The Price of Health
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The Price of Health

The Modern Pharmaceutical Enterprise and the Betrayal of a History of Care

Michael Kinch, Lori Weiman

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eBook - ePub

The Price of Health

The Modern Pharmaceutical Enterprise and the Betrayal of a History of Care

Michael Kinch, Lori Weiman

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About This Book

From "pharma bros" to everday household budgets, just how did the pharmaceutical industry betray its own history—and how can it return to its tradition of care? It's an unfortunate and life-threatening fact: one in five Americans has skipped vital prescriptions simply because of the cost. These choices are being made even though we have reached a point in the conveyance of medical options where cancers can be cured and sight restored for those blinded by rare genetic disorders. How, in this time of such advancements, did we reach a point, where people cannot afford the very things that could save their lives? As the COVID-19 global pandemic has pointed out, we need the leadership of scientists, researchers, public health officials and lawmakers alike to guide us through not only in times of a global health crisis, but also during far more mundane times. For the first time in decades, people from all walks of life face the same need for medicine. It is time todiscuss the tough questions about drug pricing in an open, honest and, hopefully, transparent manner. But first we must understand how we, as a society, got here.Medicines are arguably the most highly regulated—and cost-inflated—products in the United States. The discovery, development, manufacturing and distribution of medicines is carried out by an ever more complex and crowded set of industries, each playing a part in a larger "pharmaceutical enterprise" seeking to maximize profits. But this was not always the case. The Price of Health is the reveals the story of how the pharmaceutical enterprise took shape and led to the present crisis. The reputation of the pharmaceutical industry is suffering from self-inflicted wounds and its continued viability, indeed survival, is increasingly questioned. Yet the drug makers do not shoulder all the blame or responsibility for the current price crisis. Deeply researched, The Price of Health gives us hope as tohow we can still right the ship, even amidst the roiling storm of a global pandemic. How have medicines have been made and distributed to consumers throughout the years? What seaof changes that have contributed to rising costs? Some individuals, actions, and systems will be familiar, others may surprise. Yet the combined implications of these actions for will be surprising and at times shocking to both industry professionals and average Americans alike. Like so much else in human history, the history of the pharmaceutical enterprise is populated mostly by well-intended and even noble individuals and organizations. Each contributed to the formation or maintenance of structures meant to improve the quality and quantity of life through the development and distribution of medicines. And yet systems originally created to do good have often been subverted in ways contrary to the motivations of their creators. Only by understanding this disconnect can we better tackle the underlying problems of the industry head on, preventing foreseeable, and thus avoidable, medical calamities to come.

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Information

Publisher
Pegasus Books
Year
2021
ISBN
9781643136813

CHAPTER ONE The Law of Unintended Consequences

The price of medicines has been increasing at a disturbing rate, triggering alarmed responses by American consumers. Stories abound of people skipping vital medicines, not because they do not work or cause unwanted side effects, but simply because the high prices of vital medicines would preclude other expenses, such as food or shelter. In response some consumers routinely embark upon a relatively new form of travel known as “medical tourism.” An example came to the fore early in the 2020 presidential election campaign, when then-candidate Bernie Sanders accompanied a busload of diabetic American passengers on a day trip to Canada, a destination chosen because the price of insulin for our northern neighbors is far less expensive than in the United States.1
The concept of medical tourism was not new to the Vermont senator, as he had similarly joined a busload of breast cancer survivors on a 1999 shopping trip across the northern border to access affordable oncology drugs. And Sanders was not the only one venturing on such journeys. According to the Kaiser Family Foundation, more than nineteen million Americans (8 percent of the population) similarly import medicines using full-fledged medical tourism, mail-order prescriptions, and internet orders.2
Most Americans do not view Canada as a particularly foreign country. We largely share the same lifestyle and culture. The difference in drug prices cannot be accounted for by the difference of the two nations’ currency value. The American and Canadian currencies remain relatively locked together, distinguished primarily by changes in the price of oil. Yet, Americans pay far more for drugs than Canadians.
These higher prices are taking a dire toll on the health of the United States. Fully one in five American consumers admits to having skipped vital medications simply because they cost too much.3 This statistic is nearly twice the rate reported by Canadians. Looking further afield, the rate of American avoidance of medicines due to cost is ten times higher than that experienced in the United Kingdom.4

