At Any Price

This is not good.  Try to take off your drug industry hat and read the following New York Times report on the incredible increase in branded drug prices.  The worst news is not the headline but the facts behind the numbers.  The price of brand name drugs went up 13% or 6x the rate of inflation.  Not good.  The worst news is that the price of generics went down by 22%. Most of the price increases were driven by specialty drugs for MS and cancer, which went up by 23%.

Prices are up but overall sales for branded products are down.  Fewer and fewer people must be using branded drugs.  Generics are growing and filling the gap.  Not only are generics taking business away from branded products but they are also forcing down prices for all drugs in a category where they compete.  I guess that is the purpose of generics.  We seem to have gone over the “generic cliff” where most diseases can be well managed with a generic product of some sort and brands are only needed when generics fail.  Branded drugs are becoming a niche market.

Also note in the piece the meager response from PhRMA.  As always they seem to be just looking for excuses.  Always defensive and never out front.  Comparing PhRMA to other lobbying groups such as oil, the chamber, tobacco, NRA, reproductive rights groups and others makes PhRMA look pretty weak.  The pharmaceutical industry that is arguably one of the strongest drivers of innovation in our country is dumped on time and time again.  When will we stand up?

Now is the time for the industry to fight back.  For an image of what could happen if things are not changed it might be worth thinking about the automobile industry in Cuba.  From the time of the revolution up until about a year ago new car sales did not happen in Cuba.  Government restrictions and high costs basically have resulted in an island that drives cars built in the 1950s.  Yes they are cars and they do move people from place to place some of the time but they don’t even begin to compare with cars driven in the rest of the world.  We all think this is a little silly, but if things don’t change the same could happen to our industry over the coming decades.  Innovation is being stifled.  New drugs, even when priced appropriately, are not succeeding.  This will hurt long term if it continues.  Today few are overly concerned, just like the folks in Cuba weren’t too disadvantaged by not being able to buy new cars in the early 1960s, but after decades without innovation this becomes an issue.

The rules need to be changed.  First, the industry needs to get the public on our side.  They must begin to clearly understand the value the industry brings to society.  I am really proud when I hear about people with AIDS now learning to live with the disease rather than merely trying to prevent death.  I love seeing those “vaccine preventable” diseases actually be prevented around the world.  The industry needs to help society recognize the progress in healthcare we have led.  But this is more than just an image battle.  Longer patent protection is needed to support increasingly risky and expensive innovation.  Government regulation for clinical development and even marketing practices need to be modified.  Financial incentives paid to physicians to use generics should be examined relative to fair trade practices.  If the industry can’t work within the current payer system it needs to look for drastic changes.  The ideas could go on and on but the fact is we need new ideas.

The quote in the piece about “any drug at any price may not be sustainable” may need to be looked at from a different angle.  I would say that what is not sustainable may be a healthcare system without innovation.  Cost savings and unwise protection of generics without considering innovation may be what is unsustainable.  There is a price that we will pay for downsizing the branded drug industry and when all the facts are considered I am not sure the public will be happy.  Only collectors think those cars in Cuba are cute.

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