Drug and device makers: Obscene profits and kickback -- a big part of why our "healthcare" costs so much

 

Drug companies are greedy parasites. This is well-known to everyone. Even the shock troops of the Republican right know about and decry it.

The drug companies start with the capitalist model – sell something at a profit – and take to an extreme: make as much profit  as possible no matter who it hurts (as long as it doesn’t hurt them).

They have a great business plan: people need their medicine, they (or mostly their insurance companies, including government insurers Medicare and Medicaid) are willing to pay for it, even if truculently, and they’ll pay whatever is asked.

While we are all shocked periodically by stories of individual dramatic greed, such as Mylan and its CEO Heather Bresch jacking up the price of EpiPen® to over $600 (Epi-Pen® and Predatory Pricing: You thought our health system was designed for people’s health?, Sept 3, 2016) or Martin Shkreli and his company Turing brazenly raising the price of Daraprim® from $13.50 to $750 (Drug prices and corporate greed: there may be limits to our gullibility, Sept 27, 2015), the fact is that this is the standard business model of pharmaceutical companies. Think of colchicine, an anti-gout drug first used by ancient Egyptians at least since 1500BC, having its price jacked up from $4/mo to $5/pill (VISA and colchicine: maybe the banks and Pharma really ARE in it for the money!). 

Or, to get to one of the biggest scandals of all, the price of insulin!  Should there be anyone who does not know, insulin was one of the most important drugs ever discovered. Unlike the newest drugs that I have recently discussed, which sell for thousands (or tens of thousands) of dollars a month, insulin is not for a niche market. It is for diabetes, one of the most common diseases. For people with Type 1 diabetes, who produce no insulin of their own, it is simply an absolute requirement for life. For the larger group of people with Type 2 diabetes, it is often a critical part of controlling their disease. It was discovered by Canadians Banting and Best in the 1920s, who sold the patent to Eli Lilly and Co. for -- $1! (Not sure if that was a US or Canadian dollar.) This drug – the impact of which is HUGE – now is over $100/month for the cheapest generic forms if you have a coupon, and, depending upon the formulation, can be hundreds!

So, we have predatory pricing on products people absolutely need for their lives. Check.

We have outrage among millions of people of all political stripes. Check.

We have the ability to control these prices, starting with the largest payer in the US, Medicare. Check.

We have done what we can, as a government and a society, to address this issue. Um, uncheck. Nope.

In fact when Congress passed the Medicare Drug Plan, (MMA, Part “D”) in 2003, it specifically forbade Medicare from negotiating drug prices. Good deal for the drug companies! Guaranteed payment and no ability for the purchaser to negotiate the price! Where can you or I get that deal? Nowhere, of course. We do not have huge piles of $$ for paying Congressmen. Every time the drug manufacturers suggest that they need their profit to pay for Research and Development (R&D), we need to note how much MORE they spend on Marketing (including lobbying and contributions). It is also worth noting that contrary to their propaganda, MOST drugs are not developed in the US. It is the large plurality, but Japan and Western Europe also contribute a lot. (see, e.g., Light and Lexchin Pharmaceuticals as a market for “lemons”: Theory and practice and Pharmaceutical research and development: what do we get for all that money?, also for another take US Pharmaceutical Innovation in an International Context) More important, perhaps, is that most of the basic (high-cost, high-risk) research is funded by you, the taxpayer, through National Institute of Health (NIH) grants; drug companies most often buy the patents only after the original research shows promise.

Of course, in recent years, there has been a change. In labeling. Some expenditures that used to be included as marketing are now included as R&D. Not that the amount that they spend on lobbying, political contributions, marketing to physicians, and direct marketing to consumers has changed. And of course we have the FDA approving incredibly expensive and profitable drugs against the recommendations of their scientific panels (FDA approves Alzheimer's drug against the recommendation of its scientific panel. Be very concerned, June 21, 2021). This is corruption, this is your government selling you down the river to increase the profits of an industry that everyone, justifiably, hates.

And then, of course, we need to consider the device makers. You know, the companies that make stuff that is stuck into your bodies by surgeons, from artificial hips to cardiac defibrillators. Just to make sure that they do not continue to fly under the radar, getting cover from the excesses of the drug manufacturers. This is important; unlike drugs, if it turns out that your  implant  is not the best choice, or is not working well, or is really inferior, or is harming you, it is not as easy to just stop and put a new one in. That artificial hip? They opened you up, cut out the top part of your thigh bone (femur), and part of where it inserts into the pelvis (ilium) and put in this new hardware. Replacing it is a big deal. So getting the best one available is important. Usually, this decision is left up to the surgeon. So how do you get surgeons to use your device if you are a device manufacturer? Marketing! Telling them how great it is! Showing them testimonials from other surgeons!  Oh, yes, and, of course good old kickbacks, paying them for using your product! This is reported on in a recent piece in Medscape, “Device Makers Have Funneled Billions to Orthopedic Surgeons Who Use Their Products”, June 17, 2021. That is how you wanted your surgeon to choose the new part that is going to replace part of your hip, or spine, or knee, right? Bribery?

