Why is it so hard to lower the cost of prescription drugs?
Consider the fate of an utterly modest, tentative attempt in the waning days of the Obama administration. In 2016, under a little-known provision of the Affordable Care Act, the Department of Health and Human Services proposed a plan to study one aspect of the problem: the amount Medicare pays for drugs administered in physician offices, which had more than doubled in just eight years. Under the existing practice, physicians who administer medicines in-office, usually for cancer, rheumatoid arthritis, or eye disease, are reimbursed for the average cost of the drugs plus 6 percent of those costs. It’s a classic case of perverse incentives: the higher the cost of the treatment, the more the doctor gets paid. Several studies confirm what common sense predicts: the approach causes physicians to prescribe more expensive drugs than they otherwise would. The proposed five-year experiment would change the physician reimbursement to a flat fee plus 2.5 percent of the drug cost. The costs to Medicare would be compared with a control group still reimbursed at the 6 percent rate. If costs dropped under the new reimbursement plan, Medicare would consider switching to it permanently.
At first glance, reactions to the proposal were predictable. Consumer groups, including the AARP, liked it. Physician groups and pharmaceutical companies, both of which stood to lose substantial income from a switch, opposed it. More surprising was the addition of some powerful allies speaking out on the side of physicians and Big Pharma: patient advocacy organizations. One hundred and forty-seven such groups—with names like the Epilepsy Foundation, the Kidney Cancer Association, and the Lung Cancer Alliance—signed a letter to Congress and the Obama administration insisting that the plan would “represent a major step back for patients and people with disabilities.” Lawmakers from both parties, including Democrat Nancy Pelosi and Republican Tom Price, the future secretary (and now ex-secretary) of HHS, started echoing the patient groups’ objections, overwhelmingly opposing the experiment. In December 2016, the Obama administration withdrew the proposal.
Why would groups representing medical patients, who rely on prescription drugs, oppose an attempt to make those drugs less expensive? There’s no doubt that they held honest concerns about potential unintended consequences. But there was another variable at work, too. Patient groups face their own perverse incentive: drug industry money. A study by the advocacy group Public Citizen found that three-quarters of the patient groups that publicly opposed the Medicare experiment received funding from the pharmaceutical industry. That is almost surely an undercount, since the groups are not required to disclose their donors.
Patient advocacy groups have a sterling reputation among the public and lawmakers alike. They provide patient and family education, counseling, and even financial assistance during difficult times, along with advocacy for increased awareness and prevention strategies. But when it comes to drug pricing, their reliance on pharmaceutical industry funding, along with a natural desire not to imperil development of new treatments, typically puts patient groups on the side of the industry.
And that is a problem, because the industry is the driver of the prescription drug pricing crisis. Over the past forty years, pharmaceutical companies have relentlessly pushed for federal policy to keep prices high, arguing that huge profits are essential to stimulate investment into new medicines. Thanks especially to laws and trade agreements giving drug companies lucrative patent protections, the industry has become one of the most profitable sectors in history. And it has used those profits to build substantial political clout, employing more than twice as many lobbyists in Washington, D.C., alone as there are members of Congress.
While dramatic price increases like the 450 percent hike in the cost of EpiPens and the 5,000 percent overnight increase for Daraprim—the latter overseen by the notorious “Pharma Bro” Martin Shkreli—have earned the headlines, an astonishing 90 percent of brand-name drugs have more than doubled in price over the past decade. A 2016 study found that one out of every five Americans reported not filling a prescription because they couldn’t afford it.
There are plenty of ideas out there for bringing drug prices under control. Lawmakers have introduced dozens of such proposals in Congress and state legislatures. Many would reshape the industry far more radically than a mere Medicare reimbursement adjustment would have. But the failure of the proposed Obama administration tweak to Medicare Part B shows that real change is unlikely to occur as long as patient groups are standing in the way. It wasn’t long ago that patient activists were at the forefront of lowering the cost of live-saving medication. To solve today’s prescription drug crisis, they’ll have to find their voice again.
The end of the twentieth century saw a major breakthrough in treating HIV/AIDS. The discovery of antiretrovirals, or ARVs, turned a virus thought to be a death sentence into a chronic but manageable disease—for those who could afford the medicine. But, despite the fact that government-supported scientists played the key roles in developing it, the miracle drug was protected by monopoly patents held by multinational pharmaceutical companies. That meant the companies were free to charge exorbitant prices for the treatment—which they did.
Indeed, the rising cost of prescription drugs has gone hand in hand with industry efforts to expand its monopoly control over drug patents. The industry’s first big win was the 1980 Bayh-Dole Act, which allowed private pharmaceutical companies to claim patents on drugs developed through U.S. government–funded research. Its second policy victory came in 1995, with the TRIPS (Trade-Related Aspects of Intellectual Property Rights) agreement. That deal forced the global community to adopt U.S.-style patent protections, starting with a baseline twenty-year monopoly, which is routinely extended by clever corporate legal maneuvering.