The Greedy, Needy American

A commonly held misperception is that American spending on medicines reflects the fact that Americans simply take more medicines. This presumption is an extension of the international stereotype of the overindulged and overweight American, impatient for quick solutions and willing to pop a pill for anything.5
Americans are rather unique in one way (with the exception of New Zealand) in that we are constantly bombarded with a flurry of drug advertisements. It seems impossible to recall a time before the countless television commercials portraying smiling, happy people presumably made that way by the miraculous remedies being pitched.
Given the media saturation of advertisement, along with the fast-talking announcers legally required to convey the potential risks of the product, it may come as a surprise to learn that Americans do not consume any more medicines than our international peers.6 This fact might even serve as an indictment of the advertising industry because one would presume an efficient use of this media, given the billions of dollars spent, would at least increase the number of doses sold. Instead, we contend that advertisement costs have primarily served as contributing factors to the ever-escalating prices of medicines.
Stated simply, the higher spending per capita of the American consumer on medicine reflects nothing other than the higher costs that we pay for each pill, injection, or infusion we receive.
Interestingly, the elevated rates of American consumer spending are a relatively recent phenomenon. As recently as the mid-1990s, the average costs paid by Americans for medicines were in a middling position as compared with other developed-world nations.7 This all began to change with the approach of the new millennium, when the pace of price increases far surpassed those paid by our international colleagues. These differences have continued to accelerate ever since, creating an unwanted form of American exceptionalism.

