc. when they no longer qualify as a tax write off.

    Health care had its roots in charity–Catholic nuns, Protestant Deaconesses, etc., caring for those who were ill or dying. Now, it’s a major business and it is breaking this country. This has to stop. A good starting place to lower drug costs would be to ban direct advertising to patients and limit advertising to health care providers. Take away the tax incentives to discard equipment and stop building new hospitals when the beds in existing hospitals aren’t full.

    There won’t be real change until people discard the fear put out by those who are getting rich from health care profiteering that there will be “death panels” and “rationing”. No, there will be lower prices. There are more of us than them.

  21. I am a Veteran so with the exception of dental care, the V.A. is where I go. Back early in 2014 Bernie Sanders attempted via S. 1982 to expand VA benefits and access to VA Care. It was an ambitious piece of Legislation. With the exception of two Republican Senators the remaining scum bag Republican Senators voted against the bill.

    I have also heard the rumors the Corporatists are trying to Privatize the V.A.

  22. Privatization is the methodology employed by corporate America to take over the country’s economic, social and political institutions (if such is not already a fait accompli and I haven’t noticed in the hustle and bustle of everyday living). It’s not just medicine; it’s law, it’s architecture, it’s everything where a buck can be made. My greatest fear is not Putin, Iran et al., it is the total corporate takeover of America not from without but from within which, among other things, signals the eclipse of the American experiment in democracy.

  23. Neal, and Peggy Hannon, Bernie Sanders in his 8/24/16 live stream launch of Our Revolution to 240,000 watchers also advocated CO Amendment 69 – single payer healthcare system. I contributed $10 to their campaign and received a thank-you postcard from an RN!

  24. Privatization is the selling off of the government piecemeal; benefiting cronyism, nepotism and political patronage. I can also be used to further racism, sexism, anti-Semitism, anti-Muslim, anti-LBGTQ, further xenophobia and be used to benefit the current “fad” of basing laws on so-called Christianity…RFRA comes to mind.

    It benefits the “buyer” and often does not accomplish government established goals – Indianapolis has a list of such deals. It’s not just medicine; it’s law, it’s architecture, it’s everything where a buck can be made.

    At the national level it can be used, as Gerald so aptly put it, “It’s not just medicine; it’s law, it’s architecture, it’s everything where a buck can be made.” We are in essence, paying twice; initially with our tax dollars supporting elected officials who are selling it off a little at a time.

  25. EpiPen the latest disgrace….No surprise. Money trumps all other considerations in our HC system, Big Pharma the poster child for abuse.

  26. Ohh, one other thing about maybe why we cannot have Medicaid, or Medicare for all, or to negotiate the cost of prescription drugs.

    Pentagon Cannot Account For $6.5 Trillion Dollars. Yes readers that is Trillion with a big T.

    You do not hear much about this in the McMega-Media. They are focused on Hillary’s E-Mails, the Clinton Foundation and the latest pronouncement from the Trumpet.

    I am sure the Wall Street, Security-Military-Industrial Complex is delighted by this development. The President, Congress and Senate have clearly failed to exercise any over sight. Just send the tax payers the check!!!!

    What we need is operation “Clean Sweep” to get rid of the incumbents. Although given candidates like Evan “Duck and Cover” Bayh and John Gregg I am certain these two would be little improvement at all.

  27. Solving the misuse and under regulation of capitalism is like solving climate change. To start we have to fight ignorance bought by oligarchs.

  28. Privatization is proof of the lack of innovation and desire to get rich without taking risks. The greedy pig privateers see all of those tax dollars going for Social Security, schools, prisons, the V.A., what have you, and connive how to wrap their stubby fingers around as much of it as they can–as opposed to inventing something, coming up with an idea for how to make systems run smoother, providing a better way to provide a service, inventing new recipes, other innovative ideas that have resulted in successful businesses in the past. That’s just too much work and completely uncertain–grabbing tax money is a sure thing. People have to pay taxes. If they don’t, they go to jail and pay fines to boot. Just be sure to schmooze the right politicians and come up with a selling point that you can do better than the government is doing. Even if you don’t deliver on your promises, you’ll be rich by the time they put you out of business.

    Privatization might make sense if it produced better results or more value for money spent, but it doesn’t. Charter school students do not even do as well as they did when they were in public schools. The swine running private prisons are behind the push for longer prison sentences and doing away with credits for prisoner education (reads as: more profit-why spend money on education that might improve an offender’s post-incarceration life prospects when it can go to improving the investors’ ROI?). They’re working on trying to get Social Security money and taking over the V.A..

