When drug companies raise prices, everyone picks up the tab

With pharmaceutical companies, your health problem is their profit.

With pharmaceutical companies, your health problem is their profit.

Bad blood makes for good business.

Consider that the abstract for a paper by Irl Hirsch, a researcher at the University of Washington. He did the math on the price of insulin glargine, the chief ingredient in a common drug used by diabetes patients.

From 2003 to 2016, America’s inflation rate was 8.3 percent. During the same period, drugmakers jacked insulin glargine’s price by 593 percent.

Because they could.

America’s in a state of outrage over drug prices. First came Martin Shkreli, the notorious “Pharma Bro.” His company made a 60-year-old drug to treat parasitic diseases like malaria. Last fall, with no competitors on the horizon, Shkreli turned parasite himself, spiking its price by 5,000 percent.

The latest assault comes from Mylan, the American company that pretends to be Dutch to avoid U.S. taxes. In 2007, it bought the EpiPen, an instant injection cure for allergic shock that was first developed in 1977. At the time of purchase, the EpiPen’s price was $57. Nine years later, Mylan has raised it to $650. 

Such naked gouging ignites scandal. But Stephen Parente, a professor of health economics at the University of Minnesota, says vilified companies have the advantage of waiting it out. 

“There’s the collective shock of it, which produces outrage in the market, and every once in a while it catches fire, like with the EpiPen,” he says. “Then it retreats and goes away, and something else displaces it” in the news. 

And the industry moves on. It’s a feast-or-famine business: Invent a new drug or corner the market on an old one, and the money piles up. But there can be equally violent swings in the wrong direction.

By this summer, Mylan’s stock price had doubled since 2011 as it preyed upon the country’s allergy sufferers. After its foul deeds became public, its stock plunged 20 percent in two weeks. This is what happens when senators and state attorneys general see their own advantage in calling for your blood.

Of course, these kinds of “market corrections” are usually years — and billions of dollars — too late. Congress and the Food and Drug Administration aren’t exactly hot on the industry’s heels. Think of them resting comfortably at its feet.

There’s a simple diagnosis for why that is. The industry will tell you it needs gargantuan revenues for research and development. That’s not really true. One recent review found that only one of the 10 biggest American drug companies, Roche, spent more money on medical research than marketing. (Picture those TV ads of a guy throwing a Frisbee as a soothing voice rattles off six dozen agonizing side effects.)

Stephen Schondelmeyer, an economics professor at the University of Minnesota College of Pharmacy, notes that drugmakers are spending a lot on another kind of R&D.

“Republicans and Democrats,” he says. “The pharmaceutical industry will spend as much or more than any other industry lobbying the government.”

Last year, Big Pharma spent $240 million sucking up to the government. It’s on pace this year to throw another $30 million at congressional campaigns. Funny how this injection of cash works to keep the patient paralyzed, but pain-free.

“Even when events have occurred,” Schondelmayer says, “nothing has changed, and Congress isn’t willing to stand up to [pharmaceutical companies]. And nothing will, until Congress begins to show concern about pricing, greed, profiteering.”

What do the captains of pharma think of their chiseling? They don’t. If there is a problem, it’s not theirs to solve.

We want to believe saving lives is reward enough. “But that’s just not true” in America, Parente says. “In some cultures, it may be more true.”

Take Mylan CEO Heather Bresch, whose pay went from $2.4 million in 2007 to around $19 million last year with little notice. By comparison, it was an instant scandal in France when Olivier Brandicourt got a $4.5 million deal to take over Sanofi, the company that makes the diabetes drug Lantus.

The tumbles of Bresch and Shkreli function as a clinical trial for how not to rip people off. Jack up the price overnight, and Americans bay for blood. Boost it steadily, like a diabetic gradually packing on weight, and we won’t notice until one day we look down and can’t see our shoes.

Robert Albee, 73, gave a lot of himself over three decades working in the Peace Corps, as a teacher, and in juvenile corrections. He also added a lot to himself, stacking 275 pounds on a five-foot-eleven frame.

“I was eating too much, didn’t exercise, and smoked three packs a day,” Albee says. “I was a pretty intense guy.”

In 1995, Albee was diagnosed with type-two diabetes. He now runs five Minneapolis diabetes support groups, shepherding 120 patients through blood testing, followed by discussions about diet, exercise, and medicine.

Many are elderly immigrants from Africa, and almost all are “very low-income” and on public aid. Without it, they could never afford what keeps them alive.

Who’s footing the bill? You.

The drug companies aren’t bleeding the poor. They’re gouging the government and your insurance company. That’s why prescription spending on Medicare and Medicaid is projected to hit $133 billion this year. That’s why your health insurance has seen a relentless series of double-digit price hikes over the last 20 years. 

The only people free from this beating are pharmaceutical executives and the politicians they drug with money to keep them pliant.

If drugmakers won’t change their ways and confess their sins, the least they could do is tell us which drugs they take to sleep at night.

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