The USA Pharmaceutical Industry

[Zingadoon]

With all due respect to WT69 (aka Chazz R. And Miami Bob, there are some very straight forward reasons why these drugs cost more in the US. Also, there are huge differences (at least on the business issues) between branded, patent-protected drugs, legitimate generics and generic versions of protected drugs.

The short answer (if you don't want to read this whole post) is that the US consumer is paying for all of the research and development for new drugs and is therefore subsidizing the sale of pharmaceuticals all over the world.

.True, of course. The response is always interesting when this is pointed out to your local M. D. Or pharmacist back in the Homeland. Just keep in mind foreign meds not manufactured to American standards, nor are they always maintained post-production in a proper ambient environment. (of especial significance in tropical countries. Always confirm manufacture date, and refuse to acknowledge the 'expiration date.' Try to never purchase anything more than 6 months old, and whenever you find an especially good batch: Stock Up.

[Father Sky]

Hardly what I wanted for a first post but WallEyes post on the nobility of the drug companies and their trials and tribulations needed a response - even if it is late. The operative words here are "taxpayer funded" That's right all you US citizens, we are paying for the bulk of R & D for the pharmaceutical companies and giving them exclusive rights to market what we pay to develop so they can profit over $200 Billion per year. With the talk of capping liability caused by shady clinical trials which are funded by US and operated by contractors we are tactually privatizing profits and socializing risks. The FDA's revolving door between industry and approval apparatchiks is unethical, reprehensible and to my mind criminal.

In the past few years, we have started to see, for the first time, the beginnings of public resistance to rapacious pricing and other dubious practices of the pharmaceutical industry. It is mainly because of this resistance that drug companies are now blanketing us with public relations messages. And the magic words, repeated over and over like an incantation, are research, innovation, and American. Research. Innovation. American. It makes a great story.

But while the rhetoric is stirring, it has very little to do with reality. First, research and development (R & D) is a relatively small part of the budgets of the big drug companies—dwarfed by their vast expenditures on marketing and administration, and smaller even than profits. In fact, year after year, for over two decades, this industry has been far and away the most profitable in the United States. (In 2003, for the first time, the industry lost its first-place position, coming in third, behind "mining, crude oil production," and "commercial banks.") The prices drug companies charge have little relationship to the costs of making the drugs and could be cut dramatically without coming anywhere close to threatening R & D.

Second, the pharmaceutical industry is not especially innovative. As hard as it is to believe, only a handful of truly important drugs have been brought to market in recent years, and they were mostly based on taxpayer-funded research at academic institutions, small biotechnology companies, or the National Institutes of Health (NIH) The great majority of "new" drugs are not new at all but merely variations of older drugs already on the market. These are called "me-too" drugs. The idea is to grab a share of an established, lucrative market by producing something very similar to a top-selling drug. For instance, we now have six statins (Mevacor, Lipitor, Zocor, Pravachol, Lescol, and the newest, Crestor) on the market to lower cholesterol, all variants of the first. As Dr. Sharon Levine, associate executive director of the Kaiser Permanente Medical Group, put it, "If I'm a manufacturer and I can change one molecule and get another twenty years of patent rights, and convince physicians to prescribe and consumers to demand the next form of Prilosec, or weekly Prozac instead of daily Prozac, just as my patent expires, then why would I be spending money on a lot less certain endeavor, which is looking for brand-new drugs?"

Third, the industry is hardly a model of American free enterprise. To be sure, it is free to decide which drugs to develop (me-too drugs instead of innovative ones, for instance) and it is free to price them as high as the traffic will bear, but it is utterly dependent on government-granted monopolies—in the form of patents and Food and Drug Administration (FDA)–approved exclusive marketing rights. If it is not particularly innovative in discovering new drugs, it is highly innovative—and aggressive—in dreaming up ways to extend its monopoly rights.

And there is nothing peculiarly American about this industry. It is the very essence of a global enterprise. Roughly half of the largest drug companies are based in Europe. (The exact count shifts because of mergers. In 2002, the top ten were the American companies Pfizer, Merck, Johnson & Johnson, Bristol-Myers Squibb, and Wyeth (formerly American Home Products); the British companies GlaxoSmithKline and AstraZeneca; the Swiss companies Novartis and Roche; and the French company Aventis (which in 2004 merged with another French company, Sanafi Synthelabo, putting it in third place) All are much alike in their operations. All price their drugs much higher here than in other markets.

