Muscatel: Big Pharma Needs to Change

Surging prices and excessive profit margins aren’t necessary for innovation.

by Garrett Muscatel | 11/14/19 2:20am

As talk of “Medicare For All” begins to dominate the Democratic presidential primary, discussion of “Big Pharma,” or the pharmaceutical industry, become all the more frequent. The rising price of life-saving drugs contributes to a fast-growing sense of insecurity in the American health care system. 

A Nov. 7 column in The Dartmouth written by Gabrielle Levy ’22 implored students in to “Stop Hating on Big Pharma” because research and development is expensive — thus, the rise in prices is necessary to pay for this R&D. However, this argument misses the larger picture of Big Pharma’s corrupting influence on the rising cost of life-saving drugs for people who need them the most.

For full disclosure, I serve on the Committee on Commerce and Consumer Affairs in the New Hampshire House of Representatives, where I spend most of my time on health insurance and culling the rising cost of prescription drugs. The pharmaceutical industry can attempt to frame Turing Pharmaceuticals CEO Martin Shkreli and his outrageous price hikes as an outlier, but he is just one of many insidious examples of the pharmaceutical industry profiting off of people that must buy their products to stay alive.

Take insulin as an example. In 1923, the patent for insulin was sold for $1; yet today, the most popular forms of insulin can cost over $400 per vial. Most diabetics need several vials per month, raising the cost of surviving for millions of Americans by thousands of dollars each year. Due to weak regulatory enforcement, these price hikes go unchecked, putting American lives at risk just to make a buck. A January study in the Journal of the American Medical Association showed that as many as one in four diabetics report difficulty paying for life-saving insulin.

“Big Pharma” shouldn’t need profit as an incentive to innovate when human lives are at risk. Day after day, I hear stories in the legislature about how rising prescription drug costs are the number one driver of increasing insurance premiums. The industry’s tactics are harming Americans far too frequently, which is why Senate Majority Leader Dan Feltes (D-Concord) and I have introduced a bill to cap cost-sharing for insulin at $100 per month. Big Pharma lobbyists have continually opposed critical efforts like ours to make prescription drugs more affordable, calling them harmful to “innovation.”

Pharmaceutical executives often dismiss rising prices as a result of the extremely high costs of research and development associated with new drugs. It is true that Big Pharma spends billions of dollars developing new drugs that significantly improve our lives every year. However, R&D does not actually account for the majority of company spending — a study from the Campaign for Sustainable Rx Pricing showed that R&D accounts for only 20 percent of spending, about the same as what is spent on marketing. Television ads alone accounted for $3.7 billion in spending in 2018, with much of it going towards expensive brand name drugs like Humira, used to treat arthritis, which retails at approximately $8,200 for 40 milligrams. Direct-to-consumer advertising is illegal in every other country except New Zealand and often faces criticism for exaggerating benefits, downplaying side effects and avoiding even the slightest discussion of cost. 

According to my calculations, Big Pharma could nearly double R&D spending and still make a hefty profit if they cut down on ads, but that’s just the beginning. Pharma also spends big on efforts to stifle generic competition, such as offering coupons that lower the copays of brand-name drugs to just below the cost of generic alternatives. These coupons seem like a great deal, but we all end up paying for them through higher insurance premiums and lower wages for those who get their insurance through an employer. A 2016 study showed that coupons increased drug spending by $2 billion during the sample period. Manufacturers make a six-to-one return on investment from coupons, but the evidence suggests that coupons have no impact on patient’s ability to access their medications. We pay more for insurance, the pharmaceutical industry walks away with a bigger profit — and no one is any healthier. This is just one more example of the brilliant yet devastating efforts of Big Pharma to increase their profits at our expense, and it demonstrates the urgent necessity of reform. 

This College sits in New Hampshire, a state hit hard by the opioid epidemic. This is a place where Big Pharma’s greed seemingly knows no bounds. I’ve known too many people hurt by the lax regulation in this industry, and I’m sure many of you reading this feel the same way. 

I’m not ready to write off Big Pharma just yet, but it’s about time we did something to rein in the high prices and pill-pushing that are claiming too many American lives.

Garrett Muscatel, a Democrat and a member of the Class of 2020, represents Hanover in the New Hampshire House of Representatives. 

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