Tuesday, March 26, 2013


For a couple of years back in the mid-‘50s, I worked as a Drug Detail Man (Pharmaceutical Representative) for a leading drug company. Like all the Detail Men from other companies, I was in the business of promoting my company’s drugs to doctors and bribing them with all sorts of goodies to get them to use our products.

The drug companies tell us how much they spend on research and development and they do spend a lot of money doing that. But what they don’t tell us is how much money they spend on promoting their products. Those multi-color full-page ads in medical journals and other publications cost a ton of money. Those TV ads aren’t cheap either. Add to that the cost of sending out thousands of pharmaceutical representatives to doctors and pharmacies detailing their drugs and bribing doctors with interest free loans, all kinds of expensive little knickknacks and, in some cases, lavish entertainment for doctors, their nurses and their clerical staff.

I had one doctor in charge of a large clinic in Las Vegas come right out and tell me that he knew my product was superior to the drug from a competing company that he was using. When I asked him why his clinic was not using my drug while knowing that it was better, he came right out and said: “Once a month (the representative) from (the drug company) takes our whole office to a dinner show at one of the casinos. You do the same for us and we’ll start using (the product I was promoting).”

I suspect the pharmaceutical industry spends just as much, if not more, on promoting its drugs as it spends on research and development. Then, in order to make a profit, the prices of drugs are driven sky high.

By David Hendricks

Houston Chronicle
March 24, 2013

One of the worst problems in the health care industry - the artificially high cost of prescription drugs because of a rigged system reducing competition - is getting worse. And Congress won't do anything about it even though it would reduce deficit spending.

The Federal Trade Commission files lawsuits where it thinks it can make a difference, but the pharmaceutical companies are staying ahead of enforcement efforts.

The problem exists in the relationship between brand-name companies that make prescription drugs under patent and other drug manufacturers that make generic versions when the patents expire. The brand-name companies are making an increasing number of agreements to delay or prevent generics from reaching market with lower prices.

The FTC last month reported that in fiscal year 2012 that ended Sept. 30, drug companies made 40 "pay for delay" deals, which is significantly higher than the 28 deals made the previous fiscal year.

The agreements involved 31 pharmaceutical products with combined U.S. annual sales of more than $8.3 billion. The deals hurt everyone, both people taking pills and taxpayers.

"By delaying the entry of cheaper generics, pay-for-delay deals cost Americans $3.5 billion annually and will add to the federal deficit" because Medicare and Medicaid programs pay the higher costs for brand-name drugs the same as consumers do, the FTC said in a recent press release.

"The Congressional Budget Office has estimated that legislation restricting these agreements would reduce the debt by almost $5 billion over the next decade," the FTC added.

The deals between brand-name and generic companies usually come in the form of out-of-court settlements when brand-name companies seek to halt generics companies from making slightly different versions of a certain medication.

In the out-of-court settlements, the brand-name company sometimes paid the generic company to keep their products off the market for a certain period of time, hence the term "pay to delay."

But the deals are becoming more complicated to better skirt enforcement of weak anti-trust laws. Brand-name companies now are offering to keep their own "authorized generic," which is exactly the same medication that once was under patent protection, off the market if the generic companies also will delay putting out their versions. The generics go along with the deal because it reduces competition in the long term.

Consumer savings would be highly beneficial. In 2011, the FTC said generics usually cost 20 to 30 percent less, sometimes 90 percent less, than brand-name drugs. A month's supply of a brand-name drug costing $300 could be sold as a generic for as little as $30.

The FTC has one lawsuit pending before the U.S. Supreme Court in a case where a company making a testosterone-replacement drug called AndroGel allegedly paid generics competitors a share of its profits from sales of its patented product to keep the generics off the market.

Legislation to restrict the deals was proposed in 2011. The FTC is not aware of any pending legislation in the new congressional session.

How can Congress, as it considers the federal budget, not take steps that would save taxpayers and consumers money with one law that would stop obvious anti-competitive activity in a critical industry, health care?

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