Exploring the Truth About the High Cost of Prescriptions – It’s Not What They Want Us to Think

high cost of prescriptions

Pharmaceutical companies have told us that we must pay ultra-high prices for patented medications so they have money to continue research that will ultimately lead to the development of the next wonder drug.

Like most everything involved with medicine, people in the U.S. pay much more for prescription drugs than anyplace else in the world. Of course name-brands always cost more than generics, but the U.S. that cost is much higher. In fact, here in the U.S., we make up 4-5% of the world’s whole population and 33% of the developed world’s population, yet account for 42% of all pharmaceutical revenue. The following quote from NCPSSM.org 2014 (The National Committee to Preserve Social Security and Medicare)

“Part D already costs about $80 billion a year and is on track to double by 2022 as benefits improve and Baby Boomers retire. For two reasons, a significant chunk of that money is wasted on overpayments to drug companies: When Part D began, millions of patients were shifted over from Medicaid, the state-federal program for low-income people that gets far lower drug prices than Medicare. Suddenly, the cost of providing drugs to the same people shot up. Congress barred Medicare from negotiating the way Medicaid and the Department of Veterans Affairs do with drug makers to get lower prices. Instead, lawmakers insisted the job be done by private insurance companies.”

The big question is, is pharmaceutical research really so expensive that, even at the current prices of name-brand medications, they have little profit left over to invest in research? We can always look at the annual financial statements that has to be filed each year. These reports include annual revenues, itemizes costs, profits, etc. Check out this list of the top Pharmaceutical companies in the U.S. for 2015. Just below that, we’ll see just how much they spent on research and development… then you be the judge.

Here is a list of the top companies in 2015 and the products they bring to the marketplace:

Johnson & Johnson
Revenue: $74.331 billion

Headquartered in New Brunswick, New Jersey, United States, Johnson and Johnson ranks No. 1 in the USA. Johnson and Johnson is the largest pharmaceutical company in the U.S. Some of the most popular consumer products manufactured by this company are–Band-aid bandages, Johnson baby products, Acuvue contact lenses, Neutrogena skin care products, Clean & Clear face wash, and Tylenol medications. 

Pfizer
Revenue: $58.98 billion

Headquartered in New York City, United States, Pfizer is one of the oldest pharmaceutical companies in the USA.  Pfizer specializes in developing and manufacturing a wide array of drugs and vaccines for oncology, immunology, cardiac ailments, endocrinology, neurology, etc.

Abbott Laboratories
Revenue: $39.87 billion

Headquartered in North Chicago, Illinois, in United States, Abbott Laboratories is one of the largest pharmaceutical companies in the USA. Abbott Laboratories has etched its place in history by developing the first ever HIV blood-screening test in 1985. Medical tests developed by Abbot Laboratories along with the diagnostic instruments manufactured by it are used worldwide for diagnosing and monitoring major health conditions such as cancer, HIV, cardiac failure, hepatitis, metabolic disorders, etc.

Bristol Myers Squibb
Revenue: $18.8 billion

Headquartered in Park Avenue, New York City. This global biopharmaceutical company aims at discovering and manufacturing world-class medicines to assist patients in recovering from serious health conditions such as cancer, heart ailments, HIV, AIDS, mental disorders, and rheumatoid arthritis. In past 10 years, Bristol Myers Squibb has delivered fourteen innovative medicines to the world.

Amgen
Revenue: $15.58 billion

Headquartered in Thousand Oaks, California. Amgen is ranked the second largest independent biotechnology company in the world. Amgen specializes in discovering, developing and delivering innovative drugs that are used for the treatment of rheumatoid arthritis and several autoimmune diseases. Amgen also manufactures drugs used for preventing infections in patients who undergo chemotherapy.

Biogen Idec
Revenue: $5.05 billion

Headquartered in Weston, Massachusetts. Biogen is one of the top biopharmaceutical companies in the U.S that discovers, develops and manufactures drugs for serious health conditions such as, cancer, neurodegenerative disorders, and autoimmune disorders. Biogen is known for developing the first remarkable therapy for treating haemophilia A and haemophilia B.

