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Synopsis of The Truth About The Drug Companies

The pharmaceutical industry has convinced Americans that high drug prices are not only justified but necessary to maintain the steady flow of new and improved drugs. In addition, the industry has established itself as an American free enterprise, independent of government aid. In her book The Truth About the Drug Companies Marcia Angell, M.D. dispels these myths by discussing three main themes: the distribution of the pharmaceutical industry’s budget, the amount of innovative drugs produced, and the dependence of drug companies on government-granted monopolies. Her proposal on how the system should be reformed may help Americans gain access to innovative drugs at reasonable prices.

The pharmaceutical industry claims that drug prices are high because of research and development costs, estimated by The Tufts Center for the Study of Drug Development to be about $802 million per new drug. However, research and development is usually performed at universities or government research labs, many of which are supported by the National Institute of Health. This allows the pharmaceutical industry to bypass the most lengthy and expensive part of the drug making process: research and development. In 2002, the Fortune 500 list of the top ten U.S. drug companies showed worldwide sales of about $217 billion. Only $31 billion (14%) of this was spent on R & D and $67 billion (31%) was spent on marketing and administration.

The pharmaceutical industry claims that drug prices are high in order to reward their innovation and creative thinking. However, between 1998 and 2002, 415 new drugs were approved by the FDA, of which only 133 were classified as original discoveries. Of those 133, only 58 represented a significant improvement in drugs already available on the market. In addition, of the 21 most effective drugs approved between 1965 and 1992, public research was responsible for 15 of them. Consequently, consumers are paying for the research that discovered the drug via taxes as well as the prices marked up by the drug companies.

Drug companies are heavily reliant on the government’s ability to grant patents and exclusive marketing rights, both of which make it illegal for competitors to sell the same drug for a given amount of time. Patenting guidelines are far from stringent, possibly because the people responsible for granting patents are paid bonuses that depend on the number of patents they process. The FDA’s flexible guidelines make it possible for drug companies to get a new patent for an inconsequential variation in a drug already on the market. Drug companies are also able to file multiple patents for which they can sue generic companies, further extending their patent life. These guidelines don’t encourage innovative and creative thinking; they promote a system for recycling drugs already proven to effective.

If consumers are ever going to get reasonably priced drugs, then drastic changes need to be made through more stringent U.S. patent laws. In addition, the public should know exactly how the drug companies utilize their budgets. This would eliminate all false ideas about grandiose expenses on research and development and people would start to realize how unnecessary the high drug costs truly are.

Written by Ryan Serrano with Eric Sternlicht, Ph.D. Occidental College, Los Angeles, CA.