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Second Opinion: Rising Cost of Prescription Drugs
Hosted by Abigail Trafford
Washington Post columnist
Tuesday, Aug. 14, 2001; 2 p.m. EDT
Welcome to Second Opinion, a weekly column and Health Talk discussion with Post Health columnist Abigail Trafford.
A retired prison guard in North Carolina ran up a hospital bill of $5.2 million. A 75-year-old woman who suffers from Alzheimer's Disease spends more than $1,000 out of pocket for all her prescription drugs even though she is on Medicare. Why do prescription drugs cost so much?
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Gillian Woollett, Ph.D.
(The Post)
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The cost of prescription drugs for common conditions such as heart
disease, arthritis, diabetes is rising. And Medicare does not
cover outpatient prescription drugs.
To answer these questions and to talk about the rising cost of prescription drugs is our guest Gillian Woollett, Ph.D., associate vice president for biologics and
biotechnology at the Pharmaceutical Research and Manufacturers of America.
The transcript follows.
Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.
Abigail Trafford:
Hello everybody. Have you noticed that you're paying more for prescription drugs these days? Why do you think the price is so high? Today we're going to talk to a representative from the phramaceutical industry. They produce the drugs and they set the price. Tomorrow we're going to talk with a representative from the consumer group, Families USA. There's a lot of disagreement out there. How much does it cost to develop a blockbuster drug such as Claritin? Why do drugs cost more in the U.S. than in Canada. Is the U.S. the leader in new drug discoveries? What do you think? Have had a recent experience of drug sticker shock? Send us your comments and questions.
Abigail Trafford:
Hello and welcome. Everybody is concerned about rising drug prices. And everybody wants health coverage to pay for these medicines. Why do prescription drugs cost so much?
Gillian Woollett, Ph.D.: The research and development to make safe and effective medicines is very expensive - an average of $500 million and 12 - 15 years to get a single product to the medicine chest. MOst people don't realize that only 3 out of 10 drugs that come to market make a return on the average development cost. While the other 7 may be modern miracles and save millions of lives, they don't make a profit. Think of it like drilling for oil - the gusher must pay for the dry wells. To keep making new and better medicines we must make a return on the ones that we can.
Rockville, Md:
Dr: Thank you for answering my question. I take a fairly expensive, IM injection once a week. It is an interferon medication. I'd like to know why it is so expensive. Under my drug plan, I pay only $30 a month for the medication, which I take once a week. The cost is about $1300 a month otherwise.
Gillian Woollett, Ph.D.: The medicine you are taking is a biologic - i.e. a very complex molecule that is extremely difficult to make. To ensure the highest level of purity, potency and identity as required by law extremely expensive dedicated facilities are needed to make it.
Abigail Trafford:
In a recent case at Duke University, a patient with a rare blood disorder ran up a hospital bill for $5.2 million. Most of the bill went for drugs. How could drugs possible cost $5.2 million?
Gillian Woollett, Ph.D.: As you said in your story today, the products used in the Duke case are isolated from very limited natural sources including pigs. But as you also said this is a very rare example.
Abigail Trafford:
You talk about return on investment.. . What is the target profit margin for most big drug companies--15%? 25%?
Gillian Woollett, Ph.D.: We cannot talk to targets, but the investment is very high risk. The investment by the US Pharamceutical industry in R&D is over 20%. The average for all other US industries, excluding medicines is 3.9%. This year alone the pharmaceutical industry will spend over $30 billion in R&D -- that is more than the entire budgets of the National Institutes of Health. In order to maintain this level of investment a reasonable return must be achieved. Think of it this way: if the software industry is successful, you might have a faster computer program in the future, if the pharmceutical industry is sucessful you might have a cure for Alzheimer's in the future. Profits lead to investment; investment leads to R&D; R&D leads to more cures and better treatments.
