Are things about to change? The signs are certainly there. First, the Bush administration’s deeply-flawed Medicare drug benefit, which passed late last year after an unprecedented all-night session of arm-twisting, has proved unpopular with the public, and especially with seniors, largely because of the giveaways to pharmaceutical companies insisted upon by the GOP. Not only does the bill ban the increasingly popular importation of drugs from Canada, but it also bars the federal government from using its buying power to bargain down the price of drugs (as every other advanced democracy does), thereby ensuring that seniors will pay more for medication than they might otherwise. But more significantly, the rising cost of health care and its damaging consequences–from seniors unable to afford life-extending medicines to companies unable to hire because of rising health-care premiums–is shaping up to be one of the top domestic issues in the current presidential race. And one of the chief reasons for the rising cost of health care is the higher cost of drugs.

Sen. John Kerry (D-Mass.) is already exploiting the drug angle, bashing the Bush administration for not allowing drugs to be imported from Canada. That attack has clearly hit a raw nerve with the public, which is why there’s a chance that bipartisan legislation could be passed this year on this high-profile, if modest, reform.

But that’s just one more sideshow on the road to true reform. On the campaign trail, Kerry is talking about everything from rewriting the Medicare drug benefit to fighting the skyrocketing prices of employer-based health insurance by having the federal government pay for employees’ catastrophic costs. Should Kerry win, then, the hottest policy book in Washington is likely to be Marcia Angell’s The Truth About the Drug Companies: How They Deceive Us and What To Do About It.

Angell, a former editor of the New England Journal of Medicine, believes that many of the problems with (and much of the unnecessary cost of) our health-care systems derive from a single source: the pharmaceutical industry’s role in sponsoring the development of new drugs. She argues that this leads to corruption of the clinicians who conduct research, misleading and sometimes faulty science, and more importantly, a tendency for the industry to dedicate its resources to producing slightly-improved versions of existing drugs which have proven to be profitable, rather than exploring new territory.

Angell proposes to sever entirely the ties that bind clinicians to the drug companies, forbidding the industry from any involvement in the testing of new drugs and handing those functions over to a new branch of the federal government. It’s perhaps the boldest call yet for reform. Angell’s prescription has some good in it but as well as some overreach. But some reforms–including Angell’s more modest initiatives–are essential if we’re going to stop the health-care system from becoming the whale that ate the economy.

The amount of money Americans spend on drugs each year has tripled in the past decade and is the single largest reason the cost of health care is rising at double-digit rates each year. Industry analysts, like the consultancy IMS Health, project that drug costs will nearly triple again over the coming decade. Once a minor adjunct to improving health, pharmaceuticals today drive every aspect of our health-care system. Where sick people may have once spent weeks in the hospital or undergone expensive surgery, today their inpatient visits may last only days or even hours because new and improved drugs and drug therapies have replaced numerous, once-difficult procedures.

So the complex system that generates new drugs (and to a lesser extent new devices and procedures) is the technological leading edge of medical innovation. The process begins with basic research undertaken by laboratory researchers (mainly working at universities) who aim to understand the biology of a particular disease and to identify the biochemical mechanisms for intervening. These expensive steps are largely funded by taxpayers through the National Institutes of Health.

As this fundamental work yields conclusions published in academic journals, scientists working for both universities and industry try to identify potential therapeutic agents which might help attack a given disease. (When these therapies are found by university or NIH researchers, the university itself or the government usually patents the discovery, and then licenses it to drug companies. When a pharmaceutical manufacturer’s scientists discover such an agent, the patent is taken out by the company.) Then industry scientists develop those agents into drugs that can be taken by patients and marketed to physicians and hospitals. The products must then go through a series of clinical trials mandated by the federal Food and Drug Administration. Drug companies foot most of the bill for the trials, and hire physicians to run them. The law requires the companies to prove only that their drugs are better than placebos. If the FDA agrees that such a drug meets the “better than nothing” benchmark, it grants a license. If not, the money the drug company put into development is lost.

The drug industry argues that its double-digit price increases are necessary to fund the rising costs and uncertain payoff of all this research and testing. But first, it’s not industry but government that pays for the most critical research–funding the science and analysis that will enable the drug industry to go after diseases like Alzheimer’s, many cancers, and most rare maladies for which there are no cures. Second, while the costs of drugs are going up, the number of truly innovative new drugs approved by the FDA annually have not only failed to rise, but have also fallen precipitously since the mid-1990s. This despite the fact that a decade ago Congress loosened some FDA testing requirements, thus easing industry’s ability to bring important new drugs to market quickly.

