Pharmaceutical Economics - The Patent Protected Health Racket

As an economist, Dean Baker, co-director of the Center for Economic and Policy Research (CEPR) has cottoned on to the fact that the patenting of pharmaceutical drugs leads to costs of drugs so high they are just about bankrupting the national health systems that pay them. His recent article in Truthout, Prescription Drug Scams, raps the industry for corrupt practices such as paying doctors to prescribe their wares and buying political influence with campaign contributions.

"To economists", he says, "the corruption in the pharmaceutical and medical supply industry should not be surprising. In most industries, competition drives prices down close to the cost of production, but in these sectors, government-granted patent monopolies keep prices far above costs. Drugs that would sell for $20-$30 per prescription (without any payment from insurers) routinely sell for several hundred dollars. In some cases, drug prescription prices run into the thousands of dollars. That's what you can do when the government gives you a monopoly on a drug that a patient needs to stay alive."

"The basic economics of drug patents are striking. The country spends $220 billion a year on drugs. Without government patent monopolies, it would be paying around $70 billion for the same drugs, a saving of $150 billion a year. According to data from the industry, this excess spending supports $40 billion a year in drug research, meaning that the public pays almost 4 dollars in higher drug prices for every dollar in drug research.

But the picture gets worse. According to the Food and Drug Administration, two thirds of the industry's new drugs are copycat drugs that are not qualitatively better than existing drugs. This means that the public spends more than $10 in higher drug prices for every dollar that the industry spends researching breakthrough drugs.

Wait, it gets even worse. According to data from the industry, it costs drug companies almost 7 times as much to perform a clinical trial as the NIH."

(See Dean Baker's whole article here)

In an earlier article on his blog, Dean takes the press to task for patently overlooking the macroscopic economic distortion that he says is a $300 billion annual state subsidy to big pharma. While reporting on agricultural subsidies, the pharmaceutical one that takes the form of a government granted monopoly on drug production is overlooked.

But Baker has only half the story. What is even worse - big pharma is not just an economic scam, it is actually at the root of our dismal state of health - quite apart from the astronomical costs. Peter Tocci, a Holistic wellness consultant and health writer, comments on Dean Baker's "economy angle" article pointing out what is really happening in the world of pharmaceutical "health".

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"Industrial parents, forced to procreate manpower for a world into which nobody fits who has not been crushed and molded by sixteen years of formal education, feel impotent to care personally for their offspring and, in despair, shower them with medicine." - Ivan Illich, "Medical Nemesis"

Dear Dean Baker,

Thank you for your summary exposition on the economics (and other aspects) of drug scams, as linked below, appearing on TruthOut. It's a must-read for everyone. Unfortunately, things gets much worse than the even-worse you described :-)

The ugliest truth is that the conventional medical paradigm, which informs the use of chemical drugs, is seriously flawed to begin with -- and that's no accident either.

The need for "a drug that a patient needs to stay alive" is created/exacerbated by the very presence and influence of conventional medicine (conmedicine), and by its practice. The corruption began in 19th century France with the adoption by 'science' of plagiarist Louis Pasteur's Germ Theory of Disease, a dangerous half truth, along with its corollary known as the specific-disease doctrine (the grand refuge of greedy, unstable minds).

From that double scam arose the use of chemical drugs, as well as one of the worst threats we face today -- vaccines, especially mass inoculation.
http://www.geminipress.com/symptoms4.html
And another: the abuse of antibiotics (mostly fungal toxins).

Almost all conmedical drugs are TOXINS. They are so by definition. Not only do they generally not improve disease, but usually deepen it -- even if the symptoms (conventionally called 'the disease') disappear. This is a much bigger and more evil scam than the ones outlined in your article, because it's designed to perpetuate illness, under different names (specific diseases), for 'fun and profit.' Not just capitalize on illness.

Medical drugs kill easily 110,000 people annually. Overall, conmedicine kills between 250,000 and 750,000 people annually depending on how one looks at things. And to top it off, they cure almost nothing, although to their credit they are absolutely miraculous with trauma, and very nearly as good at health-crisis intervention as they are at health-crisis creation.

And of course, as you imply, the politicians continue obediently to devise law and "health care reform" that subjugate the people to this Frankensteinian system, while the media panders and well-intentioned but misguided adults (legally) dose themselves and the kids, imagining that the worst threat is illegal drugs. It would be hilarious if ... well, if we weren't poisoning the the frogs and fishes with our drug-sopped urine, for one thing.

Here is the question: Of what interest is widespread wellness to an industry whose financial health depends upon people being sick? For more on this, please see
http://www.geminipress.com/reform.html

Thanks again for your good work.

Best,
Peter G Tocci

See also related:

Drug firms a danger to health - report
Sarah Boseley, health editor
Monday June 26, 2006
The Guardian, UK
Drug companies are accused today of endangering public health through widescale marketing malpractices, ranging from covertly attempting to persuade consumers that they are ill to bribing doctors and misrepresenting the results of safety and efficacy tests on their products.

