Readers Write: U.S. Customers get good value for higher prescription drug prices

The Island Now

CNBC – not my favorite station – was recently quoted that “attacking drug companies is one of the remaining bipartisan activities in Washington.”

Stephen Moore writing under the title of “Money Matters” talks of turning on the TV and listening to the politicians vilify drug companies as public enemies. Democratic presidential candidate, Sen. Elizabeth Warren refers to pharmaceutical firms as “corrupt cartels” that ”rig the rules, insulate themselves from accountability, and line their pockets at the expense of American families.“

The administration recently issued new regulations requiring manufacturers to list the price of their drugs in television ads. I think this is a waste of time since nobody really knows what drugs cost at the retail level.

Congress has already passed the “Know the Lowest Price Act” and the “Patient’s Right to Know Drug Prices Act,” both of which try to promote transparency in prices. The Senate’s bipartisan Prescription Drug Pricing Reduction Act would reduce the government’s spending on drugs by an estimated $100 billion over the next decade.

Vermont Sen. Bernie Sanders has likened drug company CEOs to murderers and says when they raise prices too much, we should “put them in jail.” On the Republican side of the aisle, President Donald Trump says the drug companies “get away with murder” and that he wants to force down drug prices, however possible.”

The Wall Street Journal had an article on their opinion page “Where You Want to Get Cancer.” They are quoted as saying “mortality rates are falling, especially if you live in the US.”

Mortality rates, as defined by Wikipedia, is a measure of deaths in a particular population, scaled to the size of that population, per unit of time.

The cancer death rate in the United States fell 2.2 percent from 2016 to 2017 – the largest single decline in cancer mortality ever reported, the American Cancer Society reported, Cancer remains the second leading cause of death after heart disease in both men and women nationally.

What percentage of people survive cancer? The five-year relative survival rate for all cancers combined has increased substantially since the early 1960s, from 39 percent to 70 percent among whites and from 27 percent to 63 percent among blacks. Improvement in survival reflects advances in treatment as well as an earlier diagnosis for some cancers. Survival varies greatly by cancer type, as well as earlier diagnosis, as well as the stage at diagnosis.

Relative survival is the proportion of people who are alive for a designated period of time, usually five years, after a cancer diagnosis divided by the proportion of people of similar age, race, etc. expected to be alive in the absence of cancer based on normal life expectancy.

Five-year survival rates do not reflect the most recent advances in detection and treatment because they are based on patients who were diagnosed at least several years in the past.

A think tank known as the Information Technology and Innovation Foundation produced a study in September of 2019. The study was called “The Link Between Drug Prices and Research on the Next Generation of Cures.” It was written by Joe Kennedy.

It begins “Academic studies consistently show that a reduction in current drug revenues leads to a fall in future research and the number of new drug discoveries. Policymakers need to keep these costs in mind when setting any policies that affect drug revenues.”

The biopharmaceutical industry is one of America’s leading sectors in terms of funding research and employing researchers. Public policy should try to encourage its growth and protect its competitiveness.

Congress could lower drug prices by expanding access to affordable insurance, streamlining regulation for the manufacture of approved drugs, encouraging other counties to pay their fair share of the cost of developing new drugs.

Kennedy writes that “policymakers must choose between the respective demands of current and future patients. Government price controls and other measures to reduce drug prices, such as weakened intellectual property protection will undoubtedly help current patients. But this will come at a cost. Money not invested today can be invested for tomorrow. An overwhelming body of academic research shows that price controls will significantly restrict the number of new drugs in the future.”

Kennedy’s report shows that artificially reducing drug revenues today will not only cause companies to cut back on their future research – meaning the next generation will benefit less from new drug discoveries – it will jeopardize U.S. leadership in an industry that “punches above its weight in funding research and employing scientists.”

Drug companies must make significant profits on their best selling drugs in one generation in order to reinvest in the next generation. A large portion of these “profits” goes to three sources before they are available for distribution to shareholders.

First, the revenues must cover the costs of the high number of failed research efforts, most of which generate no revenue. Second, they must pay for the long delays between initial research and product sales. These capital expenditures account for roughly half of the total costs of developing new drugs. Finally, a large portion of the remaining revenue goes into new research on the next generation of drugs.

Market investors quickly notice whenever companies do not have a group of promising drugs in their pipelines and the money that could be spent here is spent elsewhere.

The ITIF report shows numerous studies have shown a firm link between prices and profits on the one hand and higher levels of research and drug innovation on the other.

This well-established link will be broken if prices are lowered by political demands by people, many of whom have not done their homework and do not know all of the ramifications of their actions.

Lowering prices now will result in less future research and fewer new drugs. This decline in future drugs will, in turn, reduce patient welfare over the longer term.

Bertram Drachtman
Great Neck

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