I want to assure you I’m not a bloody socialist like a few friends I have in England.

Matt, I would urge you to read a piece in the current New England Journal of Medicine — Doctors and Drug Companies, by Dr. David Blumenthal.

The author, among other things, writes about the drug industry’s…. “methods that are deeply troubling and even criminal” and its …. “egregious excesses.”

This may be an eye-opener to rabid free-market advocates.

Here we go again!

In trying to justify the high prices of drugs, Big Pharma always invokes its supposedly massive costs for R&D when in reality it’s the vast marketing budget that eats up over 1/3 of of its annual sales revenues ($200 billion.)
Where is the honesty there and how can we believe them
in trying to justify their outrageous prices?

A lot of that marketing money is spent on massive advertising to doctors, in DCA, and in other activities masquerading as “education” and “research.” A lot of those things are questionable, even corrupt.

But in addition, I made it clear we have to do other things, including curbing monopoly rights to facilitate getting generic drugs faster,
strengthening the FDA to distance itself from industry influence, creating an independent institute to carry out clinical trials and replace those sponsored by Big Pharma, getting the drug industry out of medical education, and establishing reasonable and uniform pricing.

I feel these things would work. Nobody had confronted Big Pharma before about its practices, and it’s a good thing we are finding out more about them. Besides Dr. Angell’s book, two others by Dr. Jerome Kassirer(On the Take) and an investigative
team from TIME (In Critical Condition ) just came out, with chapters quite critical of the drug industry.

Also consider there are dark clouds ahead for Big Pharma if it decides to do things as usual. People are mad, states are complaining about drug bills busting their Medicaid budgets, and the drug pipeline, particularly for innovative drugs, is slowing down to a trickle. On top of that, patents are due to expire on a number of blockbuster drugs.

So, yes it’s in the interest of the drug industry to impose better discipline on itself, or BIG TROUBLE will be looming just ahead.

As previously noted, I agree that there are problems that should be fixed, and that fixing them has a good chance to lower prices in a “productive” way. (Admission: I’m not really sure what “productive” means, except that it does not include arbitrary price caps.)

But I confess I’m still mystified by your emphasis. Per your last post, you argue as follows:

“Chief among these [problems] is that the drug industry bamboozles the public by overstating its R & D expenses….”

For the sake of argument, let’s grant that industry really does massively overstate R&D costs. (My personal guess is that the actual degree of financial obfuscation is more than what pharma claims, but less than what its major critics claim. No matter.)

Do you really think this is the “chief” problem? Do you think forcing pharma to disclose the “real” numbers would have more impact on drug prices than any other single change? Or is there some reason you think other changes would be ineffective without that change as well?

I hope I don’t sound like I’m bashing; my questions are quite sincere.

In my opinion, forcing “reasonable” financial disclosure would not, by itself, do anything useful. It might make people more angry at big pharma (again, assuming they really are bamboozling), but it would still require other changes to actually lower prices. That’s why I argue we should focus on those other changes, and ignore the marketing budget question entirely.

This will be my last riposte on this subject, since it appears we can beat this to death without agreeing, mainly because of our differing philosophies. It’s not because I’m a Marxist, as you imply, and which is not true, but we are looking at this subject from two entirely different perspectives.

My original comments on this issue began after reading Malclom Gladwell’s piece in the New Yorker, and I felt he did not lay out a comprehensive picture of the problem of high drug prices, in contrast to the litany of what Dr. Marcia Angell, in her book, described as corrupt practices by Big Pharma to tweak these prices.

Chief among these is that the drug industry bamboozles the public by overstating its R & D expenses (11% of sales revenues) when these are dwarfed by its vast marketing scheme that eats up 35% of the revenues, in contrast. Couple this with other unsavory practices, all documented in Dr. Angell’s book, and you begin to see why prices are set so high, victimizing a lot of people except the investors.

JB contends that is perfectly alright, withou acknowledging that there are problems. And that’s where JB and I differ. It’s not a simple question of letting the market run on its own course; we need to make sure the rules are fair. Come to think about it: 10 drug companies outstripping the combined profits of 490 other businesses on that FORTUNE 500 list. And that has been consistent for the last 20 years. You call that a high-risk business?

On the subject of fee schedules, yes I’m quite familiar with the old UCR and the current RV-based system.The old system did not last because medical providers, sad to say, abused it – an example of a free market gone wild. The RV system at least is fair, and while not perfect, it is equitable and reasonable. Most of us still make confortable sums of money, but without the freedom to dictate how much we can charge without constraints.

Which brings me to my last point: ethics in medicine. I don’t have to wear my ethical compass on my sleeve; that ought to be ingrained in the practice of our profession. While I can understand JB’s need to behave like a businessman, that’s not the image that I would like to project to the public as a physician. Mixing medicine with business is not a good mixture, which can only sully our already tarnished image.

Maybe I’m too much of an idealistic physician, but what is wrong with that? I practiced Internal Medicine for 33 years, retired three years ago, and never had any regret about not commercializing my practice. It’s the last thing we need at a time when the public is getting increasingly skeptical about our profession.

BTW, RGL, if you are a typical physician, you earn a very comfortable six figure salary. I don’t think it’s reasonable for you to earn that much when some people can’t afford to buy their medicine.

