Midwest Today, Fall 2000

Rip-Off!

How Drug Companies Are Fleecing Americans

Americans pay more for prescription drugs than almost anybody anywhere else in the world. Based on each nation's average price of pharmaceuticals, turned into U.S. dollars, one dollar of prescription drugs in this country costs only 71 cents in Germany, 68 cents in Sweden, 65 cents in the United Kingdom, 64 cents in France, 57 cents in Italy, and 47 cents in Mexico.

Some members of Congress have gone on the warpath against the pharmaceutical industry, accusing the drug companies of "fleecing Americans."

What especially galls them is the fact that across the border in Canada, the same name-brand prescription drugs are selling for significantly less.

For example, Tamoxifen, a breast cancer drug, costs $34 for 60 pills in Canada; in the U.S., it costs $241 for 60.

Three pieces of legislation are pending in Congress to address the issue:

A Drug Parity Bill (HR 1885/S 1191) would allow American drug distributors and pharmacists to re-import prescription drugs from Mexico and Canada -- where drug prices are low -- as long as the drugs meet strict safety standards and were approved by the Food and Drug Administration (FDA). The large savings would then be passed on to consumers.

A Prescription Drug Fairness for Seniors Act, (hr 664/S 731) would try to circumvent price discrimination and make prescription drugs available to Medicare beneficiaries at the substantially reduced prices offered to the federal government.

The Health Care Research and Development and Taxpayer Protection Act (hr 626) would prevent taxpayers from being charged twice for the same drugs.

"Currently, taxpayers fund the development of drugs at the National Insti-tutes of Health, which in turn sells the drug to a corporation for very little money," the bill says. "Once the drug company has control of the product, they charge an exorbitant amount of money to consumers."

The pharmaceutical industry is now fighting back. Recently it bought full-page ads in The New York Times, Washington Post and usa Today warning Americans that their health is at risk if they buy prescription drugs from Mexico or Canada.

Counterfeit drugs, the ads say, will in-evitably make their way "across our borders and into our medicine cabinets."

This is an issue with enormous ramifications for ordinary Americans.

People with low or fixed incomes, especially the elderly, sometimes cannot even afford the medication they need every day to stay alive and well. They might skip a month, or take a pill every other day instead of every day, and wind up getting sick.

Thus they cost the health care industry far more money than they would if they were taking regular maintenance doses of the drugs they need.

Meanwhile, using Fortune 500 numbers, the top seven pharmaceutical companies took in more in pure profit than the top seven auto companies, the top seven oil companies, the top seven airline companies, or the top seven media companies.

More significantly, the pharmaceutical's 18% profit-to-revenue ratio was, by far, the highest margin of any industry in the nation.
For every dollar of revenue the drug companies take in, they pocket more than 18 cents in pure profit. Rep. Bernie Sanders, Vermont's maverick Independent Congressman, comments "It's absolutely outrageous that the same industry that is making that much money could say with a straight face that making drugs more affordable will somehow threaten their business."

In the drug companies' defense, Leigh Tofferi, director of government and public relations for Blue Cross/Blue Shield, said that in many instances, these high-priced prescription drugs simply did not exist a few years ago, and we're lucky to have them now.
"As the costs go up, it's not necessarily a result of something bad," Tofferi said. "Many of these prescription drugs are new, and they're used to treat diseases that weren't treatable before. There's a drug for Multiple Sclerosis now. It treats the symptoms. And it's really improved the quality of life for people who suffer from ms. It's about $1,000 a month. So we're in a situation where there are new discoveries and new technologies in drugs that are doing good things for patients, but they're very expensive."

But then, why are prices lower in other countries?

Critics attribute the high cost to the large amounts of money the drug industry spends on advertising, lobbying and campaign contributions.

According to a report released by the Center for Responsive Politics and Common Cause, there was a 57% overall increase in campaign contributions and lobbying expenditures by the pharmaceutical interests between 1995 and 1999, with a 47% rise in PAC contributions. Soft money contributions increased by 121% in the same time period.

In the health field, some people worry that any attempt to control drug company profits would prevent Wall Street from investing in the companies.

"Pharmaceutical companies won't be able to raise capital to do research," said Carl Dixon, president of the Kidney Cancer Association. "Then the companies will have to do smaller scale research and look at larger diseases. In cancer, you would look to treat breast cancer and prostrate cancer, because those are big markets. And the 203,000 people with kidney cancer would continue to have an uncured disease."

Sanders called the drug industry's claim that limiting profit would limit research and development "a myth."

"Pharmaceutical manufacturers claim that any legislation that may but into their extraordinary profit margins would force them to reduce the amount they spend on research," he said. "However, only between 20 and 30 cents of each prescription drug dollar is spent on research and development."

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