Of course, it is not listed as bribery on the companies’ balance sheets, and I’m sure that the individual surgeons do not report it on their income tax under “kickbacks”. Back in 2012, surgeon and writer Atul Gawande, in an article in the New Yorker called “Big Med” (discussed by me in Quality and price for everyone: Bigger may be better in some ways, but not all, Aug 24, 2012) reported on an effort in a Harvard-affiliated hospital to standardize the hardware used by orthopedic surgeons. Rather than having each surgeon pick their own favorite and having the hospital have to stock several – or sometimes more than 10 – versions of, say, an artificial hip, a committee researched the quality and the hospital stocked 1 or 2 of the best, and each surgeon had to use them. This improved outcomes. There was no suggestion that the surgeons were, at that time, getting kickbacks, but it is certain that the manufacturers whose products were not chosen were not happy about it.

It is not hard to see why the American people distrust the healthcare system, and the hugely profitable drug and device industries that supply it, and the healthcare “providers” – hospitals – that deliver it, and, sadly with news like these kickbacks, even the doctors and other clinicians caring for them. And I haven’t even gotten into  (today) the insurance companies! As in so much else, it often appears that both our major political parties are the parties of Corporate America, although one is at least making some efforts to limit those corporations. The other is, like the drug companies, totally shameless.

It is not hard, but it is sad. And worse, destructive to our health, as individuals and as a society. 

"Single Payer", "Medicare for All": Good ideas and about time!

The call for a universal health care system in the US is probably greater than it ever has been. While, of course, the Republicans, whose only firm position is completely kowtowing to billionaires and major corporations, are opposed to it, many Democrats have signed on to the “Improved and Expanded Medicare for All” bill in Congress (120 at last count). Democrats running across the country have been calling for “single payer” as well as “Medicare for All”, from outspoken Democratic socialists like Alexandria Ocasio-Cortez in NY (and of course Bernie Sanders) to moderate Democrats running in states and districts that Trump won. They correctly see this as an issue that cuts across traditional liberal-conservative lines, and even racial lines, and may be their path to victory.

Many Republicans (although not the Republican congressional leadership) are reading the same tea leaves, and are hedging, trying to say that they favor the things that people like about the ACA (most important, the protection against insurers denying coverage for pre-existing conditions). Of course this often requires major dissembling for those who, like our Arizona GOP candidate for Senate Martha McSally, voted to gut the ACA, and even Texas senator Ted Cruz who authored the “Cruz Amendment” that would strip virtually all protections for people under ACA. President Trump, never one for nuance, has no difficulty having it both ways: he calls for the repeal of ACA while insisting that his health care plan will protect people’s ability to have health insurance, pre-existing conditions or not (it won’t).

It is in this context that the recent Sunday NY Times’ Magazine article by Elisabeth Rosenthal and Shefali Luthra, ‘“Don’t get too excited” about Medicare for All’ becomes important. For starters, “Don’t get too excited” is not necessarily the opinion of the authors but a quotation from Rep. Jim Cooper (D-TN). Rep. Cooper was responding to the surprise of one of his Nashville constituents, Dr. Carol Paris, President of the leading physician advocacy group for single payer, Physicians for a National Health Program (PNHP), that he had signed onto the Medicare for All bill. Nonetheless, the article does raise many cautions about the movement to single payer or Medicare for All, mainly about different interpretations of the meanings of this by different advocates, and incomplete and sometimes inaccurate understanding of them by regular people. The most important thing about it, however, is that it had to be written at all because there is such a movement; long-time activists, including PNHP physicians, remember that it was not too long ago that such an idea was poo-pooed, dismissed. Not now.

Clearly, the quantum step forward was the 2016 presidential campaign of Bernie Sanders. The establishment pundits of both parties were shocked at how popular and successful this old Jewish socialist from Vermont (ok, originally Brooklyn) was across the country. He didn’t win the Democratic nomination, true, but he might have won the general election against Trump. Certainly, his straight talk and the fact that he directly addressed the felt needs of regular people was the main reason for his popularity, and people’s fears about their health risks and costs were central to this (see A majority of Americans are worried about health care costs -- and a majority of Congress doesn't care, October 16, 2018). Bernie had advocated for single payer for decades, as had great leaders before him including the late Representative Ron Dellums of California (see Ron Dellums: Loss of a great leader and a job for the rest of us, July 31, 2018), but the visibility of his presidential campaign skyrocketed the visibility of single payer.