Since the United States is the major profit center, it is simply good public relations for drug companies to pass themselves off as American, whether they are or not. It is true, however, that some of the European companies are now locating their R & D operations in the United States. They claim the reason for this is that we don't regulate prices, as does much of the rest of the world. But more likely it is that they want to feed on the unparalleled research output of American universities and the NIH. In other words, it's not private enterprise that draws them here but the very opposite—our publicly sponsored research enterprise.

Maybe we should be talking about privatizing risks and socializing profits.

[Miami Bob]

Of the cost for pfzer in the USA--that is quite a subsidy paid by USA consumers. C, for the name brand, sells for 1/3 less than in the USA. A redistribution of wealth world wide? Or drug companies have too much power in the USA?

[Wild Walleye]

Maybe we should be talking about privatizing risks and socializing profits.Welcome to the board. We need a few more "useful idiots."

[Father Sky]

That would get you.

Seriously, If we are paying for the bulk of the R & D and the bulk of the company's investment is in marketing the US taxpayer should receive better return; perhaps in the form of better prices. The research process has been socialized for over 70 years while the profit is privatized. There just hasn't been a quid pro quo to the taxpayer. There is not a balance to the equation.

[Wild Walleye]

That would get you.

Seriously, If we are paying for the bulk of the R & D and the bulk of the company's investment is in marketing the US taxpayer should receive better return; perhaps in the form of better prices. The research process has been socialized for over 70 years while the profit is privatized. There just hasn't been a quid pro quo to the taxpayer. There is not a balance to the equation.Get rid of all subsidies and leave the money in the taxpayer's pocket. Why just attack the pharma biz? What about the alternative energy biz? For more than 30 years, that industry has sucked billions out of the taxpayers and never produced anything. How about ADM? How much money have they got over the last 40 years and they can't even get ethanol to the pumps. At least pharma has (contrary to your comments) produced some amazing products. If you really think pharma has done nothing, come over to my place and meet my neighbor whose 5 year old son is only alive today because of pharma advancements in cancer treatments.

[Father Sky]

I said BETTER prices to the US market, I didn't say free. There should be profit on manufacturing. I don't think there should be a profit on the marketing. Sandoz makes a very nice profit on their sales outside the US as do all of the other International companies. If they didn't they wouldn't be operating.

No where did I say Pharma hasn't done anything useful. Obviously they have. They have also been harmful by rushing to market products which are unproven to beat a competitor. This is the reason for major liability cases. And, yes, the US is the most contentious and litigious nation on the planet. Mostly because of the entitlement attitudes of Big Pharma. The model of the U. S. Pharmaceutical industry spending almost twice as much on promotion as it does on research and development, contrary to the industry's claim, is flawed. If Big Pharma wants the profits they should pay for the research, not just the marketing. The model is broken and needs fixing.

Read my full post. The bulk of R & D is paid by the taxpayer, it isn't just subsidies, it is directly funded research at mostly State Universities funded 98% by the US taxpayer. (The patents are then turned over to Big Pharma for preparation for market. There should be a return on the billions invested by the US taxpayer. In the past 15 - 20 years there have been more dollars given to University research by Big Pharma but it is still small and it is specifically a contracted purpose with expectations provided within the contract. This is another flawed model. The involvement should be by grant and at arms length.

The boundaries between academic medicine—medical schools, teaching hospitals, and their faculty—and the pharmaceutical industry have been dissolving since the 1980s, and the important differences between their missions are becoming blurred. Medical research, education, and clinical practice have suffered as a result. Medical centers increasingly act as though meeting industry's needs is a legitimate purpose of an academic institution. Meanwhile, health care in the United States is a for-profit business. Until (and if) it becomes wholly not-for-profit, there will be excesses compounded by human greed. But not always.

I agree about ADM, their model is horrible and they poison the planet at the same time. My ex used their revolving door from University to privatized $$$ after her taxpayer funded research showed profit potential (after emptying my pockets. Another gift to a major multinational from our pockets.

