Pills and Profits

One of the many aspects of America’s mess of a healthcare landscape–a mess that the Senate GOP is trying to make much worse– is the issue of drug prices. Pharmaceutical companies defend that pricing by pointing to the significant costs of research and development.

That argument seems persuasive–if we ignore the inconvenient fact that taxpayers fund a considerable amount of that research. As Fran Quigley recently wrote in the New York Times, 

How’s this for a great deal? The United States government funded research and development of a new vaccine against Zika. But the Army, which paid a French pharmaceutical manufacturer for its development, is planning to grant exclusive rights to the vaccine to the manufacturer, Sanofi Pasteur, along with paying Sanofi up to $173 million.

Sanofi will be free to charge the United States American health care providers and patients any price it wishes. Although American tax dollars funded the vaccine, and the United States took the economic risks, history suggests that many Americans would not be able to afford it.

This is a negotiating strategy of unconditional surrender. Although President Trump said before taking office that drug companies were “getting away with murder” and had campaigned on lowering drug prices, his administration is doing the opposite. A draft order on drug pricing that became public in June would grant pharmaceutical companies even more power to charge exorbitantly. For example, it could shrink a federal program that requires companies to sell at a discount to clinics and hospitals serving low-income patients.

Another major problem is the fact that for-profit drug manufacturers have little incentive to produce medications for which there are no markets, so diseases that are widespread in poorer countries get little attention. Quigley notes that, of the 756 new drugs approved between 2001 and 2011, fewer than 4 percent targeted so-called “neglected” diseases, despite the fact that those diseases afflict one out of every six people in the world.

A new drug company intends to change that reality.

Pécoul and Doctors Without Borders decided to tackle the diseases that were killing the global poor. Doctors Without Borders dedicated its 1999 Nobel Peace Prize award money to providing seed funding for the Drugs for Neglected Disease Initiative, known as D.N.D.I. The aim was to see what could be accomplished when research priorities ignore questions of profitability, and the price of medicines is “delinked” from research costs, which are instead shouldered by public financing or philanthropy.

An immediate challenge was that D.N.D.I. possessed none of the required hardware for the expensive drug research and development process: It had no labs, no manufacturing facilities, and no distribution process. It fell to Pécoul to recruit partners, including private pharmaceutical companies he persuaded to share drug compounds that had been uncovered but abandoned because of lack of profitability…

D.N.D.I. has already delivered seven new patent-free, low-cost treatments for neglected diseases.

Interestingly, D.N.D.I. has created these seven drugs, with 30 more in testing, at a cost of $290 million to date. For-profit pharmaceutical manufacturers have long claimed that it costs them $2.5 billion to develop a single drug, although critics insist that the figure is an exaggeration intended to justify higher-than-necessary prices.

D.N.D.I. conducts “open source” research, and does not patent its drugs.

Pécoul and his D.N.D.I. colleagues say their biggest challenge now is securing sustainable funding for research — another illustration of the limits of a model with no profits to invest in research. But the government funds research all the time — it’s just often turned over to for-profit companies. The Zika vaccine is one example. The prostate cancer drug pacilataxel, the leukemia medicine imatinib and many mental health and H.I.V. medicines and vaccines can all trace their origins to government-funded research — only to be handed over to industry to charge what they want.

As the article makes clear, this model cannot replace for-profit drug manufacture. But if governments provide more resources to nonprofit companies modeled after D.N.D.I, their products, at least, would be available and affordable to everyone.

Some economists have argued that since Medicare and Medicaid are the leading purchasers of drugs (and Medicare is forbidden by law from negotiating on price), the money saved by buying from nonprofit drugmakers could easily replace all privately funded research and development. The increased public research dollars could then be applied, D.N.D.I.-like, to develop the medicines that would have the most significant public health impact.

Focusing tax dollars on the public good…what a concept!


  1. Pharmaceutical companies “development costs” + marketing and advertising + prescription writers + wholesalers + retailers = drug prices. The blog explains the problem with development costs; the cost of the mostly unnecessary advertising has to be significant and undermines the traditional doctor-patient relationship. Then everyone adds overhead and profit before grandma finds out she can’t afford her medicine.

  2. There is also the problem of doctors over-prescribing drugs which easily and quickly cause addiction problems. I have commented before that the one hour special broadcast with Bernie Sanders and Chris Hayes from a small town in the poorest county of West Virginia should be re-aired. Especially after yesterday’s fiasco vote by the Senate with it’s preordained outcome. That program covered the prescription and health care problems in general from a ground-zero position. It is worth seeing again.

    We can also talk about the life-saving drug Harvoni for Hepatitis C victims; $1,152.58 PER PILL and those life-saving EpiPens and the life-saving chemo treatments which McCain will be receiving as he fights to prevent others from the availability to save or lengthen their lives. No amount of money Lilly Endowment puts into aiding those who need their form of assistance, can cover up their part in the Big Pharma culture.

    Medicare being denied by law to negotiate costs is a source of increasing the cost of Medicare for Social Security seniors and disabled recipients, deducted from our monthly checks. If Medicaid can negotiate costs for the low income recipients, that gives the illusion that Medicare recipients, who pay for their coverage, must have a decent income. How is the situation of negotiating/denied negotiation for drug costs dealt with for those whose Social Security is so low, they qualify for the state Medicaid system to pay their Medicare costs?

    Insurance companies, tiring of covering a percentage of expensive prescriptions, benevolently moved many drugs to over-the-counter (OTC) availability to end their responsibility to pay any of the cost. Because the OTC cost was often higher than the co-pay cost to patients (often due to the strength and number of meds OTC); only insurance companies saw the savings.