In the context of ARVs, the existence of these patent monopolies put corporate profits ahead of human lives. Even though the medicine could be produced at barely over $1 a dose, the price established by the patent holders was over $1,000 per month. For low-income countries, the cost was an impossible burden. At the turn of the century, just one of every 1,000 Africans infected with HIV had access to the medicine. Meanwhile, more than two million people in Africa were dying from AIDS each year.
The conventional wisdom in the global health community was that it was just not going to be possible to treat HIV in the developing world. A prominent article in the prestigious British medical journal the Lancet argued that officials in poor countries should resist the “political appeal” of providing AIDS treatment, and focus their limited dollars on prevention instead. “It’s so politically incorrect to say, but we may have to sit by and just see these millions of people die,” an unnamed global health official told the Washington Post in early 2001.
But people living with HIV took a different view. In 1998, a group of South African patients with connections to the anti-apartheid movement and the earlier, successful AIDS treatment movement in the U.S. formed the Treatment Action Campaign. TAC launched a campaign of civil disobedience, illegally but openly importing a generic version of the AIDS medicine fluconazole, which cost less than 10 percent of the price charged in South Africa by the patent holder, Pfizer. TAC’s demonstrations steadily grew larger and more insistent, filling the streets with thousands of singing, chanting demonstrators. Activists conducted “die-ins,” and filed charges of culpable homicide against the minister of health.
Stung by the negative publicity, pharmaceutical companies decided to go on the offensive, suing to block a South African law that opened the door for importation of generic medicines. The U.S. Trade Representative backed the industry, accusing South Africa’s government of violating international intellectual property law.
But TAC and other activists knew how to play hardball, too. In the U.S., Al Gore, then a presidential candidate, had supported the industry’s tactics in resisting access to generic ARVs. So activists relentlessly heckled him at his public appearances. They even interrupted his official campaign announcement, chanting “Gore’s Greed Kills” and passing out fliers saying “Vice President Gore Doing Drug Company Dirty Work.”
The common thread running through all this activism was that patients were in the lead, demanding that the issue move from an abstract discussion of intellectual property laws to a question of human rights. As one HIV-positive TAC activist said at a protest, “You are denying me drugs. Look me in the face and tell me to die.” TAC’s cofounder Zackie Achmat refused to take ARVs until they were widely available to the poor of the country. He suffered through life-threatening lung infections, but stuck to his vow, even after South African President Nelson Mandela personally begged him to take the drugs.
Eventually, reportedly at the urging of Gore, President Clinton gave in, issuing an executive order in May 2000 pledging not to interfere with African nations’ efforts to obtain cheaper AIDS medicines. The activists now focused their attention on the corporations. On March 5, 2001, the day that oral arguments began on the drug companies’ South African lawsuit, TAC led a “Global Day of Action” against the corporations. Marchers in major cities carried signs saying “Stop Medical Apartheid.” Others convened mock court hearings in front of the offices of GlaxoSmithKline and Bristol-Myers Squibb, finding the companies guilty of murder.
The drug companies blinked. Six weeks after the Global Day of Action, they dropped their lawsuit, even agreeing to pay the South African government’s legal fees. With the barriers to generics dropped, ARV prices fell by as much as 99 percent. The United Nations created the Global Fund to Fight AIDS, Tuberculosis and Malaria in 2002, and U.S. President George W. Bush announced in 2003 the President’s Emergency Plan for AIDS Relief (PEPFAR).
In 1999, just 20,000 South Africans were on ARVs. More than three million are today. Globally, PEPFAR and the Global Fund provide antiretroviral treatment for more than nineteen million people. After the pharmaceutical industry dropped its South African lawsuit, TAC leader Zackie Achmat told a cheering crowd outside the courtroom, “We have made the mightiest industry in the world shake in its boots.”
The industry learned from its defeat, and has been spending millions to court patient groups ever since. A recent New England Journal of Medicine report revealed that at least 83 percent of the largest nonprofit disease and patient advocacy groups accept pharmaceutical industry donations. (Again, that’s an undercount, because the groups don’t have to disclose their donors.) Most organizations do not report the specific amount of donations, but the available information suggests that a majority of industry donations were likely $1 million or more annually. The American Diabetes Association, for instance, received $2.5 million from the Eli Lilly Foundation in 2015—and then refused to take a position in favor of last year’s Lilly-opposed Nevada legislation to lower insulin prices. Many patient organizations’ governing boards even include drug industry executives. “The ‘patient’ voice is speaking with a pharma accent,” the study’s lead scientist, Matthew McCoy, told Kaiser Health News.
The minority of patient groups that refuse to be bought off face a core challenge, says David Mitchell, a multiple myeloma patient and founder of Patients for Affordable Drugs, which refuses to take any industry money. “Take me, for example: I have an incurable cancer that finds its way around the existing drugs, so I need there to be new drugs discovered,” Mitchell says. “And the drug companies know a lot of people are like me or have loved ones like me, so they say they need these prices to find the new drugs. It is like extortion: Give me your money or I am going to pull the trigger.”
The pharmaceutical industry marketing is a bit subtler than that, but it does center on the notion that high drug prices are justified by the research the companies conduct. There’s one big problem with that argument: a huge proportion of that research is actually paid for by the government.