Rosenthal and Luthra utilize a good bit of ink describing what single payer is --the government is the only payer for health care, rather than multiple private insurers; Canada is the best example of this, and Britain has a government-owned national health service. They also note that Medicare for All means exactly that, that everyone, not just those over 65 and the blind and disabled, would be in the Medicare program. Of course, since Medicare is a single payer program, it would be single payer. They describe the misconceptions people have (“would I be able to keep my present plan?”), and also talk about other countries, such as France and Germany, that have universal health care without a single payer but with a heavily-regulated marketplace. They observe that partialist solutions do not generate the enthusiasm of single payer, but that the latter would be the hardest and thus (perhaps) most difficult to institute. Among the concerns they note are the displacement of insurance company employees and the decrease in doctors’ income.

But these are the most important points.

1.       Our health care system is not working. Our life expectancy is much lower than other developed countries, about 43^rd, and a recent article in Smithsonian Magazine covers work that projects that it will drop another 21 places by 2040, to 64! Other measures of access to care and quality of care are comparably poor. Yes, there are heroic and wonderful things that medical care can do for people, but if these are not accessible to everyone, and if the cost of them precludes spending on even basic care for everyone, it is not working.
2.   Our health care system is incredibly costly. By far, we spend more, overall, as % of GDP, and per capita, than any country in the world, as illustrated by the graph from the Kaiser Family Foundation. It is more than twice as much as most of the developed countries, all of which have far better health status.
3. Profit is the problem. Specifically, corporate profit made from providing health care services (or, in the case of insurance companies, not providing health care). This is how we manage to do both #1 and #2 – because the functional goal of the US health system is not to increase the population’s health but to make as much money as possible for insurers, hospitals, drug companies, and providers.

These are the core issues that need to be addressed, and what sets the US apart from all other developed countries. Yes, Canada has a single payer system such as we might have with Medicare for All (and they even call it Medicare). Britain has a National Health Service, with most hospital and health care facilities owned by, and some doctors employed by, the government. Britain, however, allows private insurance for those who can afford it, Canada does not. France and Germany and Switzerland have multiple insurers, but they are not unfettered to maximize profit by denying care. In Switzerland, for example, insurers have to be non-profit, have to offer the same benefits, and have to charge the same amount. They compete on quality of service! Can you imagine that here?

So, while Rosenthal and Luthra repeat the idea that single payer, although the most enthusiasm-generating, would involve the biggest change, it is also, in another sense, the least complicated. Trying to get to a system like that that evolved in these other countries over decades will be more complicated to understand and to implement. Many of the suggestions for incrementalism (“Medicare for More”, “public option”) will not solve the problems we have because they do not include everybody, and because they do not eliminate the incentive for making money on the back of denying care that is the core flaw in our current situation.

“Medicare for All” and “single payer” are popular among people because their core meaning is understandable, and they would address the needs that they have.

• ·        Everybody in, nobody out!
• ·        No profiteering!

Simple message. Needed solution.

Epi-Pen® and Predatory Pricing: You thought our health system was designed for people’s health?

Martin Shkreli, the former CEO of the drug company Turing, achieved his 15 minutes of fame (or infamy) last year through predatory pricing, raising the price of pyrimethamine, an old drug used to treat a parasitic infection in the brains of immune-compromised (usually HIV-infected) people from $13.50 to $750 a pill (Drug prices and corporate greed: there may be limits to our gullibility, September 27, 2015). Shkreli manage to further alienate people by his testimony before Congress, widely described using adjectives such as “smug” and “condescending”.  The most recent Pharma CEO to hit the news for price gouging, Heather Bresch of Mylan, seems to be trying to avoid Shkreli’s “doubling down” by making an apology, of sorts.

Bresch’s company, unquestionably with her active involvement, raised the price of Epi-Pen®, a self-injectable form of epinephrine that is sold to prevent people from dying from severe allergic (anaphylactic) reactions to a variety of substance, from peanuts to bee stings, from about $100 to $600 for a 2-pack. Two things: first, such pens are lifesavers. As a physician, when I tried to figure out what I needed to pack in an emergency first-aid kit for camping, it was #1. It was the only thing I could think of that actually could keep someone from dying in the woods. Second, epinephrine is an old, cheap drug. As ABC news reported, a doctor in Canada showed how a physician can prescribe a whole vial, plus small syringe and needle, for under $10, and a person can easily inject themselves, just under the skin. The “value” of the Epi-Pen is that it is self-injecting, but hard to even justify the $100. Or the somewhat higher cost of a generic (Mylan, indeed is a generic company.) Bresch, the daughter of a US Senator, was awarded an MBA by West Virginia University despite not finishing the coursework (which led to the resignation of the president). She protested that she wasn’t being predatory like Shkreli, and offered to sell the drug at a 50% discount, only $300! That is still a lot. I have a friend whose daughter is allergic to peanuts; both her day care centers require her to have a 2-pack of Epi-Pen®, with prescription (thus can’t do the epinephrine bottle) – this could cut her outlay from $1200 to $600. Of course, she will spend it to potentially save her daughter’s life, the key point that Mylan and Ms. Bresch understood when they raised the price. At more or less the same time, Ms. Bresch raised her own salary from a paltry less-than-$2 million a year to $18 million. I guess the rise in the price of Epi-Pen® funded that. MAD Magazine® used to do satire but its recent coverage of Epi-Pen® is almost investigative reporting (see picture).