Cottage City, Md.:
It's hard to phrase this in a non-confrontational way, but doesn't it seem rather odd that the drug companies manage to make drugs so much cheaper for Canadian users that it would be cheaper for Americans to re-import the same drugs? One assumes that the companies would sell at a loss even to our good neighbors in the north. Abigail Trafford:
We need a good explanation for this. Why are American-made drugs cheaper in Canada?
Gillian Woollett, Ph.D.: The American market gets the medicines first. Also the American market covers most of the R&D cost. The Canadian's with their price controls do cover manufacturing costs but don't make many medicines for themselves. Price controls do sound apprealing but they are dependent on a free market South of the border to come up with the new and better medicines. There is no other America for America to depend on. Canadians do pay a high price for their price controls in terms of limited access and rationing of health care. Many Canadians come to the US for care because they cannot wait for their system to provide it. Americans would reject this kind of health care.
Abigail Trafford:
You say that interferon is a "biologic" and therefore more complicated to produce and more expensive. Please explain what a biologic drug is and how it differs from regular prescription drugs such as pennicillin or Claritin?
Gillian Woollett, Ph.D.: A biologic is a class of product that is derived either from natural sources or from genetic engineering of a micro-organism. It is more complicated than we know how to make synthetically - basically they cannot be made chemically. Drugs are made using basic chemical principles and do not involve living systems. In the US drugs and biologics are regulated differently by the FDA because there can be tight specifications for drugs, but biologics are defined also by how they are made, e.g. blood factors for haemophiliacs are derived from blood or from genetically engineered bacteria.
Vienna, Va.:
Is it true that it would be cheaper if the patient physically cuts their doses in half?
Gillian Woollett, Ph.D.: You should NEVER cut a dose in half because the dose as prescribed is that which your doctor has decided is optimal for your care. However, there may be different dosing schedules that you can discuss with your doctor as it is true that often the pill with the higher amount of active ingredient is not that much more expensive. Some medicines have a very narrow therapeutic index, e.g. blood thinners, and it is extremely dangerous to change doses without very careful monitoring. Bottom line talk to your doctor before you change your medicine in any way.
Mt. Rainier, Md.:
I have a hard time believing that a spokesperson for PRMA will be an unbiased guide into why drug costs are so high. The drug companies complain incessantly about how much it costs to develop and test drugs, but seldom mention how much is contributed through federal grants and research. The profit margins would also indicate that the drug companies are finding this expenditure extremely lucrative, crying all the way to the bank. Abigail Trafford:
You raise some good points. But no one is "unbiased" in this debate. That's why it's so difficult for us consumers to figure out what's going on in the din of rhetoric from politicians, physician groups, the drug industry and the health insurance industry. (And it's why we're having two online discussions this week!)
Your question about the role of federal research funding in developing new drugs is a good one. Dr. Woollett, NIH spends billions of dollars on studies that test drugs. Federally-funded scientists do basic research on promising compounds and federally-funded physicians conduct clinical trials to test the effectiveness of new drugs. Doesn't the drug industry get a big boost from government-funded research? And shouldn't that contribution be reflected in the price of the drug? In other words, shouldn't a drug be sold at a discount if its development benefited from government research dollars?
Gillian Woollett, Ph.D.: The basic research enterprise of global academic scientists is critical to the understanding of how the human body works, and what has gone wrong in human disease. However, this does not provided ANY pills in bottles for patients. Only the pharmaceutical industry makes medicines that are then routinely available to patients and this takes expensive clinical studies. While some clinical research in undertaken in academia it is usually sponsored bythe pharmaceutical industry. Hence, it is like NIH and others produce a sea of minnows. It is then up to industry to attract the invesment and select a fish to grow up. This is where the high risk and cost comes in. Anyone is welcome to have a go! We need as many people trying as possible - if it was really cheap and easy to cure cancer we would already have that cure.
Olney, Md.:
How can you say that drug prices are so high because of research and development costs when marketing expenditures are usually twice those on R&D, and on marketing to physicians, all pharmaceutical companies combined spend an average of $13,000 PER PHYSICIAN to influence, excuse me, "educate" doctors?
