Inventers who patent their drug inventions are supposed to have patent protection to restrict supply and protect their prices  for only a limited term of years , but most pharmaceutical drug manufacturers have resorted to the practice of perpetuating their patent monopolies by filing for new patents based on only minor and not always positive modifications to their original formula so as to prevent generic copies of their drug from being sold at competitive prices as the expiration date of the original patent approaches.  Once the patent is renewed  in this fashion, the sponsoring manufacturer removes from the market altogether the originally formulated drug   lest it become subject to such competition .   That’s why prices can rise rather than fall as technologies age. This process of constant patent perpetuation, known as patent “evergreening” has kept many drug prices high by restricting competition from generic versions of the original formula, which may be exact copies of its chemical composition. The pharmaceutical’s powerful trade group, called the Pharmaceutical Research and Manufacturers of America, donates heavily to politicians from both parties to prevent government  oversight ,  and these lobbyists insist that their industry is highly competitive. However the allegedly intense competition is not necessarily about making better or more affordable drugs but by attempting  via extensive advertising and payments to doctors to get more consumers to use their particular drug, by overstating its benefits and/ or encouraging its use when the drug is not helpful. In addition to these price gouging tactics, drug manufacturers have found new ways to increase their profit margins by moving their bases of manufacturing operations overseas so as to lower their US tax liability. Pharmaceutical companies rank among the top tier of the most profitable companies in America while its citizens routinely pay double or triple or even more for drugs here than do residents of other developed countries.   

The federal  government’s Food and Drug Administration (FDA) must approve all prescription drugs for licensing before they can be sold on the US market, but FDA approval of drugs is conditioned  on  passing the  relatively low threshold that the drug under review must be “safe and effective”, meaning more effective than taking nothing at all. There is no FDA requirement that a drug for example whose formula represents only a minor tweak of its original formula in an effort to “evergreen” its patent, be shown to be more effective than the original formula it replaces, and indeed in many cases many are not. Moreover the FDA standard does not even address the basic issue as to whether the drug under consideration is more effective than the several other treatments already approved for the same condition. Equally importantly, the FDA test for approval does not include any consideration of price , which is a consideration that almost all other nations now use as they consider whether to admit new drugs . This failure to consider comparative utility and cost of drugs seeking FDA approval is a major flaw in FDA reviewing standards.  

Moreover in the past thirty years the previously established  tradition that each FDA approved drug would have only one patent attached to it has evaporated. The average number of patents per drug rose from 2.5 in 1990 to 3.5  ten years later. Many bestselling medicines today are covered by more than five patents and some by more than a dozen. These patents protect not just the basic essence of the formula but also the processes that create each particular part of it  and its  delivery systems as well. This thick wall of cumulative as well as “evergreened” patent protection effectively delays  any duplication by cheaper generic manufacturers.     Today multimillion dollar court battles over patent now precede and retard each generic entry into the market, driving prices up in the process. Now the basic rules of operation in our healthcare economy  as established by the FDA and the U.S. Patent and Trademark Office have been resolved in favor of the pharmaceutical drug industry, and our strong patent system together with the absence of price restrictions has led to a significant shift of pharmaceutical research and development investment to the US and away from Europe, where government price setting has become increasingly common.   

The character of the US pharmaceutical industry has also changed in the process. Whereas Dr. Jonas Salk, inventor of the polio vaccine, declined to take any profit from any patenting of his work, humanitarian researchers looking to make a positive social impact on society have been replaced in the executive  suites of the big drug companies by money managers who are focused on maximizing their profit margins.  For much of  our history until the  1980”s , drugs were cheap. Vaccines cost pennies and antibiotics and epinephrine shots cost a few dollars. Now things have changed.  A prime example of the new leaders in the pharmaceutical industry is Martin Shkreli, a thirty something former hedge fund trader who bought the rights to a cheap generic drug to treat parasites that had been on the market for years and overnight raised the price from $13.50 to $750 for a typical one month supply.  

