Congress needs to tackle the real driver of healthcare costs

Unless you’ve bought a prescription drug recently, you may not be aware just how much they’ve gone up. And it’s not just brand-name medicines. Some generics are up 2800 percent. These massive increases in drug prices are no accident. Neither is the pharmaceutical industry’s assault on a much-needed drug discount program that helps health care providers treat the needy across the country. 

The House Energy and Commerce committee is holding a hearing on Tuesday on that program, called 340B, and it’s essential that some basic facts be understood about how the pharmaceutical industry operates. 

{mosads}Americans are conditioned to believe that big drug companies compete in the free market and spend most of their profits on research to find new cures. That’s not so. According to GlobalData, leading drug companies spend up to twice as much on marketing as research and development. 

In truth, Big Pharma has used its political power to limit competition and drive profits. Deft lobbying on Capitol Hill by deep-pocketed drug companies has ensured Americans pay the highest prices for medicines in the world. For example, Gilead Science’s newest hepatitis drug Harvoni costs a staggering $94,500 for a course of treatment. But what about the cancer drug Gleevec which sets Americans back $90,000? Or the AIDS drug Fuzeon, which runs $25,000 a year – for life? All have enormous health value, but the price tags aren’t sustainable. 

Drug companies charge a fraction for their medications overseas. Gilead’s other hepatitis drug Sovaldi costs $84,000 in the U.S. and just $900 in India and Egypt. It’s the same with thousands of other medicines that sell for 30 to 300 percent less in other developed countries. Unlike any other product, drugs are blocked by law from being re-imported into the U.S. at lower prices. The result? Market forces will never be allowed to work and our medicine prices will remain sky high. 

Drug companies are making mountains of money. Most of it from Americans. Top manufacturers enjoy profit margins of up to 40 percent a year. It gets worse. Awash in cash, Big Pharma is actively trying to gut the 340B drug discount program. Why? Because this program, which was created by a bipartisan Congress and President H.W. George Bush, requires manufacturers to sell medicines at reduced profits to providers that treat high numbers of low-income and other underserved patients. 

Even at discounted 340B prices, drug companies can still do quite well. How do we know? Because in many cases, they sell these medicines in other countries at retail prices that are lower than the discounted 340B prices here in the US. For example, Zofran, used to treat nausea, sells for $112 through a Canadian pharmacy. The discounted U.S. price is more than 300 percent higher at $456. The thyroid drug Synthroid costs $27 in Canada. The 340B price: $ 66 — 144 percent more. Both of these drugs have been on the market for many years and their prices are stable. As well, their research and development costs were recouped years ago. 

It is clear that the 340B program isn’t going to bankrupt the pharmaceutical industry. It’s not even making a dent. 340B drugs account for just 2 percent of the $329 billion annual U.S. pharmaceutical market. It is a drop in the bucket. For some perspective, drug companies spend 8 percent -­more than $27 billion -­ on marketing and advertising each year. 

It’s time for our lawmakers to tackle the drug-price problem head on. Congress also needs to protect the 340B program so our neediest citizens can continue to get access to life-saving medications and health services. If the drug companies won’t compete and continue to abuse their market and political power, Capitol Hill needs to step in to protect American consumers and taxpayers. 

Gutknecht served in the House from 1995 to 2007. He consults with a number of companies and organizations, including Safety Net Hospitals for Pharmaceutical Access, a non-profit association of providers participating in the 340B program.


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