Abigail Trafford:
Wow! Is this true? The drug industry spends TWICE as much on marketing as on research and development?
Gillian Woollett, Ph.D.: We are so glad you asked this. The estimated cost for R&D bythe phamaceutical industry is over $30 billion. The marketing cost in total are about $15 billiona nd half of that is for free drug samples. The marketing data is from an independent study by IMS Health.
As for educating Doctors. It is critically important that their limited pharmaceutical training from medical school, often decades ago, is updated such that their patients can have access to the newest and most effective medications. We added more than 30 new medicines to the medicine chest in 2000 alone - doctors want information and the companies are the ones that know those medicines best. I would suggest that a doctor that is not keen to learn all he/she can about new drugs is one to be cautious in consulting.
Arlington, Va.:
I recently visited a new doctor due to a change in health coverage. When I asked for a prescription to a drug I had been taking for acid-reflux for three years (and was quite happy with), he denied it's benefits and instead wrote me a prescription for a newer drug on the market. After letting him know that I would much rather stay with what's been working for my condition, he still refused until I finally gave in and got the prescription for the new pills. It turns out these pills are 40 dollars more expensive than the generic version of my old prescription... My question is, do doctors have contracts with certain drug companies, and if so is there any legal battles against such obvious conflicts of interest?
Gillian Woollett, Ph.D.: I am not aware that doctors have contracts with drug companies, but they do have contracts with health organizations and hospitals who may have formularies, i.e. restrictions on what medicines can be prescribed. We support a free market and access to all medicines by all patients.
Mt. Rainier, Md.:
The drug companies have found a good way of reducing risk by not taking chances on drugs with a small audience. Instead they concentrate on more-of-same drugs like Claritin (one MORE allergy relief to add to scores) with large audiences, and then make their drug 'special' with advertising campaigns. Abigail Trafford:
This makes sense from business point of view. You want to sell a lot of prescriptions! But I thought the Orphan Drug Act that was passed years ago was aimed at increasing the patent life and profitability of drugs that have a small audience. How successful has this program been to develop drugs for "orphan" diseases? Can you give us some examples?
Gillian Woollett, Ph.D.: The Orphan Drug Act has been very successful. Since 1983 when the Act came into force more than 220 drugs and biologics for rare diseases have been brought to market. In contract fewer than 10 such products came to the market in the decade prior to 1983.
However, if you accept that the larger market represents more patients from a business point of view, you must also agree that it represents more patients benefiting from the treatments. Hence, there is a limit to how much one should try to over-ride the market.
North Brentwood, Md.:
The R&D on drugs is expensive no question - though overseas testing certainly lowers the price. But before we start looking at the pharmaceuticals as Mother Theresas, let's look at the profits they're taking in. The big drug companies are raking in cash and spending millions on lobbying Congress to maintain their patents. Abigail Trafford:
O.K. We need some numbers. Dr. Woollett, how much does the drug industry spend on lobbying Congress? What do you get from spending these amounts?
Gillian Woollett, Ph.D.: I am a acientist and am not able to answer your question with exact numbers. We work in Washington and State capitals to explain the value of our products, and the importace of a free market. We want to be allowed to compete and to innovate to the benefit of all. Let me come back to this central point - if the pharmaceutical industry is successful, it means we are making medicines that benefit patients. When the pharmaceutical industry does well, patients do even better.
Abigail Trafford:
A followup for our viewer in Cottage City. Canada may not be a big producer of drugs--although many Canadian researchers are involved in studies of drugs. But Europe is a big producer of drugs. It originates about the same percentage of new drugs as the U.S. So it's not as though the U.S. is the Lone Ranger of drug development. So once again. Why do U.S. drugs cost more in the U.S. than in European countries? The Euopean drug companies seem to be able to produce new drugs and make them available in countries with national health plans that negotiate lower prices for drugs. Why couldn't we do that in the U.S.?
