Profitability versus humanity — the price of health
06 October, 2015
Pharmaceutical companies and the discussion about the price of drugs; where do you stand on this?
Well it's certainly back in the spotlight at the moment, partly because of the TPP, but also because of a week or two back where you might recall an American company called Turing Pharmaceuticals headed by an ex-hedge fund manager, bought the marketing rights for a drug called Daraprim and hiked its price overnight from $13.50 per pill to $750. There was an immediate public outcry, lots of media coverage, and it even prompted Hilary Clinton and Donald Trump to discuss new policies in their political campaigns, which promise to limit the ability of pharmaceutical companies to hold people to ransom in terms of drug prices.
There was such an outcry that the Turing CEO immediately promised to drop his drug's price (though he hasn't done it yet, and it is not expected that the price will return to its original price). The CEO has become the new symbol of industry greed and insensitivity, added to the already bad name of pharmaceutical companies and reopened the debate about whether life-saving drugs should be so expensive, i.e. shouldn't humanity be more important than profitability.
While I wouldn't go so far as to feel sorry for this guy, he was not particularly unique and was really only doing what other drug companies have been doing for decades. Pfizer, which is America's largest drug company, raised the prices of 133 of its branded drugs this year, with 75% being hikes of 10% or more.
The thing that irked the public was that the company's greed was so obvious. A small increase might have been justified but a 55-fold overnight hike is just downright greedy.
Right, and this has all surfaced through the TPP discussions, in regards to patents and how long they last
That's right and it's hard, nobody feels sorry for pharmaceutical companies and they are seen as the bad guys of business. I guess it raises the question — what is a drug worth? The standard answer from pharmaceutical companies is that it costs so much to develop drugs that they need to be compensated for the time and effort involved, hence the high price. As you know, drugs start in laboratories where chemical compounds are discovered and tested in petri dishes and then on animals. This process can take three to four years, and only one in 1,000 drugs survive this step of the process.
The drug then moves to clinical trials which basically involve testing on humans. This can take five to ten years and only one in ten drugs make it through clinical trials and to market. A 2014 report found that the average cost of going from chemical compound to an FDA-approved drug is $2.7 billion. Even drugs that fail along the way can cost millions because of the time, plus scientists and equipment, plus test after test required. So pharmaceutical companies say "we need to charge an arm and a leg for these drugs because we need to recoup the money it cost us", and also because competitors will very quickly jump on the bandwagon, take their intellectual property and create similar drugs — generic drugs — and sell them at a much lower price, the pharmaceutical companies say "we need patent protection for 10 years or more". Part of the TPP discussion revolved around the US wanting to increase the length of patent protection for drug companies from five years to eight years. In the US, drug companies have twelve-years of patent protection for branded drugs before the market opens up to allow competitors to produce generic versions of the drugs, obviously with lower prices. During the TPP discussions, New Zealand and Australia came out and strongly opposed extending the patent period because giving US drug companies eight years to exclusively market their brand of drug when a generic company could come out with a similar drug and sell it a lot cheaper and improve accessibility and affordability of life-saving treatments. As it happens, the US relented on the extension, but we still don't know the final outcome.
We know there's five years, but some are saying it will extend to eight.
Yes, it might. But even so, you look at pharmaceutical companies and think, "all these people who need these drugs, why are you stopping them from having a cheaper version or access to more reasonably priced drugs"?
Well, that's because they cost billions to produce...
Yes and I think the argument — and the TPP discussions really prove this — of humanity over profitability will continue for some time yet.