The acceleration of the drug  approval process which the FDA allowed at the height of the AIDS epidemic in 1991 ,to spur the development of antiviral medications, relaxed the already problematic standards for all drug approvals,  and the pharmaceutical industry took full advantage of the new opportunity to get drugs of even questionable value approved. The FDA relaxed its rules for what constituted proof that a drug was effective, allowing for greater use of so called “surrogate measures”. Drugmakers no longer had to prove that their product actually eliminated the symptoms of illness over time. Instead they could simply measure things like blood markers that were felt to correlate with such benefits.   That made sense for HIV because that virus attacked immune cells in the blood, so measuring their levels was an adequate proxy for the patient’s condition and an HIV drug’s effectiveness.  However this use of surrogate endpoints  made little sense for FDA review studies of drugs to treat conditions such as type 2 diabetes, because drug developers were no longer expected to prove that their products actually worked to relieve symptoms but merely that certain designated markers, which were taken   as  proxies  for improvement  of health, had moved in a certain  direction. As Thomas Fleming, professor of biostatistics at the University of Washington said, “not only does the accelerated FDA approval process allow sponsors to get marketing approval much sooner and with much less research expenditure but also it allows them to market products  that although biologically active are less likely to provide truly important effects.”   Moreover there is little or no FDA oversight to ensure that drug developers follow through on their promises to do follow up studies after receiving FDA licensing to ensure that products approved through these proxy targets actually produce long term improvements for patients.

The rise in direct advertising to consumers reflects the industry’s increased emphasis on  drug promotion at any cost, often outspending any other industry in that department.  Merck spend more money advertising its painkiller Vioxx ($160 million) than  Budweiser did  ($146 million) as Vioxx drug sales topped $1.5 billion and 25 million people took the drug. That success did not last however as even before formal FDA approval a reviewer what raised concerns that Vioxx might cause increased risk of heart attack, a concern that was confirmed by later studies. Researchers concluded that Vioxx was responsible for 88 thousand heart attacks, nearly half of them fatal. Merck withdrew Vioxx from the market and the company ultimately paid a criminal fine of $950 million for its marketing and sales tactics.  

The United States is the only country in the world other than New Zealand that allows drug companies to advertise , incentivizing  people to pressure their doctors to give them medication which may be neither helpful nor appropriate for them.   

Pharmaceutical companies often try to justify the high costs of their drugs citing  a long  research and development process and the expense of the FDA process of human testing for safety and effectiveness. They say the typical cost of bringing  a new drug to market is well over $ 1 billion. In some cases that may be  true. But academic studies have pegged   the actual average scientific research and development costs for a new drug much lower, in a range between $44 million to $125 million.  It remains unclear how much of the industry’s typical $ 1 billion estimate for drug development  is for mass market advertising to consumers and promotion to doctors, who are commonly rewarded with lavish cruises and trips to resorts for “product education” seminars that feature their drugs.    

Prices for pharmaceutical drugs invariably rise  to whatever the market will bear.  About twenty years ago all drugs for treating multiple sclerosis (MS) , for example, were priced at about ten thousand to fifteen thousand dollars annually . Many of the same drugs still cost about $15,000  a year  overseas  because countries there bargain with the pharmaceutical companies for a national price. However Medicare is not allowed to engage in  drug price negotiation , except for a limited schedule of drugs designated in the Biden administration.

Now that prices for MS drugs for example, have grown to such high levels that few patients can afford them, drug  companies have come up with a new tactic called “co pay assistance” . This is a unique form of self interested corporate “charity” designed as a “donation” to cover patients’ co- payments so that the drug manufacturer can thereby retain the patient and continue to bill to submit bills for the full price of the drug to the insurer. A direct payment by the drug company to the patient could be viewed as an illegal  bribe,  so to improve the optics ,  foundations with noble sounding missions like “ending healthcare disparities” have been  created to cut the checks to patients who cannot afford their co payments. Taken at face value, these foundations appear to be very generous. The AbbVie Foundation  and the  Johnson & Johnson Patient Assistance Foundation each “give” more than $700 million a year.    By donating a tax deductible $1250 for example to cover a patient’s 25% monthly copayment due on a $5,000 drug for which the drug manufacturers can charge full price to the insurer, these providers   are still making a nice profit and saving on taxes as well. The only victim is the healthcare economy as a whole because this practice sustains high drug prices.