RGL, I went through the same type of medical training that you did, but I don’t wear my “ethical compass” on my sleeve. I agree that there is a problem, but where I disagree with RGL is that I don’t think it’s my place to compel another person or company to use their talent and resources to solve those problems. RGL is free to start a Pharma company that will behave as he deems reasonable, or to invest his money in such a company if he wants to. I’m here to serve my patients. Most of them pay me, but some don’t. If I didn’t behave like a businessman, the bank would foreclose on my office, the IRS would confiscate my assets, my employees would not come to work, and the power company would turn out the lights. If those things happened, I would not be here to serve my patients. So, yes, RGL, I believe that we all ought to behave like businessmen. That’s the only way that we can assure that we will be here for our patients. RGL may be in a practice where someone else “behaves like a businessman” for him, but there is no doubt that that is the only way that we will be able to be here, to take care of our patients, and to work to solve our society’s problems.

I don’t know how long JB has been in surgical practice, but I presume he must be familiar when physicians were billing patients on the basis of UCR – usual, customary, and REASONABLE. That was before Medicare and private insurance companies started controlling fees. Why? A number of those charges were deemed to be UNREASONABLE, indefensible under the pretext of a market-centered society. A number of us may not feel we are not being paid enough, but at least the current fee schedule system is much saner. And by the way, it’s not based on the unsavory philosophy that you can charge as much as you can.

It’s also naive to believe that that Big Pharma “will not give away its products” if there is no prospect of profits waiting for them. This is not a question of giving their drugs away as much as it is of asking them to price those drugs REASONABLY. When, for the past 20 years, you have the Big Ten of Big Pharma amassing profits larger than those of 490 other businesses combined on Fortune’s 500, you are talking about real money. Can we just agree it is nothing more than naked GREED?

Of course nobody is forcing Americans to buy these expensive drugs; even if they are forced, many cannot afford to do so. But isn’t that why there is a problem and we need to do something about it? I get the feeling JB could care less, but my training as a physician has endowed me, and thousands of colleagues I know, with certain ethical standards. We all need to advocate for the interests of our patients, unless JB feels we all ought to behave like businessmen.

For JB to believe it’s the American way to extract as much profits as possible, cognizant there are problems in the drug industry, is to embrace a philosophy that recognizes no ethical compass. As I said before, corporations, like physicians, ought to have a conscience.

I don’t practice in a free market. I practice in the USA where Medicare, Blue Cross, Cigna, and United control my fees. I would be delighted to practice in a free market where my fees would be determined by what I felt I was worth and what the patient could afford to pay. That ended years ago. I get paid the same whether I spend 25 minutes or 2 hours taking out a gall bladder. If the 2 hour gallbladder is your standard, then getting the same fee for ¼ of the work may seem like “bilking.” I don’t think so.

The new expensive drugs are either worth what is being charged, or they are not. As a surgeon, I know that some of the new antibiotics are expensive, but if they get someone out of the hospital a couple of days early, everyone wins. I don’t pretend to know much about statins, but I do know that when properly prescribed they can extend lifespans. I don’t know why a doc would prescribe Lipitor instead of generic lovastatin at 25% of its cost, but I do not believe it’s because the prescribing physicians are fools, uninformed, or tools of Pfizer. Presumably, they are all better than niacin. Whether the extra benefit is worth the extra cost is between the doc and his patient, with a possible contribution from the trial bar and the insurance company.

This goes for the copycat drugs also. They are similar but not identical, and there is the occasional patient who can benefit from, say, Nexium, and not Prevacid. Even after they go off patent, the multiple copycats continue to be manufactured and sold; see the multiple NSAIDs, some of which are OTC, and the H2 blockers, which were the blockbuster high dollar drugs of the late 70s and early 80s and now all OTC and cheap and all still sold.

Big Pharma will not give away its products; it’s too high risk to develop new types of medication without a high potential profit down the road (there has to be a cat before there is a copycat). Bringing up Canada is specious. If Americans start to drive down profit margins by taking the Canadians’ limited drug supply, the Canadians will quit selling to Americans, and the Pharmas will quit selling to Canadians. The American drug market is what drives the Pharma industry. The Canadian market, even at market prices, could never support the current R&D efforts of the drug companies.

Americans buy the drugs because they believe they are worth the money. Of course they would be happier to buy them for less. The problem is that no one is going to develop and sell them for less. No one is forcing anyone to buy them today.

It’s great to want to “balance our desire for profits with fairness and responsibility,” but that is pretty difficult to do when you have the FDA on one side, the shareholders on another side, and the trial lawyers surrounding you. I don’t blame them for behaving the way every other corporation does. They make a product and sell it for whatever price they can. That’s the American way.

I have no problem with Big Pharma conducting marketing activities as long as they are not disguised as “education” and “research.”
We also need to make sure we get rid of what Dr. Angell calls lures, bribes, and kickbacks in the conduct of these activities. Qetsal surely must be aware of these
shenanigans if he has been in practice long enough.

Marketing is what sells products, and Big Pharma knows about that. But it ought not to put a smokescreen by exaggerating their costs for R & D, while minimizing their marketing expenses, to dupe the public into believing that’s what is driving drug prices beyond what is reasonable.