The basic research that makes up the front end of the drug development process is time-consuming, expensive, and often frustrating. Corporations are wary of investing in research that may not yield a profitable drug. So they turn to governments, especially the U.S. National Institutes of Health (NIH) and its $32 billion annual budget for medical research, to assume the risk. A study of drugs receiving the U.S. Food and Drug Administration (FDA) priority review status—a designation given to the drugs most likely to have a major impact—from 1988 to 2005 showed that two-thirds of them traced their roots back to government-funded research. U.S. funding contributed to the science underlying every one of the 210 new drugs approved between 2010 and 2016. Groundbreaking drugs to treat cancer and mental health, along with vaccines, all owe their existence to taxpayer-funded research.
That direct government research funding is supplemented by pharma industry tax credits that can reach as high as 50 percent of research costs, plus the government’s role as the bulk purchaser of its products. Altogether, some analysts calculate, the private sector only pays for a third of U.S. biomedical research, and much of that is focused on so-called “me too” drugs, which provide no new therapeutic benefit compared to products already available. This helps explain why the industry spends far more on advertising and sales than on research and development.
Beyond this taxpayer-pays-twice equation, there is growing evidence undermining the very premise of awarding monopoly patents—that they are needed to spur innovation. Until the latter third of the twentieth century, most countries forbid or limited patent protection of drugs. This reflected the widely held belief that medicines were a public good. The inventors of insulin won a 1923 Nobel Prize for their efforts, but sold their patents for a dollar each so that the medicine could be widely distributed. “Insulin does not belong to me, it belongs to the world,” the lead inventor Frederick Banting explained. A recent paper by NYU professor Petra Moser found that countries without patent laws have produced more than their share of inventions, including innovative new medicines.
Current proposals to reform the U.S. medicine system range from requiring corporate transparency on research costs and profits to treating the pharmaceutical industry as a public utility. Multiple pending bills in Congress would legalize importation of cheaper medicines from Canada. More ambitious proposals would move toward a patent-free, nonprofit system of drug development. Dean Baker of the Center for Economic and Policy Research has estimated that if the U.S. provided medicines without the artificial price markup imposed by monopoly patents—a markup that funds the industry’s windfall profits, high executive salaries, and tens of billions of dollars in annual marketing costs—the savings could fund the replacement of all private industry research and development several times over.
Of course, the pharmaceutical industry sees that kind of reform as an existential challenge, and will resist it with all of the substantial resources at its disposal. The history of social change suggests that the only way to overcome that resistance will be a movement led by those most affected by the drug pricing crisis. World-changing campaigns like the U.S. civil rights movement and the South African anti-apartheid movement all benefited from sympathetic allies. But at the front lines were always people who were themselves victimized by the targeted injustice. “There is always an important role for the expert, the policy researcher, for those gathering evidence,” says Diarmaid McDonald of the Just Treatment campaign in the U.K. “But there will be very little change if you don’t have direct patient advocacy to decisionmakers.”
There are signs of hope for this kind of patient advocacy again taking center stage. David Mitchell’s group, Patients for Affordable Drugs, has gathered thousands of patient stories and played a role in successful state-level drug pricing transparency pushes in Maryland and California. In 2016, cancer patients Zahara Heckscher and Hannah Lyon committed high-profile civil disobedience when they occupied the lobby of the Washington building that houses the pharmaceutical industry lobbying group and protested the monopoly patent extensions of the proposed Trans-Pacific Partnership. (Heckscher, who had breast cancer, died from the disease earlier this year.)
In South Africa, the Treatment Action Campaign builds on its HIV/AIDS treatment legacy to argue for access to breast cancer treatment that is unaffordable to most women in the country. Activists in India and Thailand have successfully pushed for greater access to generic cancer drugs. The Union for Affordable Cancer Treatment, led by breast cancer patient Manon Ress, is leading the fight for U.S. generic manufacturing of the chemotherapy drug paclitaxel and helped push down the price of a breast cancer drug in the U.K.
Last year, when Nevada legislators considered a bill requiring transparency on insulin pricing, and the established diabetes patient groups who had received pharma funding refused to take a position, other patients stepped into the breach. T1International, a new type 1 diabetes patient group that refuses industry funding, helped to organize an all-volunteer online campaign supporting the Nevada bill, using the group’s signature hashtag #insulin4all. It also called out the larger patient groups for their timidity on drug pricing and organized a “Stop Price Gouging” patient demonstration outside insulin manufacturer Eli Lilly’s headquarters in September. (Disclosure: I am part of an organization that cosponsored that event.)
T1International’s director Elizabeth Rowley says she understands other patient groups’ decisions to take industry money and put it to good non-advocacy use. But she and her colleagues at T1International are determined to avoid those compromises, even if it means their organization is woefully underfunded compared to the bigger diabetes patient groups. “It’s just so important for the public to hear from the patients who are struggling, because they are the ones who know best,” she says.
That was the lesson of the HIV/AIDS drug pricing movement, and it is one David Mitchell agrees with, too. “Meaningful change will not occur without an independent, focused patient voice,” he says. “In the absence of that voice, pharma companies and pharma benefit managers will fill that void with, if you will pardon my French, bullshit.”