An Insider's Look at Big Pharma

Book Review: The Truth About the Drug Companies: How They Deceive Us and What To Do About It, by Marcia Angell, M.D., 2004

“Prescription drugs are an essential part of modern medical care. Americans need good new drugs at reasonable prices. Yet the pharmaceutical industry is failing to meet that need. There is a widening gap between its rhetoric and its practices. Driven by its lust for profits, it seems almost bent on eventual self-destruction. Its current way of doing business is not sustainable. …Those who pay for drugs – government, insurers, and individuals – simply do not have the money to continue to support the industry in its present form. And the public is angry.” --- from Marcia Angell’s The Truth About the Drug Companies.

In this revealing exposé of the drug companies, Dr. Marcia Angell brings to light questions that American consumers of pharmaceutical have been asking in recent years. Why are drug prices so high? How effective are the new medications being advertised by drug companies? Have the drug companies gotten too powerful and corrupt?

During her two decades at The New England Journal of Medicine, most notably as its editor-in-chief, Dr. Angell has been witness to the ever-increasing power of the huge pharmaceutical industry, known as big pharma, and the weakening position of the American drug consumer. In writing this book, one central aim was to debunk big pharma’s repeated assertion that high drug prices are necessary to fund their research and development (R&D) of new drug production. According to Dr. Angell’s research into the practices of the pharmaceutical companies, the amounts spent for the heavy advertising of drugs outstrip R&D by a long shot, as do the astronomically high profits garnered by these companies.

By way of comparison, big pharma spent 14% combined worldwide sales on R&D, but had a profit margin of 17% of sales, a whopping profit margin that compares extremely well to other industries. More surprisingly, the drug companies spent 31% of sales on marketing and administration, most of which is represented by the marketing of their drugs to the public. Clearly, as Dr. Angell asserts, the drug companies could cut into advertising or profits to bring down drug prices. But in this industry, securing high profits is the ultimate goal.

Once we learn that R&D is small compared to marketing and profits, Dr. Angell then emphasizes that R&D still amounts to a lot of money – about $31 billion per year. What do we get for this money, which we supplied to Big Pharma by paying high drug prices? As it turns out, not very much. Despite the hyping of their innovative drugs, most of the new drugs promoted by big pharma today are what Dr. Angell calls “me too” drugs. “Me too” drugs are slightly changed variations of already produced drugs. For example, there are today five different anti-depressants (selective serotonin reuptake inhibitors – SSRIs) that differ by a molecule or two, produced by different companies. Dr. Angell’s argues that these drugs have not been shown to be improvements over one another, since they have not been tested against each other. In clinical trials that are increasingly controlled by the industry, the drugs were only shown to be better than a placebo. Instead, we have no idea how they compare. And we have no idea if the money spent on their clinical trials was worth it. Nonetheless, the drug companies spend billions of dollars to convince us that their drug is preferable and worth its high cost. Meanwhile, there is a generic version of Prozac on the market that costs a fraction of what the other SSRIs cost.

Probably most revealing in Dr. Angell’s research is the sheer concentration of power held by big pharma. These companies have secured unprecedented power in D.C., employing an army of lobbyists that greatly influences the policies of Republicans and Democrats alike. In the 1980s, with passage of Hatch-Waxman, big pharma was able to extend the life of its patents and FDC exclusivity rights, the time that a company can produce a drug without competition from low cost generics. Also, with their growing marketing power, the drug companies have been able to organize “educational” activities for doctors at medical conferences that claim to educate medical practitioners on their drugs. However, these seminars are really marketing opportunities that use third-rate research to push unapproved uses of drugs. During these “educational” seminars, doctors and what the industry labels “thought leaders” receive kickbacks, lavish dinners, and entertainment. Big pharma’s power has gotten so big, it can determine through its marketing arm what doctors prescribe and even how studies of its drugs are conducted in clinical trials.

In response to big pharma’s problems outlined in her book, Dr. Angell recommends six very reasonable reforms of the industry:
1. All new drugs be tested against older similar drugs, not just placebos. This requirement would ensure that the industry not waste important resources on “me-too” drugs.
2. The FDA should be reformed as an independent agency, supported by the public and not by compromising user fees paid by the company for every drug approved. This reform would counteract the industry’s current influence.
3. An Institute for Prescription Drug Trials should be formed as part of the National Institutes of Health (NIH), which would eliminate the overwhelming power big pharma has over the clinical trials of its drugs.
4. The length of time companies have for monopoly exclusivity rights should be lessened from its current twenty years, with the change that the clock start ticking when drugs come to market. Having the clock start at when the drug is brought to market, not when the drug is first patented, would help ensure that the clinical testing stage not be shortchanged. Lessening the time companies have for exclusivity rights will help lower costs by allowing generics into the market sooner.
5. Big pharma needs to get out of the medical education business altogether. What counts as education for big pharma is really marketing. Medical institutions need to take responsibility for medical education of drugs, not drug companies.
6. Big pharma needs to open the books on resources spent on R&D, broken down on how much was spent on each drug, and how much was spent on each stage of its research. Likewise, the public has a right to know how much is spent on marketing and administration, broken down in great specificity, so that drug companies are unable to make false claims in justification of high drug prices and ultimately hide important information from the public.
7. Lastly, drug companies need to establish reasonable and uniform pricing. The current system, which charges the poor and most vulnerable the highest prices and gives discounts to larger buyers, allows for too much fraud, kickbacks and price gouging.

What is not considered in her last chapter on reform is the possibility of nationalizing this very important industry. My guess is that Dr. Angell believes that her reforms are sufficient, and moreover to achieve their approval, we would need a powerful movement demanding them. If these reforms were not on the agenda, she might say, neither would be nationalization. However, it could be argued that the very reason that these reforms are impossible in the current political climate is that an industry we rely upon for our health is in the business of making a whopping profit and using its muscle to determine the political process. As with the health care system, where we need to take out the private insurers, the drug companies that distribute our drugs should be nationalized under worker and consumer control. Afterall, as Dr. Angell reveals, the real work of bringing these drugs to market is already done by government institutions, taxpayer-funded universities and the National Institutes of Health (NIH). Nationalizing the drug companies would be one guarantee of Dr. Angell’s reforms and make the industry directly accountable to the people.

Dr. Angell ends her book encouraging a movement to bring about change. She writes, “The pharmaceutical industry has enormous clout, but what finally matters most is concerted public pressure.” One way for the public to begin building that movement is through education. Reading The Truth About the Drug Companies is one step to building that movement.