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American Drug Prices: Big Pharma's Dirty Little Secret

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Published on Sunday, December 26, 2004 by the Los Angeles Times

Big Pharma's Dirty Little Secret

by Peter Rost

The American healthcare system is the best in the world. Or so we are often
told. But is it really true?

It is certainly the best system for drug companies, which can charge the
highest prices in the world to some U.S. consumers. The Congressional Budget
Office has estimated that average prices for patented drugs in 25 other top
industrialized nations were 35% to 55% lower than in the United States.

And it is a pretty good system for hospitals, insurance companies and
others that deliver healthcare services. Americans spend about twice as much
per person for healthcare as do Canadians, Japanese or Europeans, according
to the World Health Organization.

But it's not a good system for American citizens. The U.S. has shorter life
expectancies and higher infant and child mortality rates than Canada, Japan
and all of Western Europe except Portugal, according to the WHO.

I'm a drug company executive who has spent 20 years marketing
pharmaceuticals. And I'm troubled. I'm most troubled by the fact that we
stick it to the people who can afford it the least.

For instance, elderly people who use a Medicare discount card and have to
pay $1,299 annually for a drug that the Department of Veterans Affairs
purchases for $322, according to a comparison by Families USA. Or
middle-class families that lose health insurance and have to pay $29,500 for
an overnight hospital stay, when Medicaid would have paid only $6,000,
according to the Wall Street Journal.

It just doesn't make any sense. And, not surprisingly, the companies with
the biggest profits ‹ those in the drug industry ‹ have been fighting
hardest to maintain the status quo.

Our dirty little secret is that the drug industry already sells its
products, right here in the U.S., at the same low prices charged in Canada
and Europe. It's done through rebates. These are given to those with enough
power to negotiate drug prices, such as the VA.

A 2001 study by the consumer advocacy group Public Citizen found that drug
companies' favorite customers paid just a little over half the retail price.
This leaves the 67 million Americans without insurance to pay cash, with no
rebates, at double the prices paid by the most-favored customers.

The fight against re-importation of drugs is a fight to continue to charge
our uninsureds full price while giving everyone else a rebate.

But what about all those programs drug companies provide to help the
indigent pay for drugs? If they really worked, the Kaiser Family Foundation
wouldn't have reported that 15% of uninsured children and 28% of uninsured
adults had gone without prescription medication in 2000 because of cost, and
87% of uninsured individuals with serious health problems reported trouble
obtaining medication.

People today have to choose between drugs and food. The journal Diabetes
Care recently reported on a study of older adults with diabetes. One in
three said they went without food to pay for drugs.

As a drug company executive, I care about profits. When I was responsible
for a region in Northern Europe, I doubled sales in two years by lowering
drug prices, and in the process increased my company's sales ranking in
Sweden from No. 19 to No. 7 in less than two years. I proved that it is
possible to do good business with lower prices.

It's encouraging to see that the American Medical Assn. recently came out
in favor of a system that would allow U.S. pharmacies and wholesalers to
re-import drugs safely from other countries. This is exactly what Europe has
had for more than 20 years. It is outrageous to claim, as politicians and
drug companies have done, that the U.S. wouldn't be able to safely and
cost-effectively handle re-importation. A key trade association for European
pharmaceutical companies claims there has never been a confirmed case in
Europe of a counterfeit medication reaching a patient as a result of
re-importation. In Germany, this was verified last year by the Federal
Ministry of Health.

In the next five years, branded drugs with annual sales of $72.9 billion
are expected to lose patent protection. So we in the drug industry are
fighting re-importation because we're worried about the bottom line. But
when we have to choose between that and the lives of those who can't afford
drugs, we have to choose life.

I joined this industry to save lives, not to take them. And that's the
reason I've chosen to speak out.

Peter Rost is a vice president of marketing at Pfizer. The views expressed
here are his own and do not reflect those of his employer.

© 2004 LA Times