Pharmaceutical companies excuse their poor performance by arguing that they’ve already picked all the “low-hanging fruit,” i.e. the more obvious, easy-to-find breakthrough drugs, and that it is more expensive than ever to find new ones. Angell offers a different explanation. The industry, she argues, is increasingly devoting its resources not to innovative research but to the pursuit of endless copycat versions of drugs already on the market. Citing a National Institute of Health Care Management study, she points out that more than half of new drugs introduced in the past decade have been deemed insignificant in terms of medical innovation. The steep increase in the costs of pharmaceutical development can be largely attributed to the industry’s fixation on me-too drugs for highly lucrative markets. For example, when the generic versions of acid indigestion pills are already 90 percent effective, it costs close to $100 million for a new company trying to horn in on the market to prove the “next generation” antacid is just as good.

Drug industry reformers like Princeton University health-care economist Uwe Reinhardt have proposed creating an independent agency to compare drugs already on the market, a measure that would gently nudge industry away from its current focus on me-too drugs and marketing. Such a change would give doctors the hard evidence, which would enable them to figure out which of a variety of similar drugs actually work best for their patients, and make it harder for pharmaceutical corporations to make me-too drugs profitable through marketing alone.

Angell goes much farther, wanting to drive the drug industry and its subcontractors out of the clinical trial business altogether. “Drug companies should no longer be permitted to control the clinical testing of their own drugs,” she writes. “There is too much evidence that this practice biases the research in favor of the sponsor’s drug.” Indeed, in the January 2003 issue of the Journal of the American Medical Association, a review of a dozen studies evaluating conflicts of interest in medical research showed that industry-funded analyses of a drug are much more likely to turn out favorable than comparable studies conducted by scientists not funded by the industry.

To counter this effect, Angell would establish a new institute at NIH to conduct prescription-drug trials of all new pharmaceuticals, funded by a new tax on pharmaceutical-company revenues–money which the companies currently spend running their own trials. Industry would then bring its new drug applications to the agency, which would contract with independent researchers to conduct the trials. This would eliminate industry’s control over clinical trials, which can often lead to the suppression of negative results. In a nod to Reinhardt’s idea, Angell would also have the new agency compare the new drug’s effectiveness to existing therapies to determine if it makes a useful contribution to medicine. She would also bar any researcher who takes industry money from participating in the trials.

If we’re ever going to get objective evidence from the clinical trial system, the argument for separating these trials from the process in which companies research, design, and manufacture pharmaceuticals makes perfect sense. It would provide researchers with an alternative funding source derived from the tax on industry revenue for their investigation into the potential uses of new and older drugs, and in doing so would restore the economic base for academic medicine which in recent years has increasingly turned to the drug industry for support. (In 1980, drug companies paid 30 percent of the costs of the nation’s clinical trials; now they pay 60 percent.)

But in her most ambitious reform–one she calls the most important on her agenda–Angell goes too far. She wants to deny FDA approval to any drug that “offers trivial or no advantages over drugs already available, and may be even worse. Overnight, that reform alone would force the industry to concentrate on innovative drugs instead of me-too drugs.”

Such a step would do deep damage to the drug industry: In order to devote the millions of dollars necessary to bring a drug to market, you’d have to be nearly positive that the new pharmaceutical would be better than any existing therapy, a risk executives would almost never take. Even if drug companies were entirely noble, every drug submitted for testing would not surpass existing remedies. That is something only scientific investigation can discover, and a company shouldn’t be penalized for seeking the answer.

Reforms on this scale are always difficult. The pharmaceutical companies enjoy a great deal of power, and this Congress and administration have been inclined to loosen regulation of the industry, rather than tighten it. But there is a growing sense in Washington and the country that drug prices have gotten out of control. If that spirit translates into genuine political will in the White House and on Capitol Hill, then Angell’s reforms may get a hearing in the places that matter most.

Merrill Goozner is the author of The $800 Million Pill: The Truth Behind The Cost of New Drugs and director of the Integrity in Science Project at the Center for Science in the Public Interest.

Merrill Goozner is the author of The $800 Million Pill: The Truth Behind The Cost of New Drugs and director of the Integrity in Science Project at the Center for Science in the Public Interest.

Our ideas can save democracy... But we need your help! Donate Now!

Merrill Goozner, a former editor of Modern Healthcare, publishes “GoozNews” on Substack.