Could it get worse? Sure, why not? Bresch’s father, Senator (and former Governor) Joe Manchin of West Virginia may or may not have been helpful to Mylan (it is, after all, a West Virginia company), but many politicians have been tied to helping drug companies make lots of money. Bill Moyers covers the role of Billy Tauzin, a former Congressman from Louisiana who chaired the House Energy and Commerce Committee when Congress passed the Medicare drug plan (Medicare Part D) under President G. W. Bush. That legislation prohibited Medicare from using its clout to negotiate lower drug prices. Tauzin left Congress in 2005 and became chief lobbyist for the Pharmaceutical Research and Manufacturers of America (PhRMA), converting his well-paid (by campaign donations) service while in Congress to a MUCH better-paid job lobbying his former colleagues. He is credited with having a major impact on the ACA, passed in 2010, ensuring its Pharma-friendly characteristics. And, to be sure, Tauzin, who left PhRMA after 5 years, was scarcely alone in pushing pharmaceutical industry interests in Congress, or in receiving big donations, as the Moyers piece documents. Congress appears to buy the idea that Pharma needs high prices for doing research and development (despite the fact that they spend many times their R&D budgets on marketing, and much of the basic research is done with government funding at universities) and that other countries’ restrictions on the prices of their drugs require them to charge Americans more. Of course, the real reason that pharmaceutical companies charge so much in the US is that they can get it. Whose interests is Congress working in when it does this? Not the American peoples’…

I recently discussed the fact that some large insurers (Aetna, United, Humana)  are leaving the health insurance exchange marketplace in some parts of the country because they are losing money (or, perhaps, just not making enough) because too many sick people and not enough healthy people are signing up, turning the insurance model on its head.  Although the ACA contains an individual mandate, lots of people with less money and/or fewer health needs are not signing up and paying the penalties, which are much less costly (if they are even “caught”). Of course, the ACA did not include a “public option”, which would have been much less costly, specifically to offer these insurers a competition-free field. This is discussed in detail by Princeton health economist Uwe Reinhardt in a JAMA Forum on August 25, 2016 “Why Are Private Health Insurers Losing Money on Obamacare?”. The reason comes down to the same one that has always been true, and that I discussed a number of years ago (October 20, 2009, Red, Blue, and Purple: The Math of Health Care Spending) – a small minority of people account for most health care costs. I have attached a graph from Reinhardt’s piece that makes the same point. And, although he explains the reason insurers lose money, Reinhardt does not excuse it. "If health care costs in the United States were lower, most people would probably agree that ill, low-income citizens should receive the needed health care that is available to better-off individuals. The problem is that our health system is in danger of pricing kindness out of our souls."

So we have both the greed of pharmaceutical companies and the greed of insurers. As discussed in many recent articles in the popular press, the bottom line is that the health benefit to Americans is at best a side effect of complex plans engineered to make profit. This perverted approach, almost unique to the US, has marginalized, bankrupted, and caused illness and death in many. This system doesn’t work for people. A fairly well-off couple caught in the bind of insurance costs is profiled by AP in its “The Big Story: “Without a subsidy, couple faces higher insurance premiums”. The husband notes the failure of our system to ensure that people’s health is a greater priority than corporate profit:  "Ultimately, it's clear that health care is not something that can be efficiently provided by the private sector. The rest of the Western world has figured out that health care is a right and is intrinsically a government, public-sector activity.”

Don McCanne, in his Quote of the Day,  provided that link on August 22. And then, on August 23, a profound and direct commentary from the editors of the Des Moines Register, “Editorial: Government should not rely on private insurers”:

“Americans’ access to health insurance should not depend on the profit margins, business dealings, or mergers of for-profit companies. Not in Medicare. Not in Medicaid. And not in exchanges created by health reform law. Instead of funneling tax dollars to private companies, government is better equipped to administer insurance. It is not beholden to stockholders. It does not seek to turn a profit. And it will not abandon the responsibility of providing health coverage to Americans.”

Professor Reinhardt and those editors are right. Our souls are certainly in jeopardy. And so are our pocketbooks. And so is our health.