The investment (subsidy) in alternative energy pales beside the tens of billions pumped into Pharm research by government annually. I am on an oversight board for Los Alamos National Labs and have access to most the accounting. There is nothing ($0) in the budget for research this year at the DOE premier Laboratory for renewables. The renewables research is being done in China and India and they will reap the benefits (profits.

[Father Sky]

Your headline: The answer my friend is smaller govt.

I think a streamlined government is important also. One answerable to the people and not to the corporations who lobby for huge contracts. Both major parties are wholly corrupt. However, be careful what you wish for, you might get it. With a smaller government comes less research and development in every field of study, especially pharmaceutical. As I have posted, the US and state governments provide the infrastructure and much of the core research money for basic up to finished product.

The research system is socialized, the profit is privatized. The equation doesn't balance.

[Wild Walleye]

I said BETTER prices to the US market, I didn't say free. There should be profit on manufacturing. I don't think there should be a profit on the marketing. Then you would be a proponent of not allowing Apple to profit from their marketing. Should Acosta Inc. Be shut down?

How can you make a profit on manufacturing if no one knows you have a product?

Marketing is a cost of doing business.


They have also been harmful by rushing to market products which are unproven to beat a competitor.Nice try. However, it is impossible to rush any pharma product to market, unless it is Obama's swine flu vaccine. Please tell me how long it takes to get a drug from conception to market? (hint, you can read my prior posts)


This is the reason for major liability cases. And, yes, the US is the most contentious and litigious nation on the planet. Mostly because of the entitlement attitudes of Big Pharma.The completely unfettered industry of ambulance chasing (no offense to my lawyer friends) has had nothing to do with this? How about spreading around some of that regulation to torte reform?


The model of the U. S. Pharmaceutical industry spending almost twice as much on promotion as it does on research and development, contrary to the industry's claim, is flawed.Please cite this "industry claim." Did all the members sign off on this proclaimation?


If Big Pharma wants the profits they should pay for the research, not just the marketing.Contrary to your misguided and irrational point of view, they do.


The model is broken and needs fixing.What do you propose? Nationalize it?


Read my full post. The bulk of R & D is paid by the taxpayer, it isn't just subsidies, it is directly funded research at mostly State Universities funded 98% by the US taxpayer. (The patents are then turned over to Big Pharma for preparation for market. There should be a return on the billions invested by the US taxpayer.I did. It was a bore. More than 50% of US pharma R & D is not paid for by the taxpayer. Yes there are subsidies and other forms of funding but it is no where near the size you claim. Universities and their scientists are often named in the patent and the pharma companies make generous gifts to the institutions and underwrite the research going on at these facilities.

The taxpayer should not get any return on funds invested on its behalf by the government, because the money invested should never have been taken from the tax payer in the first place. He should make his own investment decisions.


In the past 15 - 20 years there have been more dollars given to University research by Big Pharma but it is still small and it is specifically a contracted purpose with expectations provided within the contract. This is another flawed model. The involvement should be by grant and at arms length.

The boundaries between academic medicine—medical schools, teaching hospitals, and their faculty—and the pharmaceutical industry have been dissolving since the 1980s, and the important differences between their missions are becoming blurred. Medical research, education, and clinical practice have suffered as a result. Medical centers increasingly act as though meeting industry's needs is a legitimate purpose of an academic institution. Meanwhile, health care in the United States is a for-profit business. Until (and if) it becomes wholly not-for-profit, there will be excesses compounded by human greed. But not always.Sorry, I dozed off and can't comment on this section.


I agree about ADM, their model is horrible and they poison the planet at the same time. My ex used their revolving door from University to privatized $$$ after her taxpayer funded research showed profit potential (after emptying my pockets. Another gift to a major multinational from our pockets.Sorry to hear about that. Hopefully, you can find some company in Bs As that won't know ethanol from astroglide.


The investment (subsidy) in alternative energy pales beside the tens of billions pumped into Pharm research by government annually. I am on an oversight board for Los Alamos National Labs and have access to most the accounting. There is nothing ($0) in the budget for research this year at the DOE premier Laboratory for renewables. The renewables research is being done in China and India and they will reap the benefits (profits.There is a fundamental difference between renewable energy and pharma. Pharma helps to save, prolong and improve human life. Renewable energy -- other than niche applications for off-the-grid energy demands -- has been since its inception a ploy to siphon tax payer dollars for the personal profit of the individuals involved.