As prices for newer drugs have steadily increased, generic drugs which  generally are based on older formulations, have also increased in price or become less plentiful. Intense competition among generic drug manufacturers in the early 21^st century resulted in some rock bottom prices for some consumers. However the smaller profit margins plus the lure of  easier money to be made by producing more lucrative items drove some of these manufacturers to quit making older cheap drugs thereby handing near monopolies to the fewer generic manufacturers who remained in the market.   According to a Harvard expert on drug pricing, Dr. Aaron Kesselheim, probably four or five generic drugs  would need to be on the market to treat any one condition in order   to create sufficient competition to bring all their prices down. That level of competition has become increasingly rare. As a result, since 2010 generic drugs have generally settled into a price point just slightly lower than the brand name drug they mimic .

The rise in generic drug prices is exemplified by the pricing history of an old , off patent generic medicine called albendazole used to treat pinworm, a parasitic infection that causes an itchy rash. It sells profitably in most of the world for five cents a tablet and used to be cheap here as well. However now in the U.S. it costs  on average about $100 per pill. The explanation for this price jump was simply the decision  of one company, Amedra Pharmaceuticals, to secure control over  production for this  drug and then to raise prices to exorbitant levels.   Spending on albenzole increased from less than $100,000 a year in 2008, when the average cost was $36.10 per prescription,   to more than $7 million in 2013, when the average cost per prescription was $241.30. The price has remained high ever since.

Other drug companies have followed that same playbook of cornering production on old and cheap generic drugs and then either jacking up their prices or making them disappear from the market. For example, the cost of the traditionally used antibiotic doxycycline , used to treat infections ranging from bronchitis to Lyme disease, rose over the past several years  from six cents to over $3 per pill. Meanwhile two dependable generic antinausea drugs , prochlorperazine and droperidol, which emergency room doctors have relied on for decades, suddenly became hard to get at the same time that GlaxoSmithKline was seeking to introduce a far more expensive drug called Zofran . Although the  FDA had approved Zofran only to treat nausea for chemotherapy, its producer vigorously promoted its off label use for the suddenly unavailable generic drugs referenced above.  Rumors circulated that a major pharmaceutical industry player had purchased the plant that was making prochlorperazine and shut it down.  Shortages of that cheap and useful drug have plagued the United States ever since, although the drug remains in plentiful supply everywhere else in the developed world. The cost for treatment for post operative nausea and vomiting was $149 for Zofran vs. $2 or $3 for droperidol, the other generic drug that was disappeared from the market at about the same time.  The  FDA issued a black box warning that droperidol caused life threatening arrhythmias, which dissuaded hospital risk managers from stocking it even though it had been used without problems in hospitals nationwide for decades. Doctors who reviewed the evidence cited in the FDA study used to justify the black box warning  found that the abnormal heart rhythms that prompted the warning had occurred at doses 50 to 10 times higher than those which were typically given in any American hospitals. They also found that the same arrhythmias resulted when the newer more expensive Zofran drug was used at the same levels.  FDA officials are heavily influenced by  big pharmaceutical companies such as GlaxoSmithKline because of the “revolving door” which exists between lucrative executive level jobs at these companies and/or  with their powerful lobbyists,  and service in government oversight agencies such as the FDA.

Ultimately it is unclear what role GlaxoSmithKline may or may not have played in driving these cheaper competitor generic  drugs off the U.S. market. Some concern may be justified however, given that the company had been caught undertaking dubious market interventions to promote Zofran. The U.S.Department of Justice reached a $3 billion settlement with GlaxoSmithKline  covering a variety of alleged misdeeds, including promoting Zofran’s use to treat morning sickness in pregnant women. A Danish study found  that pregnant patients who ingested Zofran had a two fold risk of having a baby with heart defects.

Zofran’s patent expired in 2008 and there are now cheaper generic versions of it on the market but they still are much more expensive than the older drugs which disappeared when Zofran first came on the scene. A generic version of the Zofran pill now costs about $23 here,  but only seventy five cents in New Zealand. Shortages of cheaper, affordable essential medicines of all kinds have become the new normal in American hospitals.