Time to put the brakes on the Big Pharma Express
Prescription drugs did not become outrageously expensive by accident. Drug prices are astronomically high because that's where pharmaceutical companies and their investors want them. The brakes have come off pharmaceutical pricing, and American families are hurtling along in the passenger seat terrified of what comes next.
Pharmaceutical companies often trot out uplifting stories about miracle cures, but it is morally repugnant when patients can't afford those cures. It is morally repugnant when ailing patients must choose between filling that next prescription or putting food on the table. It is morally repugnant when patients must skip doses.
The way Big Pharma does business is unacceptable and unsustainable. Ten companies accounted for half of all profits in the health care sector last fall. Nine of those ten were drug manufacturers. Drug makers behave as if patients and taxpayers are unlocked ATMs full of cash to be extracted, and their shareholders are the customers they value above all else.
Consider these examples. AbbVie manufactures the top-selling prescription drug in America, the arthritis medication Humira. Over six years, the company doubled the price of a 12-month supply from $19,000 to $38,000. Can patients opt for a less expensive alternative? No, because AbbVie protects the exclusivity of Humira like Gollum with his ring. Thick cobwebs of patents, legal tricks, and shadowy deals with other drug makers, all to keep the cash flowing.
AbbVie's financial documents add insult to injury by showing that in 2017, a portion of CEO Richard Gonzalez's multi-million dollar bonus was directly tied to sales of Humira. It appears the same incentive was in place in 2015 and 2016. In fact, the Senate Finance Committee's review shows that all of AbbVie's top executives had the same arrangement. That means executives directly benefit when prices are higher.
Here are other Big Pharma excesses:
n Pfizer gets first prize for emptiest gesture on pricing in 2018. After stern Donald Trump tweets last year, Pfizer said it would temporarily freeze prices. But once Trump got his splashy headlines, his gaze turned elsewhere, and Pfizer's former CEO told investors it was back to "business as normal" with another round of price hikes in 2019.
n Merck gets second prize for emptiest gesture on pricing in 2018. It made sweet promises after coming under criticism, but it cut prices for drugs that provide essentially no revenue to the company. Left untouched were the cash cows, Keytruda and Januvia, which account for more than a quarter of Merck's revenue. It's like promising car shoppers a great deal, except the only discounted model on the lot is an Edsel.
n Sanofi is wringing more and more cash out of people with an incurable disease. In 2010, a vial of Sanofi insulin cost less than $100. In 2018 it cost nearly $300, and the company raised prices again in 2019. Considering the landmark breakthrough on insulin came early in the Roaring '20s, nothing could justify that sudden price increase nearly a century later. Diabetics who can't afford the costs are self-rationing and endangering their lives, but at least the investors are happy.
n AstraZeneca: In an interview earlier this year, CEO Pascal Soriot complained that his $12 million salary made him, "the lowest-paid CEO in the whole industry." He said it was, "annoying to some extent." His company, meanwhile, continues to raise the price of Symbicort, its $3 billion asthma drug. For some asthmatics, being able to breathe costs hundreds of dollars a month.
n Johnson & Johnson: This Jan. 7, CEO Alex Gorsky said drugmakers needed to self-police on pricing. Sounds good, but it didn't last long. Three days later, his company hiked the prices of hundreds of its drugs.
n Bristol-Myers-Squibb: In 2017, the company spent roughly $11.5 billion on dividends, stock buybacks, marketing, sales and administrative costs. That's roughly triple the amount it spent on research and development.
All of the above starkly illustrates drug makers' profiteering and two-faced scheming.
Pharmaceutical companies are happy to blame these outrageous price increases on everybody else: health plans, pharmacy benefit managers and regulators.
They say cutting list prices would threaten their ability to invest in research and development. Don't believe it. After all, their R&D spending pales in comparison to their spending on alluring TV ads and office-to-office salesmen.
They also say list prices don't matter; that true costs are complicated. But companies don't set and raise list prices for fun. Those prices are directly tied to the amount patients pay out of pocket at the pharmacy window. They are directly tied to what taxpayers spend on health care programs.
The truth is this: Big Pharma profits are outsized compared to others in the industry, they receive a massive portion of revenue from American taxpayers, and bear none of the consequences of high drug prices.
It's past time to get beyond the excuses and make prescription drugs affordable.
Ron Wyden, a Democrat, is the senior U.S. Senator from Oregon and the ranking minority member on the Senate Finance Committee. This column is an abridged version of the opening statement Wyden made at a Feb. 26 hearing with pharmaceutical executives.
You can find links to the complete text of Wyden's statement and video of the hearing in our on-line version of this column.