The Rise of the Pharmaceutical Enterprise

The causes for the excessive prices Americans pay for medicine are the subject of this book. The problem of high drug prices is in part a consequence of increasing complexity of both the scientific and business strategies used to develop, distribute, and market new medicines. Moreover, we will observe that the prices also reflect a unique perversion of general capitalistic tendencies.
The “pharmaceutical enterprise” has been metastasizing in both the number of industries involved as well as the number of individual companies in each industry. The overall enterprise has increasingly fractured in terms of the activities performed (discovery of new medicines is often distinct from their early or later-stage clinical development, manufacturing, distribution, and payment for the resulting products). The new industries that have joined the broader enterprise have often focused specifically on key aspects of the drug development and delivery process with the initial intent to reduce costs. Yet, over time each industry has undergone their own remodeling, as evidenced by waves of consolidation. The result has been an increase in expenses and a decrease in the efficiency of overall drug development and distribution, thereby contributing to rising costs. Unsurprisingly, each new company and industry that has been created seeks to optimize its own profitability. Thus, an already complex system, needed to apply cutting-edge science to derive and deliver new medicines, has spawned waves of entirely new industries and organizations, each of which seeks to maximize its revenues. All of this costs money, which we collectively refer to as “the price of health.”
Let us be clear, we are not advocating against a free market. Indeed, an emphasis upon a free market has historically distinguished the United States from many of its international peers, allowing the nation to prosper and become the world’s leading economic, military, and, yes, biopharmaceutical power. Yet these same positive characteristics have been twisted to create the morass of drug pricing that the United States faces today.
We will see that American dominance is not limited merely to geopolitical or economic hegemony, but extends to scientific and entrepreneurial prowess as well. Since the conclusion of the Second World War, a disproportionate number of new medical breakthroughs have resulted from research and development activities conducted at American universities and corporations alike. As we will see, the knowledge gained has been capitalized by both old and new industries, domestic and international companies. The outcomes of this tireless work have included the introduction of waves of extraordinary new medicines to prevent or treat a variety of maladies that had plagued humankind from time immemorial.
Long gone are the days that parents dreaded the coming of summertime and the inevitable accompaniment of polio or winter and the inevitable risks for influenza and pneumonia. And prior to COVID-19, many other infectious diseases had been dismissed as relics only important for the writers of history books. Moreover, as emphasized in The End of the Beginning (which Michael published in 2019), promising recent advancements suggest that cancer likewise could be considered a manageable illness within our lifetime. Many challenges remain, but even in the face of COVID-19, it has never been a better time to be sick, old, or both. Yet, it increasingly helps to be wealthy if one wants to gain access to these new miracle drugs.
The same mainstays of the American experience that helped propel the biopharmaceutical industry to greatness unintentionally contributed to unsustainable increases in the price of health. These rising costs now pose threats to both the American consumer and the entire healthcare infrastructure. We are rapidly approaching a point where both the cost to develop drugs as well as the ability of consumers to afford it may prevent new medicines from being effectively developed or distributed. Such an outcome would be disastrous at any time, but is particularly relevant given that the nation’s (and indeed the entire planet’s) population continues to get older and fatter, arguably the two greatest risk factors for chronic disease. Moreover, the COVID-19 pandemic is a reminder that infectious diseases are still with us and can and will periodically revisit us and with devastating consequences.
In planning this book, the authors centered upon the fundamental question of why the prices of medicines have bloated so disproportionately over the past few years. We both have a long history in a biotechnology industry. We love and respect this industry, where our work has allowed us to contribute to the development and introduction of new products that have fundamentally improved the quality and quantity of life. Yet, both of us were increasingly troubled and frankly confused by the fact that the prices of these innovations have been escalating so rapidly, particularly in the United States. Though neither of us have a background in economics, we presumed the widespread importance of the subject would offer many resources that would reveal the causes responsible for rising prices. If needed, we believed it would be comparatively simple to draw upon a limitless collection of academic studies of the field.
Despite the fact there is no lack of popular opinion on the subject, relatively few objective resources could help explain the phenomenon of drug pricing, much less how this system evolved. Worse still, the manifold enterprises, indeed entire industries, that are responsible for the discovery, development, distribution, and payment for drugs have remained frustratingly opaque. This lack of transparency was the indirect result of an evolution in how new medicines are discovered, developed, and distributed.
We were surprised to find that each step of the process, from early concepts through marketing and distribution, has fractured into a complexity of layered systems, many of which are comparatively new and all of which are designed to maximize profit margins. Moreover, we learned that most of these layers were originally created in an attempt to increase efficiency and restrain prices. Although the word is frequently misused, we can sincerely invoke the term “irony” to reflect the fact that our contemporary and highly troubled system for delivering medicines involves a complex series of private sector and governmental initiatives meant to increase the efficiencies of delivering safe and effective medicines to the American public.
Layer upon layer of new initiatives ultimately created a dense meshwork that has confounded reform and limited accountability. This complexity has rendered an outcome in which each element of a convoluted system (i.e., investors, regulators, biotechnology upstarts, established pharmaceutical companies, pharmacies, insurers) can individually and, with a straight face, profess their powerlessness in bringing down costs. The results of this complexity strangely facilitated an absence of accountability and, as we will see, has allowed many embattled corporate executives to point their fingers at others (with a presumed wink and a nod). Yet, each member of this circular firing squad is loaded with blanks (hence the winks) as they know that the complexity is so intense that it will confound even the largest investor, regulator, and consumer of medicines: the American government and by proxy, the American public writ large. We will see that the federal bureaucracy functions in many roles. It is the primary organization responsible for the discovery, regulation, and payment of medicines, and yet is mostly hamstrung by constraints of its own making.

Modern-Day Simon Bar Sinisters?