Maybe Los Alamos misplaced the tapes with the money transfers on them?

I am a US taxpayer (with an internet connection) and I too have access to all the numbers. I do find it curious that the OMB scoring show DOE with a budget of $2.3B for FY2010 and you say LA gets nothing. (btw, I am a bgi fan of Los Alamos, despite the above jab)

[Wild Walleye]

However, be careful what you wish for, you might get it. With a smaller government comes less research and development in every field of study, especially pharmaceutical.If there is a demand and a free market, the R & D will be done.

[Wild Walleye]

Seems very familiar.

[Miami Bob]

It is very easy to avoid this type of political clash by avoiding the political forums as I prefer to do. If you are going to be in this forum, please agree to disagree. This would be greatly appreciated.

Thank you for your anticipated cooperation.

Ps Walley--when are you back in BA? I'm down the block from your favorite hotel, may 27 to June 8. PM me please.

Sky welcome to nowhere--chill brother--and enjoy. Walley is an intelligent mature man[most of the time] who is never going to change his point of view as he will not change your point of view. He's a good guy, buy him a beer and he'll introduce you to some very hot and highly skilled young ladies even if he doesn't like your politics.

[Mbronzini]

WW. You have too much time on your hands or are bored. Good posts but very time consuming. You should be chasing women or getting your ass to Argentina. Get your shit in order. Its time for you to party. Life is too short and getting shorter by the day. You must reorder your priorities. Your big head has overpowered the more hedonistic realities of the little head. The little head needs to be exercised so that you can reenter your more chaotic environment with clarity of thought uncluttered by reality.

Mb

[Miami Bob]

Walley has provided very good mongering info--on this board and through back channels-- and, whether or not you agree with his point of view, he at least thinks about what he writes and has a sense of humor.

Walley--make some time and get your butt down TO BA

[Father Sky]

Found this site yesterday as I was researching and pre-planning a three month excursion to BA. I have the north of SA but not the southern cone so I will be taking a freighter from Galveston around the horn and back then jump ship in BA for a few months before heading to NM. I have appreciated Wally's comments (I spent WAAY to long here before I signed up. I haven't even had a chance to read everything WW wrote back, and won't till later.

I'll PM and get everything taken care of. When someone misquotes me, or twists my meaning, and presumes I am a bleeding heart my instinct and pattern is to keep on with the discussion (too many years in grad school. If it's the wrong place I'm happy to move.

I do look forward to getting there.

[Miami Bob]

HIS SPECIALITY is a tongue-in-cheek mock be-school analysis.

Of any subject you might imagine--sometimes it is spot on and many times a almost satirical of abuse of the type of analysis one might employ in anaylzing a almost too strictly from a business point of view subjects that might be far too complex for strictly such a narrow analysis. This is done in a humorous and thoughtful manner and Provokes thought. I dout that he would suggest that he should be making social policy--he is too busy making money and doing his own work and living his own life. From this type of point of view, Richrad Nixon or Mit Romney might be seen as a socailist. Don't get bent out of shape, but enjoy the discussion in the political forums or stay out of them--like I do.

No one here is going to politically convert anyone else here. Many times the political / economic discussions are lively and fascinating--sometimes they descend into name calling--unfortunately this might reflect what is going on in the usa today---division rather than dialog and compromise over the last ten to fifteen years.

Bob out--if you have the opportunity, party with Walley!

[Wild Walleye]

No one here is going to politically convert anyone else here.I am just an unfrozen caveman finance-guy. I am not familiar with your modern ways.

[Wild Walleye]

We would disagree about many things but defend the other's right to think.I agree.


If he thought Nixon or Romney were socialists he would be right, as were Reagan, Bush I, Clinton, Bush II, and Obama - National Socialists or fascists. Remember Mussolini said fascism should more appropriately called corporatism. This is the opposite of Democratic Socialism in the political sphere. The Corporatist downslide really began its acceleration under the most corrupt administration in US history, Ronald Reagan's.On second thought, f-ck Voltaire (he was French anyway)

[Father Sky]

Or Diderot:

Mankind will never be free until the last king (despot) is hung by the entrails of the last priest (minister).

