Amid all the debate about our rising health care costs, one thing you almost never hear about is rising drug costs. Think about it: You hear plenty about emergency rooms and chronic care, but nothing about drug prices, which are the main interaction most of us have with the medical industry.
And that's totally ridiculous: No wonder health care costs are rising so fast, when your doctor prescribes you a $100-a-month drug that could be replaced by a generic, but whose cost neither you nor your doctor is aware of, thanks to the mediating presence of an insurance company.
There's something fishy afoot, and all you need to do is follow the money, as this superb, vitally important infographic fromMedicalBillingAndCoding.Com does. Relying on hard-core investigative reporting from the likes of The New York Times and Pro Publica, it lays out the rivers of cash that drug makers use to ingratiate themselves with the medical community.
Obviously, the drug makers have every incentive to sway the decisions of doctors. They're protecting a $300 billion industry; keeping drug prices rising at an astronomical 8% a year is just good business. (If 8% a year doesn't sound like much, consider: If something whose cost is $100 now rose by that rate for 10 years, it would cost $216.)
Via: MedicalBillingandCoding.org
Doctors, meanwhile, are the decision-makers in this whole process. And to be fair, they often don't realize that to prescribe a brand-name drug often means switching from a generic that costs many times less. Costs are invisible to them. Which perversely means that the money that drug makers pump into the system has that much more power to sway their decisions. If they're constantly being cozied up to by drug makers pushing potentially spurious benefits, why wouldn't they prescribe those brand names?
On the one hand, you have huge informal perks offered to practicing doctors, and on the other, you have a whole class of shady doctors hired to push drugs onto their peers. And these guys are often straight-up criminals. Here's what the major pharmaceutical companies have paid our doctors since 2009.
- Eli Lilly: $144.1 million
- Glaxo-Smith-Kline: $96.4 million
- AstraZeneca: $22.8 million
- Pfizer: $19.8 million
- Johnson & Johnson: $10.6 million
- Merck & Co: $9.4 million
Isn't all this wrong, you might ask? Doesn't it mean that doctors are swayed to over-prescribe drugs, and that big pharma has every incentive to make that happen? In fact, yes. And many of the major drug makers have paid hundreds of millions -- even billions -- of dollars in fines, related to such charges. But there are resources you can tap, if you want to help address the problem.
Granted, by acting according to those suggestions, you seem to be helping no one except maybe the insurance companies (although rising drug prices also allow them to justify higher premiums). But maybe it's enough comfort to know that you're helping fight the problem, just a little bit.
If you want to learn more about the perverse system of incentives that creates all this misbehavior in the drug industry, we highly recommend this report from NPR's Planet Money podcast.
[Click here to see the infographic larger; Hat tip to WeLoveDataVis]
COMMENTARY: The pharmaceutical industry is one of the industries that I mistrust and despise the most. There's a love-hate relationship. We can't do without them, and most importantly, the pharmaceutical industry knows that only to well, and they take advantage of us.
America may have the best healthcare system in the world, but if it truly was, shouldn't we have lower healthcare costs, and be paying less for our prescription and over-the-counter medications? Unfortunately, nothing could be further from the truth, and in a blog post dated January 7, 2011 titled, "An Unabashed Look at the U.S. Health Care System, The Greatest Health Care System in the World, Damn Gummit", I explained in great detail why this is the case. And, this is not liberal propaganda, but the goddamn truth.
According to The New England Journal of Medicine, the percentage of the personal health care dollar spent on prescription drugs has grown faster than any other segment, including doctor and hospital bills, partly because the prices of prescription drugs have risen an average of 17 percent a year in the last few years. That is over 1,000 percent higher than the 1998 inflation rate of 1.6 percent.
There are a lot of reasons for this, but the biggest reasons why drugs cost more in the U.S. than ANY country in the world are as follows:
- Research & Development Costs - The high costs of research and development are often cited by the pharmaceutical industry to justify the steep prices charged for prescription medicines. However, in a study published in February 2011, two health policy experts argue that drug companies spend around $60 million on average to discover and test a new biologic or small-molecule drug, not the the $1.3 billion estimate that goes back to a 2003 report from a team led by Joe DiMasi, a health economist at Tufts University Center for Drug Development in Boston. Says study co-author Donald Light, a health policy researcher at the University of Medicine and Dentistry of New Jersey in Stratford, “Economists over the last 35 years have found more and more ways to make the costs as high as possible, and that’s been the chief lobbying tool for the industry.”
- Price Controls - Prices of brand name drugs in the U.S. are higher than ANY other country in the world. Brand name drugs in the U.S. are often marked-up 1000%. As a consequence, other countries have established price controls in order to keep drug prices reasonably affordable for their local residents. The price differential for brand-name drugs between the U.S. and Canada has led Americans to purchase more than US$1 billion in drugs per year from Canadian pharmacies.
- Pharmaceutical Industry Lobbyists - The pharmaceutical industry has thousands of lobbyists in Washington, D.C., that lobby Congress and protect their interests. The pharmaceutical industry spent $855 million, more than any other industry, on lobbying activities from 1998 to 2006, according to the non-partisan Center for Public Integrity.
- Advertising and Marketing Costs - The pharmaceutical industry has quickly discovered that advertising actually works. Up to a third of consumer's watching a drug advertisement ask their physician about that drug. As a consequence, the pharmaceutical industry is one of the largest US advertisers. It is estimated that the pharmaceutical industry pays $2.5 billion per year for direct-to-consumer advertising, and their some of their ads have made drug companies and their brand products household names. An AARP Bulletin reported that pharmaceutical giant "Merck spent more advertising Vioxx, according to NIHCM, than the $125 million spent promoting Pepsi or the $146 million spent on Budweiser beer ads. It even came close to the $169 million spent promoting GM's Saturn, the nation's most advertised car." TV commercials, like the ones for male erection dysfunction drug Viagra another example of big spending on advertising for just one drug. In spite of shifting regulatory hurdles and economic malaise, direct-to-consumer (DTC) ad spending on prescription drugs increased in 2009, largely on the strength of blockbuster brand promotion in traditional mass-market media.
- Legal, Litigation, Fines and Penalties - Pharmaceutical companies incur some of the highests costs for litigation and fines and penalties for drug crimes and civil wrong doings. Allergan, (AGN) paid the government $600 million to settle criminal and civil charges arising from the company selling their Botox product as a remedy for headaches – despite forgetting to get FDA approval to do so. Novartis (NVS) coughed up $422.5 million to get rid of criminal and civil liability problems for illegally marketing some of their products. AstaZeneca (AZN) kicked in $520 million for marketing an anti-psychotic drug for uses not approved by the FDA and for paying kickbacks to doctors. Pharmaceutical companies are also being tried in federal courts as an answer to their exploitation of Medicare. AstraZeneca Inc. had to pay $280 million in civil penalties and $63 million in criminal penalties to the federal government after the company "paid kickbacks to health care providers and coached them to cheat Medicare to promote a prostate cancer drug."
If you found the above article troubling and of concern, you might enjoy reading my other blog posts dated December 6, 2009, February 10, 2011 and April 10, 2011.
Courtesy of an article dated June 9, 2011 appearing in Fast Company Design, an article dated March 7, 2011 appearing in Spoonful of Medicine, and article dated June 2009 appearing in the National Council of State Legislatures
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