Healthy Skepticism Library item: 203
Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.
Publication type: news
Taylor , H .
The Drug Price Battle Continues : Politicians will try to cool public opinion as voters steam over drug prices.
Pharmaceutical Executive 2004 Feb 20
Full text:
The Medicare drug benefit bill was a big victory for the pharmaceutical industry because it will be administered by private-sector insurance plans, not the federal government, and their bargaining power to negotiate lower prices will probably be weak. Starting in 2006, the new benefit will reduce the out-of-pocket drug costs of Medicare beneficiaries, increase drug-regime compliance and increase product sales.
The bill also included other important victories for the industry. It prohibits the federal government from negotiating lower prices with drug companies. Also, the industry and its Republican friends in Congress turned back a proposal to legalize importing drugs from Canada.
Good News, Bad News
A Merrill Lynch study estimates that in 2006, the industry could see up to $10 billion in extra sales and $4.7 billion in additional profits because of the new benefit. Looking further ahead to 2010, the study estimates additional sales of $15.4 billion and $7.4 in increased profits. But not all experts are so optimistic; Citigroup analysts believe that pricing pressures could wipe out the profits made from extra sales.
Although those are important victories, they may be the preliminary skirmishes in a bigger and potentially very damaging war. The issue of drug prices won’t go away and will likely get worse.
Some Medicare beneficiaries will get almost immediate relief through drug discount cards, and the prospect of more relief in 2006. But other payers will get no help. Employers and their health plans, employees, and the uninsured are likely to see the continuation of a recent trend in which the pharmaceutical costs rise much faster than inflation and the rate of economic growth.
Several Harris Interactive surveys for The Wall Street Journal and other clients during the run-up to the Medicare legislation debate show that drug prices are a much bigger issue than a Medicare drug benefit and that the public perceptions of high prices have created a tremendous backlash against the pharma industry. That perception is unlikely to go away anytime soon.
The Survey Says
Following are some of the results of Harris Interactive 2003 nationwide surveys of all adults:
… 57 percent think prescription drug prices were “unreasonably high.”
… “Higher prices of prescription drugs” is seen as one of the top causes of increased healthcare spending by more people (37 percent) than any other factor. “Increased profits of healthcare companies” (24 percent) is the third item on that list.
… Prescription drug costs top the list of the most serious healthcare problems for older Americans, stated by almost three times as many people over 65 as the next most-cited problem.
… A large majority of the public think that limiting the price of Rx drugs is more important than providing a Medicare drug benefit (60 percent and 28 percent, respectively).
… 57 percent believe the pharma industry should be more tightly regulated.
… Only 13 percent believe the industry was generally honest and trustworthy.
… The percentage of people who say that pharma companies do a good job of serving their consumers fell thirty points, from 79 percent in 1997 to 49.
… Only 21 percent of the public believe that brand-name prescription drugs provide good value for money, compared with 63 percent who believe that about generics, and 36 percent for vitamins and mineral supplements.
Harris’ first survey after the passage of the new bill finds that 75 percent of all adults who know enough about the bill to have an opinion disapprove of the law prohibiting the importation of drugs.
The Politics of Price
One of the most dangerous trends in public opinion is the big increase in those who know that drugs cost much more in the United States than they do in other countries. Three years ago, Harris found that only 41 percent of the public was aware of that. By April 2003, that awareness had risen to 63 percent, and it is almost certainly higher today. Inevitably, more and more people will try to buy drugs abroad. If the federal government and industry are successful in making it difficult, it will only add fuel to the backlash. And even if they are not successful in curbing drug imports, the public’s anger with the industry for charging Americans much more than foreigners is likely to grow.
There are those in the industry who say that public anger and the growing backlash against it don’t matter because it will still win the crucial votes in Congress – as long as the Republicans control the White House and Congress – as they seem likely to do for the next several years. That may be a dangerous misperception. Even Republican members of Congress are feeling the heat and will continue to feel it from voters who are angry about drug prices. And when it gets too hot, politicians of all parties, at both federal and state levels, will try to assuage public opinion, even if it means biting the hands that feed their campaign funds.
Looking ahead, it is hard to see any satisfactory outcome for the industry until the differences between US and foreign drug prices are greatly reduced. It’s possible that the only viable long-term strategy for the industry is to establish a “world price” for new drugs, with some modest variations from country to country, and deep discounts for some drugs in the poorest countries.
