Two recent studies have shown that prescription drug prices rose significantly during the first quarter of the year. AARP, an advocacy organization for older Americans, found that the prices charged by pharmaceutical companies for brand-name drugs increased by almost four percent. A similar study by Families USA, a healthcare advocacy group, found a nearly identical increase. Given the vast sums that the pharmaceutical industry has spent lobbying against price controls, the dramatic increase in the cost of drugs isn’t surprising.
The AARP study determined that brand name drug prices increased at more than four times the rate of inflation during the first three months of this year. This was the largest quarterly price hike in six years. Older Americans take an average of four prescription drugs a month; this increase means that the cost of these prescriptions rose by almost $240 between the first quarter of 2005 and the first quarter of 2006. The study by Families USA confirmed the AARP’s findings.
It’s no coincidence that there was a surge in drug prices earlier this year. The pharmaceutical industry purposefully raised the prices shortly before the new Medicare part D drug program, which provides prescription drug benefits to seniors, took effect. When the Bush administration lobbied the Republican-controlled Congress to pass the Medicare Prescription Drug Improvement and Modernization Act, it ensured that the act contained a provision barring Medicare from negotiating price discounts with pharmaceutical companies. This was a huge windfall for the drug companies. A Boston University study found that 61 percent of Medicare funding spent on prescription drugs becomes profit for the pharmaceutical companies.
The pharmaceutical industry has spent vast amounts of money to ensure that drug prices remain high, according to a recent analysis by The Center for Public Integrity. The center found that in 2003 and 2004 prescription drug companies and their trade organization, Pharmaceutical Research and Manufacturers of America (PhRMA), spent more than $44 million lobbying against measures in numerous states to regulate drug prices. And the industry donated more than $8 million to politicians in various states. State governments are some of the pharmaceutical industry’s largest customers; they purchase 16 percent of all prescription drugs in America.
According to the National Conference of State Legislatures, 33 states have attempted to enact programs aimed at cutting the cost of prescription drugs since 2003. In response to these efforts, PhRMA’s top priority has been to “advocate against any attempts to impose price controls.” And PhRMA has enjoyed considerable success. Massachusetts State Senator Mark Montigny was the 2005 chairman of the National Legislative Association on Prescription Drug Prices, a consortium of legislators from many states that champions price restrictions. According to Mr. Montigny, “We are being squashed by the pharmaceutical industry money. They have killed lots and lots of legislation across the country.”
The success of the pharmaceutical industry in subverting price controls has allowed drug companies to dramatically increase prices. Earlier this year Ovation Pharmaceuticals bought the right to manufacture and market the cancer drug Mustargen from Merck. In less than a month the cost of a two-week prescription of Mustargen jumped from $77.50 to $548.01. And when Ovation bought the rights to Panhematin, a drug used to treat a rare enzymatic disease, it raised the price from $230 a dose to $1,900.
Similarly, Genentech recently announced plans to raise the price of its colon cancer drug Avastin. The drug currently costs about $50,000 per year for treatment. It has shown some promise in treating other forms of cancer, so its use is expected to increase significantly. Consequently, Genentech indicated that the drug will cost $100,000 per year when used by patients with breast and lung cancer. Last year, Genentech raised the price of Tarceva, a lung cancer drug, by almost 30 percent, to $32,000 for a year’s treatment.
Although the Food and Drug Administration oversees the drug industry, it doesn’t have the authority to regulate drug prices. But there’s ample evidence that the federal government can successfully control drug prices when it wants to. Although Medicare is forbidden from negotiating prices with drug companies, the Department of Veterans Affairs is required to negotiate the best prices possible. Consequently, the VA is paying 46 percent less for many popular brand-name drugs than the average prices available under the Medicare plans for the same drugs.
If the Democrats are looking for a moral values issue to campaign on in the fall elections, they need look no further. We need a Congress and a president who are willing to take on the pharmaceutical industry, and authorize the FDA to regulate drug prices on behalf of the American public. If we fail to do so, the nation’s health will continue to suffer. And access to prescription drugs will increasingly be a luxury only for the affluent.
Gene C. Gerard has taught history, religion, and ethics for 14 years at several colleges in the Southwest, and is a contributing author to the forthcoming book Americans at War, by Greenwood Press. He writes a blog for the world news web site OrbStandard at: www.orbstandard.com/GGerard.
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