[Father Sky]

I didn't say LA gets nothing I said the budget for renewables is $0, big difference. LA's budget is $2.2B this year.

As to the rest of your silly response, you are, of course entitled to your own opinion but you are not entitled to your own facts; which you have so generously tried to supply us. You write from a set viewpoint and try to cram the datum into a particular mold, when it does not fit you tell us to ignore the stuffing hanging out.

You attempt to put things in my writing I did not write nor imply (very like the Lush Bimbo, Glen Dreck, Faux News archetype.) And, like the above stated archetype, your convoluted attempt at logic doesn't work either.

As to the cost of research, the entire infrastructure is funded by taxes, from campus, buildings, labs, salaries, utilities, equipment, education (an advanced degree for anyone has a large subsidy even from private schools) and much more. The pharmaceutical industry contributes pennies (like lobbyists and campaign contributions) and rakes in billions.

Your statement:

"The taxpayer should not get any return on funds invested on its behalf by the government, because the money invested should never have been taken from the tax payer in the first place. He should make his own investment decisions."

Is prima facie ludicrous. We, as a society, make joint decisions all the time. Many of them are flawed (usually those to which benefit goes mostly to a small group of oligarchs who play the corrupt system well. If one of those (investment) decisions results in a discovery of magnitude a more equitable return should return to the society which funded the research. I do not suggest nationalization but a more balanced equation. Better contracts not written by those about to go through the revolving door to the industry involved. If it doesn't bother you a small group of people are reaping the entirety of the benefits of your (willing or unwilling) investment you are sound asleep. Oh, that's right, you dozed off in civics class.

[Wild Walleye]

Bob told me to get a life, so one last response (although, I think Bob was just miffed at my crack about lawyers) Alas, at some point, shooting fish in a barrel gets boring.


I didn't say LA gets nothing I said the budget for renewables is $0, big difference. LA's budget is $2.2B this year.Your original statement used the LA budget for renewables as a defense of your argument that big-pharma is the evil one here, totally underwritten by the tax payer. I pointed out that DOE will spend $2.3B on renewables, soundly buttressing my argument renewables are in fact hugely subsidized by the tax payer. Further, the renewable industry would not exist were it not for the government's perpetual expropriation and misuse of the citizens' private property, in contrast to the pharma industry which is highly profitable. I am not sure which is more telling, the fact that LA gets none of DOE renewables budget or that you are somehow affiliated with the lab.


As to the rest of your silly response, you are, of course entitled to your own opinion but you are not entitled to your own facts; which you have so generously tried to supply us. You write from a set viewpoint and try to cram the datum into a particular mold, when it does not fit you tell us to ignore the stuffing hanging out.Pot, meet kettle.


You attempt to put things in my writing I did not write nor imply (very like the Lush Bimbo, Glen Dreck, Faux News archetype. And, like the above stated archetype, your convoluted attempt at logic doesn't work either.I neither implied nor attempted anything. I am happy to hear that Limbaugh, Beck and Fox are archetypes in your eyes. I am surprised that we don't get along better.


As to the cost of research, the entire infrastructure is funded by taxes, from campus, buildings, labs, salaries, utilities, equipment, education (an advanced degree for anyone has a large subsidy even from private schools) and much more.Is it possible that there might be some labs contained within the corporate campuses as opposed to the academic campuses? If you don't believe this, I'll be your wingman for a mongering venture in New Brunswick, NJ. In between stops, I will personally gain you entrance to no fewer than 6 private, pharma labs. As for the academic labs, do you really think big pharma gets all this for free?


The pharmaceutical industry contributes pennies (like lobbyists and campaign contributions) and rakes in billions.Given you lack of business acumen, I can now see clearly why you might be on an oversight board for a government lab.

Although I am highly skeptical of your claim given that it is out of character for people associated with that lab (one I know well) to broadcast their affiliation on a forum geared to finding prostitutes in Argentina.




Your statement:

"The taxpayer should not get any return on funds invested on its behalf by the government, because the money invested should never have been taken from the tax payer in the first place. He should make his own investment decisions."

Is prima facie ludicrous. Au contraire (I like using them foreign words, makes me feel all fancy) a plurality (albeit slim) of the US populace believes otherwise.


