Monday, March 24, 2014

Pharma Greed or Genuine Costs?

My new insurer posts claims at their website so that I can see the activity in my account with them.  I love this.  To compare costs, especially drug costs, I've begun noting the retail cost of the drugs I take according to my pharmacy.  I now have more understanding of my insurer's push-back on approving prior authorizations (PA) for several of my prescriptions.

Whatever happened to the rule of supply and demand?  I'd thought that when supply exceeded demand, the price of the product fell.  It's when demand exceeded supply that the product's price rose.  But that doesn't seem to apply in the pharmaceutical industry.  They appear to operate under this rule: when supply exceeds demand, raise the price.  I'm still trying to figure this out, so bear with me, please. 


Big pharmaceutical companies have been justifying their pricing policies for years with the explanation that the high prices pay for the high costs of research and development for new drugs.  I suspect that marketing costs are also part of the reason.  One of the drugs I take is a biologic called Humira.  It is produced and marketed by AbbVie, a spin-off company from Abbott Laboratories.  When I took this biologic in the fall of 2007, the retail cost was about $834 per dose.  It rattled me to be handling such an expensive drug, learning how to administer it myself, and then doing the injections myself.  Due to a paradoxical side effect -- it caused pustular psoriasis instead of clearing it -- I stopped taking it in early 2008.


Five years later, my treatment toolbox is empty and I still need something to treat my chronic illness.  I met with my dermatologist who endorsed returning to Humira.  So my gastroenterologist prescribed it for me.  I expected it to cost in the neighborhood of $800 or less because it had been five years, and even more people were using it.  To my shock, I learned that the retail cost per dose is now $1591.  What?

I suppose I shouldn't have been surprised.  Another drug I've taken, a corticosteroid called Entocort, used to cost me/my insurer about $1800 per month.  When the generic for this drug, Budesonide, became available, I was excited.  I expected the cost to go down dramatically.  My first refill cost approximately $1500 per month, a $300 difference.  That doesn't sound like much but it does add up.  Still, I'd expected the cost to decrease by at least 50% because generics are supposed to be considerably cheaper than the brand name drugs.  I'm no longer taking this drug.

New drugs that come on the market start at astronomical prices.  What I've been learning is that those prices do not fall over time.  Apparently the pharmaceutical industry is not governed by the same rules of economics that other manufacturing industries are.  For example, when plasma TVs were first introduced, they were extremely expensive, thousands of dollars.  As time passed and the market opened up for them with demand increasing, the price dropped.  I'd guess that other industries have research and development costs, too.

All this leaves me slightly confused, and with the feeling that somehow patients are being ripped off somewhere.  And I find it really hard to swallow that there are businesses who profit because people get sick.  I wonder just how insurance companies figure into this, too.  I know that they establish contracts with medical providers.  Do they do the same with pharmaceutical companies or only with pharmacies?  I am relieved to have medical insurance coverage to help me with my medical costs, including drug costs. 

I still don't understand how pharmaceutical companies get to operate under different pricing rules -- at least, that's the way it looks to me.....

2 comments:

Allison Scanlan said...

Wake up! Obviously they profit off of sick people. There's so much research showing cures for diseases that end the need for medications, but cures wouldn't let them profit, would they? It us better in their opinion to have lots of sick people and those who are dying that they can make billions with one drug. The cycle goes: people trust their doctors, doctors are educated by pharmaceuticals, pharmaceuticals pay for advertising on media, media's voices are controlled and they can't mention cures, and people like taking a pill to get rud of symptoms with out catering if they heal the disease/ sickness.

Gina said...

Wow, Allison, that's one way of looking at it, of course. We could choose to look at other businesses in the same way. For example, let's say a computer manufacturer wants to make money off his customers. So, he throws out any commitment to quality and churns out cheap computers that he prices at five times the production and distribution cost. His company is famous and he sells his computers like gangbusters, but they don't last. So his customers must buy new computers 2 or 3 or 4 years down the line. This, of course, is what capitalism is all about: making money.

I understand that your objection about big pharma is that they are capitalists, making a profit off of sick people. I tend to agree. I'd like to see their balance sheets, frankly, to see how much they spend in R&D broken out by drug, how much they spend on marketing and publicity broken out by drug, and how much is actual production costs. I know that biologic drugs are difficult and expensive to produce because they are organic, must be stored carefully in refrigeration, and some are administered through infusion. But I do believe that the pharmas charge Americans far more than they charge their foreign markets. Why? Because we pay it. Or rather, the insurance companies cover the cost.

I would like to correct you about where doctors receive their education -- about both physical anatomy, diseases, medicine, and drugs. They learn about all these things in medical school, not from pharmas.

In addition, did you hear about the drug recently that can cure Hepatitis C? This chronic illness is devastating and has been incurable up until now. Here's an article about the new drug: http://www.everydayhealth.com/news/new-pill-late-stage-hepatitis-c-cures-95-percent/

Thanks for your comment!