    This is a many faceted problem; and is only one part of the health care Civil War which rages on due to the power of Donald Trump’s full support of Congress – NOT the power of the presidency due to his DEMAND that they continue this war. Are you confused yet? Has any of this distracted you from Trump/Russia/Putin/Flynn/Kuschner/Donnie Jr/Sessions/Manafort/Huckabee-Sanders/Moochie or wondering about the real reason Sean Spicer hid in the bushes, gave off-camera statements prior to his switch to Skype and his coming removal from the White House?

    “If you can’t dazzle them with brilliance, baffle them with bullshit.” I am among the baffled; which group do you belong to?

  3. As taxpayers we have been forced for far too long to publicly share the financial risk only to turn over the profits to private companies. This has been especially true in the pharmaceutical industry.

    European countries with single payer insurance negotiate prices for everything – from drugs to orthopedic implants. They pay much much lower prices for the same drugs and implants than we do here in the US.

    When the government, under GW Bush, pushed through Medicare Part D and guaranteed that drug prices could not be negotiated it was one heck of a gift to the pharmaceutical industry.

    As long as there are members of Congress who are willing to sell their souls for campaign contributions or for future jobs outside of Congress I am unable to see how this form of robbery can be stopped.

  4. All phase 4 trials are simply for marketing purposes. Then are done mostly to compare the new drug to the old drug or drugs in combination. Pharma pays big money for these trials and for the dinners that tout the results to physicians. Take away the marketing and drug costs would come down significantly.

    Regulations keep government agencies from going to market with drugs on their own, but regulations allow groups like D.N.D.I. to apply to both NIH and DoD for funding. It would be nice if regulations promoted dealing with not for profit manufacturers.

  5. heres some info, the american prospect.org. someof this article will give a idea why in America we have a winfall profits on perscription drugs. prospect.org/article/hidden-monopolis-raise-drug -prices obvisously this could have overturned with a big backlash against congress. I have a script, its $64 a hit,, i go to canada, its $17 and its made by the same pharma. generic $8 whos foolin who? i didn the math. now you can too. I wrote to my senators and congressperson, I got generic answers to a major question,wrote in detail.obviously, north dakota reps sleep with pharma… maybe a slam dunk on our reps would move the constipation… write,get it on record, shame them…. Sen,Hietkamp,Sen Hoven, Rip Cramer….. I hope your constituents live long enough to vote again.. also, one tid bit, didnt we all here about obama care ,the death squad the red right of the isle screamed about? you know doc informes patients they should have a will or trust? maybe this” dont care “act trumps peddling should be the death care act… now heres a real death squad!

  6. Whatever explanation big pharm once offered for noncompetitive drug costs it’s clear today’s problem is never ending advertising costs.

  7. I’m going to my first protest today at 4pm PT in front of John McCain’s Tucson office about this healthcare bill. Apparently, our indivisible group has been featured on Rachel Maddow’s show four times. We have an active group and will not stand down against this administration trying to take healthcare away from us.

  8. I watched an update of a Frontline documentary last night, about antibiotics, and antibiotic resistant bacteria – a group that is growing by leaps and bounds. Antibiotics are the only class of medicines that become obsolete as they are used. The more they are used, the faster you are breeding resistant strains of bacteria. It costs a lot of money (you can argue about who pays, and how much is a lot) to develop new antibiotics. But for those antibiotics to be useful when you really need them, you have to sell as few as possible. Thus, major pharmaceutical firms have backed away from spending the R&D funds to work on antibiotics. That decision makes sense from a purely business point of view – but it makes no sense at all from a human social point of view. Since resistant bacteria can attack anyone from young to old, from super rich to poor, you’d think we could figure out how to pay for this stuff, and regulate its use. Although even if we did, there would be problems with reverse engineering and bootlegged drugs, since big pharma is not the only entity that wants or needs to make money.

  9. Bush’s giveways to Big Pharma and massive tax cuts for the rich during wartime are factors in our deficit and the continuing impoverishent of America, and the basic research for many of the patented medicines you and I pay for in addition to the inflated prices Big Pharma lays on us under the R & D umbrella of excuses. Add advertising on TV for particular prescription only medicines so that the patients can tell the doctors what they want and you create demand – we live in a free market economy, you know, but so do many other countries who have banned advertising of prescription only medicines and for good reason. Let’s let the doctors determine which medicines we use unless, of course, Big Pharma has got to them, too. We need reform in this area, deep reform.

  10. I belong to a philanthropic organization that I shouldn’t name, but anyway, it purchases tetanus vaccine for $1.80 per dose that comes in pre-loaded syringes that have a bulb, instead of a plunger. It is intended for easy use by minimally-trained people. The vaccine goes to Africa to stem the rise in tetanus in mothers who are forced to deliver their babies in filthy conditions, including houses with dirt floors. The company that makes and ships the vaccine is in Great Britain. I’d like to know how they can manufacture and ship vaccine all the way to Africa at such a reasonable cost when in this country the price would probably be 10 times as much. I think we all know the answer to this one. The question is: what are we going to do about it?

    Outstanding post, as usual, Sheila.

  11. Having been a Meds Nurse on the floor and for three wards – I got to encounter the pharmaceutical industry from the delivery side. But perusing the PDR is not an insight by any means into the pricing schedules of drugs… that comes when you become the patient or your loved one and you watch your meds price increase over time usually not incrementally more in quantum jumps – such as when they become ‘endentured’ to a specific company during patent coverage! the network is vast so vast I could spend many pages of notes… but you and I both know, there is something deadly wrong with the picture. It smacks of out right ‘survival of the fittest’ some sort of eugenics on a mass scale. Well I may seem to exaggerate but not much! Please keep speaking to this, Ms. Kennedy. We need to put some heads together and interpret not only to others but ourselves just what it is any of us can do – to help bring order to this ever growing spaghetti spider of obfuscation and out right greed!

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