The lawlessness of the FDA, Big Pharma immunity, and crimes against humanity
An opinion piece by Mike Adams

THE HUNDRED-YEAR LIE -- NOW EXPOSED
Fitzgerald, a former investigative reporter for Jack Anderson, has compiled and digested the meaning of a massive number of events related to food, medicine and our environment in order to be able to tell us about how the world around us is literally poisoning us all to death. By doing so he has thrown down the gauntlet to the drug industry, the processed food industry, as well as the chemical industry for having created this crisis.

 

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posted by Sepp Hasslberger on Friday June 30 2006
updated on Monday March 3 2008

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Readers' Comments

A comment (by email) from a friend in the Netherlands:

The term "government patent monopolies" is misleading, because it suggests that a patent is an antitrust instrument. It isn't. By definition, a patent creates "exclusionary potential" for an inventor, but that exclusionary potential is not the result of antitritust type monopolies resulting from conspiratorial moves and manipulations. A patent creates a fundamental right to ownership on intellectual achievements.

Dean Baker's drive to make drugs cheaper leads him to develop a line of reasoning that preempts the fundamental right to ownership of (intellectual) property and how the owner wishes to exploit his/her property. It's the old fashioned socialist approach, preempting the rights of people to own capital and do with it what the owner deems fit.

BTW, today's socialists have developed new ways of dealing with industry and capitalists. They now apply the precautionary principle, and, doing so, try to preempt the fundamental right to market participation. Make the issue or problem bigger than a national one (the environment; global warming; ...), and the precautionary principle even preempts the rights of sovereign nations and replaces those rights to sovereign self-determination by interference by international organizations such as the UN, which is, not to anybody's surprise, the safe harbour from which the precautionalists operate.

The fact that Dean Baker targets the pharmaceutical industry doesn't make his line of more or less reasoning acceptable. If you think drugs are too expensive, then find a less expensive solution. Food supplements, maybe ? Who says one needs patented drugs to become/stay healthy ? In a way, by claiming that we need drugs but can't have them because crooks own them, Baker is supporting the idea that we need those drugs.

To un-rig the way the pharmaceutical industry is pampered by the US government, one doesn't have to preempt the right to own and exploit patents. All you need to do is propose a truly free market where insurance companies and government no longer dictate the terms of doing business.

My answer to this one:

What the pharmaceutical companies have done is to distort the process of patenting. They research their molecules in a way that only patentable ones ever reach the market, regardless of others that might be more effective but aren't patentable. In a process that has become a fine art, they have also distorted the "exclusionary potential" to gain solitary positions on many of those drugs. The result is: they fleece both the public and the health care providers of billions.

It is true that the process of patents as such is not the cause, but it is used in this instance to build up and maintain a monopoly position on health care that is ruining not only our health but also is bleeding our budgets.

You say: "All you need to do is propose a truly free market where insurance companies and government no longer dictate the terms of doing business."

Yes, a truly free market would help. But it seems today's free market advocates, the ones that influence governments, are mostly thinking that what's good for the multinational corporations should be allowed, while individual or small business must be suffocated in the red tape that only corporate lawyers are equipped to overcome...

Posted by: Sepp on July 5, 2006 12:00 PM

 

A response as forwarded by Alan, an MD in the US:

Here is a response to your email that may be of interest from Jeff J., PharmD
I agree with Jeff, the editor of Pharmacist's letter, that your concern about vaccines may be a bit excessive, at least from a societal viewpoint. But I like to keep an open mind about these issues. He shares your concerns about the patent issue...

Alan

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The part about patent protection leading to unduely increased costs for everybody makes sense to me. Drug research, development, marketing, and use is a continuously evolving system. It's not perfect, and we all know it can and should be improved upon. It's a situation that warrants all of our collective energy to think through and improve upon. The system is receiving attention designed to improve it. For example having all drug companies submit studies to a databank when the studies are started, in order allow their eventual publication when the studies are complete is a good step. Medicare Part D, and the formularies that are part of it, was supposed to be a good step to get valuable drugs to people who need them(although I think the many downsides of Part D might outweigh the good sides).

The later portion of the attached article (from Sepp) that casts doubt on vaccines and other drugs seems a bit one-sided to me. I do not doubt that there are significant societal downsides to the use of medications, but there are some well-accepted significant benefits too. I am convinced that drugs and vaccines do provide benefits to persons suffering from all sorts of psych, cardio, derm, endocrine, and many other conditions that that would otherwise lower their quality of life. At least the short-term benefits are very measurable. The fact that these many drugs and vaccines may also create some offsetting detrimental effects on society is definitely a possibility, but those are hard calls to make. It would be hard to justify society dening an antibiotic to a patient with a life-threatening infection due to societal concerns that the planet and it inhabitants will be better off without using antibiotics. If we outlaw the use of drugs, a logical extrapolation would be for us to also outlaw the use of computers, radio wave-emitting devices, automobiles, eye glasses, refrigerators, sewing machines, running water, etc. In other words, how and who draws the line on what human advancement is good or not?

Jeff

Posted by: Sepp on July 5, 2006 12:24 PM

 

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