Celgine Corporation
Revenue: $84 billion

Headquartered in Summit, New Jersey. This company focuses on manufacturing innovative medicines for cancer, autoimmune and other inflammatory disorders. Celgene aims at delivering life-changing medicinal therapies for patients worldwide. Celgine’s operates in more than fifty countries worldwide.

Gilead Sciences
Revenue: $7.75 billion

Headquartered in Foster City, California. Gilead Sciences primarily focuses on developing antiviral drugs for treating patients infected with hepatitis B, influenza or HIV. It also discovers, develops and manufactures medicines for cancer.

Eli Lilly
Revenue: $4.683 billion

Headquartered in Indianapolis. Eli Lilly is widely known for its polio vaccine, penicillin and insulin. It is also the largest pharmaceutical company in the world in terms of developing and distributing psychiatric medication.

Now back to that question, is pharmaceutical research really so expensive that, even at the current prices of name-brand medications, they have little profit left over to invest in research?

Take a look at this screenshot of the Johnson & Johnson 2015 Annual Report.

johnson and johnson annual report 2015

The total sales for 2015 are $70+ Billion

The total spent on research and development is $9+ Billion BUT look at that “Marketing” expense – $21+ Billion!

Then I hopped over to OpenSecrets to see just how much Johnson & Johnson spent lobbying in Washington in 2015. Total Lobbying Expenditures for 2015: $6,350,000

What does that tell you?

Now, the real reason prescriptions and healthcare in general are SO high compared to other countries isn’t because we cover research and development of new drugs, in fact, much of the research is conducted through universities. The real reason is, Medicare is forbidden in the law that created Medicare Part D to negotiate lower prices and that’s no accident.  The drug lobby (Billy Tauzin, R-La make sure you read more on this schmuck below) worked hard to ensure Medicare would NOT be allowed to cut into the profits which would flow to big Pharma thanks to millions of new customers delivered to them by Part D.

According to a report by the Center for Public Integrity, congressmen are outnumbered two to one by lobbyists for an industry that spends roughly $100 million a year in campaign contributions and lobbying expenses to protect its profits.

About the Medicare Prescription Drug Bill

Billy Tauzin (former Democrat turned Republican Congressman from Louisiana), was the primary driving force behind this catastrophic bill. Tauzin resigned from Congress in Feb 2004. In Jan 2005, the day after his term in Congress ended he began work as the head of the Pharmaceutical Research and Manufacturers of America, or PhRMA a powerful trade group for pharmaceutical companies. Tauzin was hired at a salary outsiders estimated at $2 million a year.

Two months before resigning as chair of the committee which oversees the drug industry, Tauzin had played a key role in shepherding through Congress the Medicare Prescription Drug Bill. Many said that the bill was “a give-away to the drug makers” because it prohibited the government from negotiating lower drug prices and bans the importation of identical, cheaper, drugs from Canada and elsewhere. The Veterans Affairs agency, which can negotiate drug prices, pays much less than Medicare. The bill was passed in an unusual congressional session at 3 a.m. under heavy pressure from the drug companies.

As head of PhRMA, Tauzin was a key player in 2009 health care reform negotiations that produced pharmaceutical industry support for White House and Senate efforts. Tauzin received $11.6 million from PhRMA in 2010, making him the highest-paid health-law lobbyist. Tauzin now is on the Board of Directors at Louisiana Healthcare Group.

So in the end, when the U.S. government is the LARGEST customer of pharmaceutical products and healthcare, and without the ability to NEGOTIATE pricing for products and services, pharmaceutical and healthcare companies can name their price – even when that price is ULTRA-High! It has NOTHING to do with the cost of research and development, but everything to do with greed and an ability that was gifted them by our elected officials in the wee hours of the morning when the world was sleeping!

