Big Pharma Controls the Prescription Market and What We Pay

Americans spent $329.2 billion on prescription drugs in 2013. Big Pharma will tell you that their high drug prices are necessary for the research and development of new drugs. That is far from the truth. In actuality, data shows that pharmaceutical’s obscenely high prices are used mostly for sales and marketing. Accordingly, statistics show that most pharmaceutical companies spend much less for research and development than they do for marketing and sales.

A 2013 accounting included a report on spending by Johnson and Johnson (USA), Novartis (CH), Pfizer (USA), Glaxosmithkline (GB), Merck, Sanofi, Roche, AstraZeneca, Lilly and Abbvie among the Big Pharma companies.

For example, 9 out of 10 spent less on R and D than they did on sales and marketing, some far less. The biggest gulf between the two spending categories belonged to Johnson and Johnson which spent $17.5 billion for sales and marketing and $8.2 billion for research and development, well over twice as much, which meant that R and D accounted for only 32% of the total.  The remaining nine spent from 40.4% to 50.8% on R and D of a combined R and D and sales and marketing costs, from Novartis to Roche, respectively. Overall, $98.3 billion was spent on sales and marketing and 65.9 billion on R and D, making a total of $164.1 billion for the two categories.

Another survey of fifteen representatives of Big Pharma show the same trend in 2014, and, in fact, their emphasis is veering from finding innovative cures to that of a consumer goods company – building brands and creating needs for these brands to make profits.

There is a reason that pharmaceuticals, like many monolithic corporations, is poorly regulated and monitored by government agencies.  Pharma’s needs a small lobbying investment each year ($229 million in 2014) to assure that politicians deliver. Thus Pharma is totally free to charge what the market will bear, which means it comes out of our pockets in the form of co-pays, premiums, and bloated tax spending by government for drugs. That extra money for Pharma means less is available for other human needs, like anti-poverty programs and education. The only example of healthcare negotiating drug prices is the Veterans Administration (VA). Otherwise, pharmaceutics have their way with us.

In 2014 Big Pharma spent 1.7 times more on sales and marketing (S and M) than on R and D. S and M includes a whole array of promotional tools: detailing, meetings, mailings, samples to doctors, journal and web ads, direct-to-consumer ads, medical education (cozy seminars with drug dispensers like doctors) and grants to health advocacy organizations. With this line-up it’s easy to see why R and D falls far behind in expenses, especially considering the competitive focus on promoting sales over new drugs.

Our familiarity with one category of S and M is TV advertising for prescription drugs that will probably surpass $6 billion in 2016, this to build a consumer following and bolster sales. It follows that manufactured demand through advertising leads to higher prices as well.

A Youtube video provides rather humorous outtakes from commercials featuring maladies and side effects we have seen ourselves with the deluge of pill-pushing on TV ads. As the video clip winds to a close, it adds to the banal and comical content by making up imaginary maladies and totally ludicrous side effects, side effects we might conjure up ourselves with equally frivolous friends.

But seeing the humor does not change the power or the intent of Big Pharma. Selling drugs and making a huge profit is the number one goal, so much so that when sales of drugs flag for one illness, they invent new illnesses for the same drug. Unfortunately, the huge prices they charge have real victims.

For example, NBC News told the story of Lauren Baumann, a healthy single mom who at age 26 discovered she had leukemia.  She learned that Gleevec was a medicine that would help her live. Having a full time job and health insurance, the once-a-day pill sold by Novartis would save her without endless expenses – so she thought. Even with insurance, she found, her co-pay for the drug amounted to $24,000 per year.  Such price obscenities, of course, are promoted by Big Pharma with its focus of pushing up demand in a market they totally control.

Patent life for drugs is 20 years, after the drug is identified as viable in clinical trials. No one else can make or sell the medication for those 20 years. Big Parma can extend the patent period by negotiating with generic drug manufacturers, allegedly, paying them not to release their generic version. They can also find a new indication for it, giving it another life cycle as a brand name drug selling at full price for another use.

If you followed drug commercials for years, you would see that Pharma finds it profitable to create new illnesses to treat with existing drugs. Eli Lilly’s example is Prozac which treated depression. In the US, annual sales the first year were $350 million and peaked at $2.6 billion a year. Then sales representative pushed doctors to prescribe Prozac for other “off label” uses like obsessive-compulsive disorder (OCD),  post traumatic stress disorder (PTSD), premenstrual dysphoric disorder (PMDD), or social anxiety disorder. Before Prozac, PMDD was not even known as a disorder.

With Prozac’s generic version, fluoxetine, other disorders have been added through the years like bulimia, post-partum depression, pathological laughter or crying. And we can add to that premature ejaculation because Prozac impedes sexual function.

Ads selling illnesses and drugs do tend to give many viewers a sense of unease regarding their well-being.  Many critics, including conscientious doctors, feel that thousands, if not millions, are taking drugs they don’t need.

This would suggest that over $100 billion now spent for sales and marketing only adds to the angst of average Americans’ lives. But for patients who need the drugs for survival, Big Pharma adds financial distress with their extremely high prices, which forces a choice between buying life-saving drugs and paying for necessities like food and shelter.

For many Americans, it is a heartless choice that feckless politicians force too many of them to make.

James Hoover is a recently retired systems engineer. He has advanced degrees in Economics and English. Prior to his aerospace career, he taught high school, and he has also taught college courses. He recently published a science fiction novel called Extraordinary Visitors and writes political columns on several websites. Read other articles by James.