5 ways pharma is misleading the public on the cost of prescription drugs

Drug companies launched an ad and publicity extravaganza this year right after President-elect Donald Trump said they “are getting away with murder” on sky-high pill prices.

More than it has in years, the pharmaceutical industry fears major legislation that would curb prices and shrink profits. TV spots lauding drug companies, quoting poet Dylan Thomas, and showing heroic scientists have been hard to escape.

But the narrative from the industry’s trade group, PhRMA, is only the rosiest, most self-serving version of the tale, say critics, and numerous independent authorities question its assertions.

They say the campaign is misleading in these five ways:

It lowballs drugs’ cost to society

For years, PhRMA said retail prescription drugs account for only 10 percent of America’s enormous health care bill. Lately, the group has been using a figure of 14 percent, counting chemotherapy and other drugs delivered in hospitals and doctor offices.

Both numbers downplay the expense of prescription meds. Arriving at the industry’s estimates requires lumping drug costs in with billions in public health spending, such as checking water and animals for pathogens, as well as nursing home care and other categories only loosely connected to the day-to-day job of healing the sick.

Retail drugs alone were 21 percent of the cost in 2014 for employer-sponsored health plans, often exceeding costs for inpatient hospital treatment. Add chemotherapy and other non-pharmacy drugs, and the portion is higher.

At CareFirst, a BlueCross BlueShield plan with members in Maryland, Virginia and the District of Columbia, total drug costs when chemotherapy and other hospital-administered medicines were added became a thumping 34 percent of the expense in the first half of 2017, says CEO Chet Burrell. By contrast, inpatient care, traditionally the most expensive health service, is about 20 percent of CareFirst’s costs.

“That tells you about the power of what’s going on with the drug prices and the degree of use of the drugs,” Burrell said.

It exaggerates drug development costs

Inventing, testing and launching a drug costs $2.6 billion, calculates the Tufts Center for the Study of Drug Development. The industry substantially finances the center’s work, leading many to question its credibility. Drug companies use its conclusions to justify high prices and cite this figure at every turn.

Outside authorities criticize the research, saying it comes from untestable data, ignores enormous tax subsidies that reduce costs and inflates results with imaginary expenses, such as profits that could have been earned if drug companies invested research dollars elsewhere.

“These estimates are all based on secret, unverifiable numbers of unknown reliability from unknown companies about unnamed drugs,” said Donald Light, a health policy professor at Rowan University in New Jersey.

The Tufts results line up with publicly available data, counters Joseph DiMasi, economic analysis director for the Tufts Center. “If anything, they suggest our estimates are conservative,” he said.

But an independent study published in September using public filings found the median cost of developing 10 cancer drugs was $648 million, while the median revenue per drug was $1.7 billion.

Light and other critics especially object to counting, as part of development costs, the theoretical profit firms might have earned if they put research money into something other than inventing drugs — such as buying extra ads for existing products. That adds more than $1 billion to the supposed cost.

What settles the argument is drugmakers’ audited financial statements, which show that costs of all kinds are far below what they collect in revenue. Ten of the top publicly traded U.S. drug companies earned profits of $83.6 billion last year on revenue of $306 billion, regulatory filings show. That’s a 27 percent pretax profit margin — accomplished even after spending billions on TV ads and salespeople.

It cheers too loudly about a slowdown in drug costs

Fueled partly by hepatitis C medicine costing as much as $1,000 a pill, retail prescription drug spending soared by 12 percent in 2014 and another 9 percent in 2015, according to government data. That was the biggest two-year increase in a decade.

So it’s no surprise growth is reverting to the mean now that there are fewer new blockbusters. Government figures aren’t in yet for 2016. But QuintilesIMS, which tracks wholesaler sales, says drug spending grew 4.8 percent last year.

“The slowest rate in years,” brags PhRMA, quoting a magazine. Actually, drug-spending growth was even lower from 2010 to 2013 before roaring back…

 

Read full story at StatsNews

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