Gillian Woollett, Ph.D.: The companies are global - even European companies have their major R&D enterprises in the US. THe US investment is increasing - while that in Europe is declining. I have seen both sides of the Atlantic (I am British by birth) and clearly there are vastly greater limitations on access in Europe as a consequence of socialize medicine. It is their legitimate choice but it has resulted in greater innovation in the US. All of Japan, Canada and Europe do not make up the same level of innovation as the US.
Abigail Trafford:
What's the thinking behind offering doctors free samples? Doesn't this create a kind of underground supply of drugs?
Gillian Woollett, Ph.D.: Doctors having free samples enables them to try patients on the new medicines immediately. This is very important for patients with access problems but even more so for sensitive conditsion where it cannot be anticipated which medicine will be optimal for which patient. It saves patients from having to fill prescriptions for medicines before they know whether it will work best for them.
Vienna, Va.:
I thought that having health insurance would help in controlling the costs of prescription drugs. Who is profitting from the charges?
What if you are a senior or someone who can't readily afford health insurance?
Gillian Woollett, Ph.D.: The pharmaceutical industry strongly supports the addition of a prescription drug benefit to Medicare. It only makes sence to bring Medicare (designed in 1965) up to the needs of seniors in the 21st century. We are encouraged by bipartisan proposals in Congress to give seniors prescription drug coverage as part of their health care similar to that which members of Congress receive today. We are optimistic that Congress can get this done. In the meantime our companies are making medicines available to those in need through their patient assistance programs but this can never be the full solution. Details on the programs are available at www.phrma.org.
Abigail Trafford:
How much does the drug industry spend on advertising? And what percentage is direct-to-consumer advertising? I see ads with Bob Dole touting Viagra and it's like he's selling a car. Don't these ads conflict with physicians' advice to their patients? Isn't that a problem?
Gillian Woollett, Ph.D.: Direct to consumer advertising empowers patients to learn more about new cures and new treatments that might be available to them. It enables patients to have more imformed conversations with their doctors. Often some conditions can be the sign of underlying medical situations that are treatable, such as high blood pressure and diabetes.
Last year I believe the total for advertising to patients was $2 billion. We do most of our advertising to physicians which was about $5 billion.
Abigail Trafford:
More on lobbying dollars. A July report from Public Citizen reports that the drug industry spent $262 million on political influence in the 1999-2000 election cycle; $177 million on lobbying, $65 million on issue ads and $20 million on campaign contributions. It also reports that the industry hired 625 lobbyists, more than one lobbyist for every member of Congress. The drug industry also spends more on lobbying than any other industry--way more than the tobacco industry or the automobile industry or oil & gas industry. This seems like a huge amount to spend on lobbying. Why not lobby less and reduce the price of drugs to seniors?
Gillian Woollett, Ph.D.: Unless we solve the access problem there is no point in us making newer and better medicines. This is one problem that only Congress can solve.
Austin Texas:
What can someone do to prepare for the high cost of health care? My husband and I are in our 50's; is long term health care a viable option? We've seen what happened to our parents and don't want to be in the same shape.
Gillian Woollett, Ph.D.: I cannot give specific advice but we know that despite the change in demographics, we have 400 000 fewer seniors in nursing homes now than we did in 1980. We also have 4 medicines in the market for Alzheimers and 23 in development. Hence, I would be very optimistic that you will be able to maintain a quality of life that would be the envy of your parents. Medicines are 8% of the health care dollar but are the treatment of choice and enable people to continue to function in their own homes, doing the activities they most enjoy.
Abigail Trafford:
Our time is up. Thanks for all your questions. Thank you very much Gillian Woollett for the view from the phramaceutical industry. Join me tomorrow at 2 p.m. for another Health Talk discussion on why drugs cost so much from the consumer perspective.
Abigail Trafford:
That was our last question today. Thanks to everyone who joined the
discussion. Join us tomorrow for Part Two of the Rising Cost of Prescription Drugs on Health Talk. Post Health columnist Abigail Trafford and Dee Mahan, a
health policy analyst for Families USA, talk about the consumer perspective of the rising cost of prescription drugs.
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