We, as a society, make joint decisions all the time.We do no such thing, except when voting and ostracizing David Hasslehoff.


Many of them are flawed (usually those to which benefit goes mostly to a small group of oligarchs who play the corrupt system well. If one of those (investment) decisions results in a discovery of magnitude a more equitable return should return to the society which funded the research. I do not suggest nationalization but a more balanced equation. Better contracts not written by those about to go through the revolving door to the industry involved. If it doesn't bother you a small group of people are reaping the entirety of the benefits of your (willing or unwilling) investment you are sound asleep. Oh, that's right, you dozed off in civics class.Dozed off? I skipped it. My time is valuable, if I waste it, I can't get it back.

Look Ricardo, see a few providers in Bs As, it might relieve the pressure all that built up sperm is putting on your brain stem. Then, write a couple of reports on the providers. Then, meet me in the political forum, or better yet at Newport and we can discuss any topic you want.

[Father Sky]

If you're not scared or angry at the thought of a human brain being controlled remotely, then it could be this prototype of mine is finally starting to work.

I like lively discussion and subscribe to Groucho Marx statement: "I don't want to join a club that will accept me as a member."

WW and I would probably have fun discussing the state of the world. We would disagree about many things but defend the other's right to think.

If he thought Nixon or Romney were socialists he would be right, as were Reagan, Bush I, Clinton, Bush II, and Obama - National Socialists or fascists. Remember Mussolini said fascism should more appropriately called corporatism. This is the opposite of Democratic Socialism in the political sphere. The Corporatist downslide really began its acceleration under the most corrupt administration in US history, Ronald Reagan's.

Laugh at what you hold sacred, and still hold it sacred.

[Wild Walleye]

Father Ricardo is a phony. The irony of it all is that he is being paid with our tax dollars via TARP, to spew his propaganda on the internet. It is hard to believe that such a situation could come to pass but, hear we are. Our govt is paying people with room-temperature IQs to spew talking points on the web. The day this douche bag sees the inside of a Bs As brothel is the day monkeys fly out of my ass.

[Father Sky]

I don't know this person of whom you speak. Let's just agree to disagree until we have that a beer when I'm in BA. As a new member I have over extended my discussion and am glad Jackson split the thread.

Best to you,

Tomas

[Father Sky]

To you showing me the best BA brothel WW.

[Esten]

Check out this story on Bloomberg. It discusses transfer pricing by corporations including several big pharma companies. This practice allows them to reduce income taxes by converting sales in one country to profits in another. An example is illustrated with Forest Laboratories, where revenues from US sales of the drug Lexapro are transferred to Amsterdam and then to Bermuda.

It's estimated $60 Billion in annual US tax revenues are lost to corporate income shifting. One senator is quoted saying "Transfer pricing is the corporate equivalent of the secret offshore accounts of individual tax dodgers".

www.bloomberg.com/apps/news?pid=20601170&sid=a7td7E8_4EeI

[Wild Walleye]

Check out this story on Bloomberg. It's estimated $60 Billion in annual US tax revenues are lost to corporate income shifting. One senator is quoted saying "Transfer pricing is the corporate equivalent of the secret offshore accounts of individual tax dodgers".

www.bloomberg.com/apps/news?pid=20601170&sid=a7td7E8_4EeIWhile the example is a pharma co. The practice is not limited to pharma. I would agree with the general thrust that it does not make sense to allow revenue earned in one jurisdiction to be allocated to another, unless there exists a corresponding, related cost center.

That said, if it is legal, why shouldn't a company avail themselves of this practice. I hope you didn't miss this passage.

"Companies try to extract as much tax benefit as possible from transfer pricing to protect shareholders' interests, proponents say, particularly in the U. S. Which imposes one of the world's highest tax rates on corporate income, 35 percent. "

[Jackson]

I don't know this person of whom you speak. Let's just agree to disagree until we have that a beer when I'm in BA. As a new member I have over extended my discussion and am glad Jackson split the thread.

Best to you,

TomasFather Sky posted 12 political messages in his first two days as a member, then proclaimed his innocence when his political agenda was challenged, and then subsequently disappeared from the forum.

Interesting.

Jackson