It's not just Valeant and Shkreli gouging drug prices
During the past few months, lurid details started emerging about the exploitative price gouging by some pharmas that were either private equity operations or managed as such. These included companies such as Valeant, Martin Shkreli's Turing, and a few others. During that time pharma's lobby, the PhRMA, together with some of the industry's CEOs and flacks, began a shrill campaign that tried to dissociate themselves from these "hedgefund" pharmas.
Spokespeople for the industry's leading companies derided the pharma investment companies for their lack of pharmaceutical research and their approach to acquiring new products through buying existing companies and then raising prices.
The criticisms of those particular companies are true enough, but top-tier pharmas also take advantage of consumers, taxpayers and employers in their own, less blatant ways.
A clear example of that emerged last week when Pfizer announced across-the-board price increases for more than one hundred of the company's existing products.
These increases were not the 3 per cent or 5 percent hikes that one might expect in an economy where inflation and the cost of living last year were miniscule. According to data from the information supplier Wolters Kluwer, most prices on existing Pfizer products will rise between nine and twenty percent.
For the anticonvulsant Lyrica, Pfizer will extract a 9.4 percent price increase. The company will also boost the cost for its erectile dysfunction brand, Viagra, by 12.9 percent.
Those two price hikes are actually modest compared to some of the others.
As an example, Warner Lambert launched Dilantin in 1953 for controlling epileptic seizures. Pfizer bought Warner Lambert in 2000 and this year it is raising the Dilantin price by 20 percent over the 2015 listing.
Pfizer's finance people on 42nd Street must be fond of that 20 percent figure for price increases because they decided to raise prices by the same percentage for the "hormone therapy Menest, the angina drug Nitrostat, Tykosyn for irregular heartbeat, and [the] antibiotic Tygacil."
To be fair, Pfizer is slapping just a 5 percent price hike on Ibrance, its breast cancer product. But they just launched Ibrance in 2015 with an annual list price of $118,200, so heftier increases will have to wait for a while.
In this respect Pfizer is typical of its peers. According to the consultancy Truveris, drug prices for all of 2014 rose 10.9 percent, but prices on patent-protected brands increased an astonishing 15 percent during that year.
Even as Pfizer's price increases help to make drug costs the fastest growing component of health care, the company uses still other methods to squeeze U.S. taxpayers. Late last year Pfizer announced it is paying $160 billion to acquire Allergan, a New Jersey company that obtained an Ireland registration for itself. The deal will allow Pfizer to "redomicile" itself to Ireland, thereby substantially reducing its U.S. tax bill. When the acquisition goes through later this year, it will represent the largest instance so far of a corporation redomiciling to avoid U.S. taxes.
So unlike a Turing that sticks consumers with fifty-fold price increases, the more conservative, "responsible" Pfizer remains content to jack up the prices of its products at four or more times the inflation rate. Such admirable restraint is what makes Americans pay triple the prices that other advanced countries pay for the same drugs.
In defense of its latest price hikes, Pfizer's management likely hews to the industry's boilerplate explanation about requiring huge profits in order to develop life-saving new drugs. That excuse is transparent nonsense.
In 2014, Pfizer spent $8.4 billion on R&D, yet in the same year the company spent 68 percent more money on selling, general & admin expenses and 43 percent more to buy back its own stock than it invested in R&D.
Price increases in fact go to line the pockets of activist investors, hedgefund shareholders and corporate officers. In 2014 Pfizer's earnings were 37.6 percent of sales and nearly one-quarter of equity.
So can anything be done about this country's "free" (i.e., corporate controlled) market that allows pharma companies to soak the elderly, the sick, the indigent and, for good measure, all the rest of us?
Fifty U.S. Congressmen believe there is. This week they sent a letter to the Director of the National Institutes of Health, urging the agency to exercise "march-in" rights that would break the patents on excessively priced drugs.
Let's see if President Obama directs his Health & Human Services secretary to give NIH this authority, thereby showing he is sincere when he says he will use executive prerogative to resist the Republican plutocracy.
If President Obama wants to burnish his legacy, then let him establish himself as the president who tamed the drug industry's predatory behavior.
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