Rx for Outrageous Drug Prices: Heal Our Democracy

expensive prescription drugs...
expensive prescription drugs...

Apart from the weapons makers, Big Pharma may be the most government-dependent industry in America.

That's why Big Pharma spends more on lobbying than any other industry, by far. In 2015, the pharmaceutical companies spent 50 percent more on lobbying than the runner-up industry (insurance). That tracks long-term trends, with Big Pharma spending $3.2 billion on lobbying since 1998, almost 50 percent more than the runner-up insurance companies.

If you're wondering why drug prices are so high, that's the real reason: Big Pharma's political power and influence.

Drug prices are spiking out of control, and the American people want action.

How strongly does the public feel about this? Well, Republican voters say that cutting drug prices is a bigger priority for them than repealing Obamacare. Americans overwhelmingly favor a range of measures to reduce drug prices, including enabling Medicare to negotiate drug prices, more transparency around drug pricing, and outright limits on prices for important medicines.

But we're not getting action on any of those ideas, or other measures to control drug costs, like speeding price-lowering generic competition. Indeed, Congress is actually considering lengthening monopoly protections for pharmaceuticals, and the proposed TransPacific Partnership (TPP) trade deal would work to lock-in drug company monopolies.

This is the important thing to understand about exorbitant drug prices: they have nothing to do with the cost of manufacturing, or little to do with the cost of research and development.

"The price of drugs really has nothing to do with how much a company spends on R&D," acknowledges John LaMattina, former president of Pfizer Global Research and Development.

Drug companies charge what they can. And because the government provides patents and other extensive monopolies, what they can charge is what the market will bear -- with no competitive pressure.

That's why we see drug prices rising 10 percent year-after-year, with prices rising after market introduction. It's why we've seen some prices spike 100 percent or more. It's why important new treatments cost $100,000 a year, or more. It's why we have rationing.

Yes, rationing.

When drug prices are high, patients skip prescriptions. A startling one-in-five Americans report not filling a prescription because of cost.

And, of course, there are enormous burdens on patients and their families when they do find a way to pay for outrageously priced drugs.

Which brings us back to the political power issue. Although the issue of drug pricing is deeply felt, although it hits hardest on a potent voting bloc (seniors), although there are incredibly compelling stories of what happens to people denied needed medicines, we don't get action.

Drug company power doesn't just come from lobbying.

  • Big Pharma spends big on elections. Drug company execs and PACs give about 30 million every election cycle to federal candidates. Although the industry has remade itself as relatively bipartisan, it played a crucial role in solidifying Republican control over Congress in 2002 -- a performance never far from the minds of elected officials.

  • No industry has been more reliant on the revolving door than Big Pharma. In one of the most revolting revolving door cases of all time, Rep. Billy Tauzin, R-La., ensured that the new Medicare Part D drug purchasing program would prevent Medicare from negotiating drug prices. Then, as the Medicare Part D legislation was being signed into law, Tauzin negotiated a new job heading up PhRMA, the industry trade association. The Tauzin case is not exceptional; it's the business model for Big Pharma.
  • The industry spends massively on PR programs designed to tout its role in developing cures, and propounding deceptive claims about the cost of making new drugs.
  • What does the industry get for its massive political investments? It maintains its monopolies. It defends its ability to take the fruits of government investments in biomedical research, with no obligation to moderate prices for government-funded inventions. It protects the tax subsidies for R&D. It ensures FDA safety standards aren't too tough. It buys the power and influence of the U.S. government to spread high drug prices to the rest of the world. And it prevents Medicare -- which by itself represents about 7 percent of the global pharmaceutical market -- from negotiating drug prices, conservatively costing taxpayers and consumers $16 billion a year. Medicare can't even negotiate the prices for drugs invented with direct and indirect federal support!

    So, Big Pharma wins with a rigged political system. The rest of us lose.

    All of this can be cured. But we have to heal our democracy.