As Americans and as humans, we naturally seek a simple answer to this crisis and to punish the evil-doers. Indeed, there has been no lack of suitable candidates. The headlines of the past few years have been filled with high-profile villains straight out of central casting. Malevolent actors abound, such as Martin Shkreli, the ever-smirking and self-ascribed “pharma bro” (who raised the price of one drug by fifty-six times), Elizabeth Holmes (the con-artist founder of Theranos, a smoke-and-mirrors medical diagnostics company that bilked its investors out of billions), and Heather Bresch (CEO of Mylan and daughter of a prominent senator, who used her connections to create the perception of an expanded market need for the EpiPen and then escalated the costs of a hundred-year-old drug to absurd levels). Although each of these characters is quite colorful, they have been thoroughly covered by investigative journalists and federal prosecutors. Although we might reflect at times upon exploits, it is not our purpose to retell these lurid tales or to overemphasize the behaviors, bad or good, of any particular individuals, organizations, or even industries.
Quite the opposite. In each case, actions taken to improve the efficiency were invariably despoiled. In particular, we will witness the steady accumulation of new industries, mouths that need to be fed and composed of companies seeking to maximize profits. The added complexity contributed to a consistent subterfuge enabled by the progressively increasing opacity. Indeed, the actions and transparency of the legal drug trade might easily be confused with its illicit counterparts.
To put this into perspective, it is useful to contrast two different types of medicines, a recurring theme throughout this book. When we purchase an over-the-counter drug at a neighborhood grocery store or pharmacy, there are usually three major organizations involved in the transaction: the consumer, the retailer (i.e., the store from which you buy the medicine), and the manufacturer (the pharmaceutical company that made and marketed the medicine).
For a medicine requiring a doctor’s prescription, these same entities are often joined by many others. First, the drug was likely discovered by one or more academic organizations and/or biotechnology companies. These entities usually participate in the early stages of the product’s development, each of which seeks to be rewarded in some fashion, typically with generous royalties for their groundbreaking activities. These biotech companies are invariably backed by venture capital funds, which invest millions of dollars often over a long time frame with the intent of maximizing the returns of their investment. Second, a large pharmaceutical company will most likely have acquired the product at some point to complete its development and regulatory approval before manufacturing it at large scale for distribution. Most of the pharmaceutical companies are publicly traded, which means they are owned by investors who demand a regular healthy return on their invested dollars. Add to this complex group of characters your insurance company, your doctor, the pharmacy where you pick up your drug, and an organization known as a pharmacy benefits manager. With this laundry list of players involved in getting you your drug, is it any wonder why things are so complicated? The most disturbing fact of this entire process is that the medicine you end up with is not determined by you, your doctor, or even your insurer, but by backroom, complex deals cut between these various entities all under the pretense of keeping prices down. We will evaluate each of these layers and find they all seek to maximize profitability. In aggregate, these many layers of added complexity contribute to the rising costs of a prescription. Worse still, the manifold layers can and do allow each to blame the other layer for rising prices.

How Did We Get Here?

How and why did such a system evolve?
Escalating prices have become so familiar to modern consumers that many of us simply accept them as a sad fact of life. Yet, the same trends that are merely irritating to a lucky and wealthy few have proven devastating to those with fewer resources. We are all aware that the impact of rising drug costs has destroyed many family budgets and could soon overwhelm our nation’s collective public health and economic well-being.
Beyond the individual tragedies suffered as a result of improper treatment, escalating rates of omitting certain medicines can convey dire consequences well beyond the borders of our nation. For example, it is quite well established that even seemingly minor interruptions in the treatment of certain infectious diseases, such as the pathogen responsible for AIDS, provide an opportunity for the virus to adapt in a manner that renders it resistant to further treatment. Similar outcomes can arise in cancer patients. These two particular exemplars are relevant to our story, as HIV/AIDS and cancer are among the most prominent examples of disease management suffering from the consequences of high treatment costs.
Although the overall structure of the system is exceedingly complex and impervious, the individual components of this complex enterprise can be easily understood. Surprisingly, it seems many of these components were created in an effort to help the American consumer; to protect the safety and efficacy of medicines, as well as to rein in costs. Yet the law of unintended consequences has always predominated.
It is crucial to reiterate that the story you are about to embark upon is one composed mostly of well-intended and noble individuals, organizations, and industries, each contributing to the formation of structures meant to improve the quality and quantity of life. (It is the belief of the authors that the Martin Shkrelis of the world are red herrings, as a...

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