Gayla – follow me @Gayla

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3 Responses to “Exploring the Truth About the High Cost of Prescriptions – It’s Not What They Want Us to Think”

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  1. Dennis byron says:

    Gayla

    You don’t know anything about Medicare Part D and probably know very little about Medicare. A little knowledge is a dangerous thing in this case (and all cases) because — although most likely no one will act on your misstatements about Medicare — the cumulative effect of all the similar misstatements about Medicare will harm people on Medicare, 80% of whom are over 65. You write:

    “Part D already costs about $80 billion a year and is on track to double by 2022 as benefits improve and Baby Boomers retire. For two reasons, a significant chunk of that money is wasted on overpayments to drug companies: When Part D began, millions of patients were shifted over from Medicaid, the state-federal program for low-income people that gets far lower drug prices than Medicare. Suddenly, the cost of providing drugs to the same people shot up. Congress barred Medicare from negotiating the way Medicaid and the Department of Veterans Affairs do with drug makers to get lower prices. Instead, lawmakers insisted the job be done by private insurance companies.”

    1. Part D cost the Federal government about $65 B in 2015, the last year for which data is available, not “about $80 B” as you claim. That is about one third of what Democrats claimed it would cost when they opposed Part D in 2003 even though President Clinton introduced it in 2000 (it is also actually costing around 60% less than the Republicans estimated)
    2. There is no current law that says benefits will improve between now and 2022 in any way that would double costs (and certainly not by 2022; what an odd year to pick?). There is a slight co-pay improvement on the books between now and 2019 that is primarily funded by we beneficiaries ourselves and our lessening use of Part B because of Part D but the financial impact is trivial. I have no idea where you get your bad information.
    3. Part D pays nothing — overpayment or otherwise — to drug companies
    4. The most “significant chunk” of Part D’s $65 B goes to provide free or almost free drugs and drug policies to poor people, something the government always did before there was a Part D. Most of the $65 B is not new government spending compared to what it spent on that group in the 1980s and 1990s and last decade (the amount increases of course because of inflation). The only difference is that the money is now spent by Medicare and Social Security instead of by Medicaid, which was the case before 2005
    5. Medicaid — then and now (for poor people not on Medicare) — only covers about 50% of the drugs that Medicare Part D covers. The price did not shoot up but to the extent it is different it is because now poor people have access to the same life saving medications as the rest of us
    6. Because the negotiating is done by people who know how to negotiate, the cost is much lower (see point 1). I would rather have people who know how to negotiate dealing for me than the government employees that negotiated $1200 toilet sets for the Air Force, which happened around the time Part D was passed

    You never said what the second reason was but that just makes your statements even more incoherent. You are a danger to senior citizens

    Also your statement that “the U. S government is the LARGEST customer of pharmaceutical products and healthcare, and without the ability to NEGOTIATE pricing for products and services, pharmaceutical and healthcare companies can name their price – even when that price is ULTRA-High” illustrates you complete lack of knowledge of Medicare. The government is not the customer in the cast of Medicare (nor in the case of the VA or Medicaid); I am (or the vet is or the poor person is). It is your government centric thinking that makes you dangerous to not only senior citizens but the disabled, vets and the poor.

    Please remove this ignorant blog post.

  2. Gayla says:

    Dennis, I appreciate you taking the time to comment even if it was a copy and paste from another comment you must have left on another post about Medicaid and Medicare. You said, “You never said what the second reason was.” If you had taken the time to read my post, you would have realized there was no “first reason” mentioned.

    My article discusses the fact that pharmaceutical companies charge ultra-high prices in the name of research and the fact that the Medicare Prescription Drug Bill which prohibits the government from negotiating prices for Medicare and how it was pushed through congress in the wee hours when very few were there to cast a vote at all.

    The VA can and does negotiate pricing – Medicare Part D does not and cannot. All information was well researched and the quote you pointed out is a direct quote from The National Committee to Preserve Social Security and Medicare in 2014 which is pointed out, if you would take the time to read rather than jumping to conclusions and copying and pasting your comments.

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