“Price to the Marketplace”: A Prescription for Disaster

It’s beyond clear that the United States has the most exorbitant prescription drug prices in the world. There’s no pretense; such costs are totally out of control. The litany of ads for seriously expensive prescription drug solutions that litter traditional television are clearly targeting elderly viewers, increasing paranoia that “gee, that sounds like me and need to get some,” seem almost inexcusable. The clamp on doctors’ effectively getting paid by pharmas to prescribe their products shifted the marketing ads aimed at the patients themselves. Do you really believe that lay people with no medical training are the appropriate target for complex drug marketing?

Think the opioid crisis just “happened”? That the massive marketing effort, starting with oxytocin, was the result of justifiable demand in the marketplace, that the ads targeting doctors and consumers of the easy pain-relief with limited side effects had nothing to do with an addiction craze that has hit too many American communities hard?

We know that the 2010 Affordable Care Act (Obamacare or the ACA) made a huge and now nasty concession to the pharmaceutical industry to generate their support for the bill: the new healthcare exchanges would not contest the prices that the pharmas charged or use their massive new bargaining power to reduce prescription drug costs. And we know that the GOP-controlled administration, plus red states hell-bent on containing ACA benefit programs, has done everything to erode the coverage under the act and virtually nothing to reduce the burdens of unaffordable prescription drugs. If anything, the approval of “skinny” cheap, red state healthcare plans that have been allowed by the Trump administration have eliminated “addiction services” from coverage… has made the opioid epidemic that much worse.

The only token Trump gesture directed at reducing drug costs has been “shame” to an industry where shame has been purged a long time ago. Trump’s threat to issue an executive order mandating that pharmaceutical companies post their real costs on any advertising they issue generated a chorus of corporate guffaws and statements of clear defiance. Muttering, “First Amendment, First Amendment,” the CEOs of the biggest and baddest pharmas stated that they had no intention of complying with such a directive. A few said that they might post pricing on their Websites, but nothing more.

In fact, the “business profits trump social benefits and individual rights” mantra of the Trump regime seems to have emboldened some in the pharmaceutical industry to fire back with a rather brazen retrenchment of “bilk the consumer” business practices. They will happily spend massive sums marketing, but, continuing their “fake news” campaign that they are just paying for their egregious research and development costs, they continue to price their products higher and higher. That the they cannot and do not charge those prices for the same products in other nations suggests the magnitude of their mendacious cost price-cost justification here in the U.S..

Nothing brings this home more than the recent rather honest “we really do bilk the consumer” statements from Pfizer’s CEO, Ian Read. Removing any pretense of consumer-friendly pricing, Read declared that Pfizer would return to “business as normal.” Writing for the November 2^nd Los Angeles Times, David Lazarus explains: “With those three words, the chief executive of pharmaceutical giant Pfizer declared this week [late October] that his company, and by extension the drug industry, is dropping any pretense of being open to price cuts and will continue gouging sick people as much as they can.

“After reporting a 45% increase in quarterly profit — 45%! — Pfizer’s CEO, Ian Read, was asked about possible pushback from the Trump administration if he announced price hikes in January after earlier saying the company would reconsider its strategy of regular increases.

“‘I expect our approach by the end of year will be what I would characterize as business as normal,’ Read answered during a conference call with analysts… ‘We price to the marketplace,’ he said. ‘We price competitively, and we will make those decisions towards the end of the year and early in January.’

“In other words, no more Mr. Nice Guy. Pfizer will once again reach as deeply as possible into people’s pockets, regardless of what President Trump might want… Because let’s face it: For all his talk of drug companies ‘getting away with murder,’ Trump has been all bark and no bite when it comes to sky-high drug prices. And the industry knows it…

“Pharmaceutical and biotechnology revenue soared to $775 billion from $534 billion from 2006 to 2015, according to the U.S. Government Accountability Office… The average profit margin for the industry in 2015 was 17%. For the 25 biggest drug companies, the average profit margin was 20%.

“And now we have Pfizer, the happy people who bring us Viagra, posting a 45% quarterly profit gain. For all of 2017, the company pocketed $21.3 billion, with a big chunk of that coming in the form of a wet kiss from the Trump tax cuts.

“In July, Pfizer wanted everyone (and by ‘everyone,’ I mean Trump) to think it could play well with others. It said it would put off its usual summertime price increases as a goodwill gesture until Trump could implement his ‘blueprint’ on lowering U.S. drug costs.

“‘Pfizer is rolling back price hikes, so American patients don’t pay more,’ Trump crowed on Twitter. ‘We applaud Pfizer for this decision and hope other companies do the same. Great news for the American people!’… Four months later, Trump’s blueprint is largely wishful thinking and Pfizer, for one, is tired of being a presidential punching bag…. ‘Look, our pricing — I don’t think our pricing situation has changed,’ Chief Executive Read said this week. ‘Our pricing philosophy is to price to the value of the product and price inside a competitive marketplace.’

“That notion of pricing ‘to the value of the product’ is key here. To a sick person, a drug might have limitless value… I have Type 1 diabetes. Without insulin, I will die. You could charge me whatever you like. If I have the money, I’ll pay it. What choice do I have?...

“The industry has spent more than $216 million on lobbying [in the U.S.] this year. Its main trade group, Pharmaceutical Research and Manufacturers of America, or PhRMA, has led the way with about $22 million in lobbying efforts, followed by Pfizer with $9.4 million — the most of any single drug company.”

It is fascinating to watch the legions of Republican lawmakers, who virtually all voted repeatedly to repeal the ACA, who once argued that individuals should make their own healthcare choices in a free marketplace without government requirements… now speak about lowering drug prices and making sure that preexisting conditions do not impact healthcare insurance costs. It seems the tide has turned. The increasing shift to a gig economy combined with the rapid rise and fall of once iconic and stable employers (Sears being the latest big casualty) has made it abundantly clear that healthcare coverage can no longer assumed to be available from employers anymore. The world has changed… and the GOP is the least credible political faction to deal with fixing our healthcare system.

I’m Peter Dekom, and it is time for everyone in this country to face the reality that without significant government regulation and control, healthcare would be relegated to a privilege accorded only to those able to afford its escalating costs.