How Does Big Pharma Make its Profits Grow?

The blog, diggredditstumble, has analyzed how major pharmaceutical companies have developed cozy relations with US legislators and  profited enormously.  And You and I?   We US citizens pay enormously.  Read this summary of the blog’s analysis:

US corporations spend billions of dollars each year on lobbying, trying to gain favorable treatment from legislators.

It's actually the pharmaceutical industry that spends the most each year to influence US lawmakers, forking over a total of $2.6 billion on lobbying activities from 1998 through 2012, according to OpenSecrets.org. To get some perspective on just how big that number is, consider that the oil and gas companies and their trade associations spent $1.4 billion lobbying Congress over the same time frame while the defense and aerospace industry spent $662 million, a fourth of Big Pharma's total.

US legislators permit pharmaceutical companies to engage in predatory pricing practices while they enjoy exclusive rights to manufacture drugs for 20 years or more. All at the same time that drug costs and drug price inflation are among of the main drivers of health care costs for individuals and families and threaten the fiscal health of our public health care programs.

Other governments set a limit on drug price increases. However, US citizens pay more for the same drugs as US-based drug companies dig ever deeper into the pockets of sick Americans to bolster their profits and meet earnings expectations of Wall Street analysts.

Each year, the Canadian government's Patented Medicine Prices Review Board releases a study analyzing drug prices around the world. According to that study, prices in the US have gone up an average of 8 percent a year from 2006 through 2011, while drug prices in Canada have remained flat.  Back in 2006 for example, US consumers paid about 70 percent more than our Canadian neighbors for prescription drugs still on patent. Five years later, in 2011, that difference had surged to 100 percent. And with drug price inflation in the United States hitting 11 percent in 2011, that gap will undoubtedly grow ever wider in the future.  

Big Pharma’s successful lobbying of US legislators touches virtually every US citizen. It affects health insurance premiums, impacts the solvency of our Medicare system, which began to include a prescription drug benefit in 2006.  While helpful to Medicare beneficiaries, it rained money on the pharmaceutical industry.  Why?  The industry's friends in Congress (and the White House at the time) went along with Big Pharma's demand that Medicare not be allowed to negotiate pricing with drug makers to make medicines more affordable to beneficiaries.

Drug makers got a huge new revenue stream from taxpayers, but ordinary citizens got cheated. The Department of Veterans Affairs can bargain with drug makers to get better deals on prices. But, incredibly, not the Medicare program.

The Congressional Budget Office estimates that the government could save $112 billion over the coming decade if Congress reconsidered its 2006 gift to drug makers and gave Medicare the ability to negotiate prices.  And you and I should believe politicians when they say that Medicare costs too much?   Remember that the next time you hear a politician say that the only way to keep the program from going broke is to cut benefits and raise the eligibility age for Medicare from 65 to 67 years.

In the weeks ahead, keep an eye on how health insurers will push for ways to weaken the consumer protections in ObamaCare so they can keep meeting Wall Street's profit expectations. 

Older people, who frequently need medications, are often blamed for costing "too much."  We must expose and end this gold heist for Big Pharma at the expense of seniors' health.

Susanne Paul, Global Action on Aging