    Today, you have the story of that CEO who received a multi-million bonus after jacking up the price of the EpiPen to $600/dose. Well, it’s only life or death for a kid with allergies and schools are required to stock it–so they’ll pay up, but we’ll give those who are destitute a little discount to show what great people we are. How can this woman even show her face? I have an idea: why don’t we put the privateers and drug company CEOs into privateer-run prisons?

  29. Joann, So many of the doctors who work in these large healthcare systems actually have very little control over their own clinic and practice….on a side note, I am not surprised by your experience with the healthcare system you mentioned. Alot of focus on building Taj Mahal’s, People Movers, and Conceirge type service and not enough in people and systems. The name Clarian didnt test welk and so they switched to IU but there were very few IU folks on the board, mostly Clarian

  30. Here is another take on EpiPen. You may need a barf bag after reading the article.

    Just some highlights:
    While Mylan Pharmaceuticals is cashing in on the EpiPen price hikes, the inventor of the life-saving device, who made it for the public, died in obscurity.

    Sheldon Kaplan, who was an engineer for NASA before inventing the EpiPen, lived a humble, middle-class lifestyle. His surviving family members say he was never paid royalties for the device he invented, and never became famous for designing a product now used by millions.

    A package of two EpiPens costs $415 in the US after insurance discounts. Comparatively, in France, two EpiPens cost just $85 USD. Mylan CEO Heather Bresch’s salary increased by 671 percent after hiking the price of the EpiPen by 461 percent over the past nine years.

    Before her hire as CEO, Bresch — daughter of U.S. Senator Joe Manchin (D-W.Va) — was Mylan’s chief lobbyist. In November of 2013, a bill requiring all public schools to carry EpiPens for students with food allergies was signed into law by President Barack Obama. Over the following three years, as schools nationwide bought EpiPens by the truckload, Mylan implemented double-digit price hikes for the EpiPen every other quarter.

    Mylan moved to further maximize its profit margins by engaging in a shady corporate accounting trick known as a tax inversion. In 2014, Mylan reincorporated in the Netherlands to lower its effective tax rate, despite its operational headquarters remaining in Pennsylvania.

    OH, by the way according to Open Secrets web site Mylan Inc $58,250 is Senator Joe Manchin’s (D) second largest campaign contributor. Also Pharmaceuticals/Health Products $178,550 is his 5th largest contributing industry.

    Nothing to see here move on, you proles.

  31. Louie, you appear to be the sole commenter who is capable of viewing the current EpiPen scandal as having far wider relevance to the average citizen than the usual partisan pet peeves or the frequently observed instances of pharmaceutical price gouging, but rather as viewing the EpiPen scandal as illustrative of one among many scandals that encompass a broader systemic corruption involving a nebulous, at this point, collaboration of powerful, politically connected people whose activities are given a greater scope and breadth of ‘freedom from oversight’ than would be mine or countless other folks who are not similarly politically connected.

    A simple smack on the back of Mylan CEO Heather Bresch’s hand and mandating an EpiPen price reduction will not begin to address the larger problems that exist within our now recognized corrupt culture of corporate business that includes both sides of the political aisle. The Washington Post has provided us with some solid reporting re: the EpiPen scandal that reveals a series of ethically messy mishaps and murky relationships.

  32. Who are we kidding? Health insurance companies have nothjng to do with health care, they strictly bankers, nothing more, nothing less. Single payer or Medicare for all will break up the health care bankers. As far as big Pharma, get rid of Citizens United, which will put a big hurt on the industry, and pass common sense laws to control them. Oh I forgot, right now we are controlled by the Republicans.

  33. Thank you BSH 8:17. I think there is always a deeper story. You mention – a broader systemic corruption. I believe you are quite right. The partisan party adherents cannot seem to see the endemic corruption in both the Democratic and Republican Parties. They see some green leaves on their tree and fail to realize the tree itself is infested by parasites.

    The Wash Post article you cited is also illuminating as to how some in our society are given protection and no matter how egregiously morally wrong they are – nothing of consequence happens to them.

  34. Vilifying doctors in this fight is the wrong way to go, especially primary care doctors. To discount their training and dedication only to be treated no better than a fast food worker is just one of the reasons why so few of our new doctors want to go into primary care. Lower pay, less autonomy and non-compliant patients can take a toll. We don’t teach the cost of pharma in schools because they are busy learning the things that will save a life.
    By all means, be angry at the healthcare system, but remember that doctors don’t run it, and haven’t for over 50 years.

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