Greed Is God: The Divine Right to Avaricious Drug Pricing

This post is a part of our Bioethics in the News series

By Leonard M. Fleck, PhD

Some recent headlines worth noting: “U.S. Prescription Drug Costs Are a Crime,” “Americans Say They are Suffering as Drug Costs Continue to Rise,” “When $65,000 for a Drug is Applauded.” There were also headlines about Trump saying he was going to do something about unconscionable drug prices. This sounded like fake news, so I passed over those headlines.

At a recent health insurer conference, David Mitchell, president of Patients for Affordable Drugs, was quoted as saying, “The system is not working right, and it starts with drug companies setting the price. But everybody in the system is making more money on the higher retail price – PBMs (Pharmacy Benefit Managers), insurers, doctors administering drugs in the office … It’s exacerbated down the supply chain.” Mitchell has multiple myeloma with drug costs of $400,000 per year.

In 2001, imatinib (Gleevec®) made the cover of Time magazine. Imatinib is used to treat chronic myelogenous leukemia (CML). Over 70% of patients treated with this drug were still alive after ten years. The cost of the drug in 2001 was $36,000 per year. By 2017, the cost of the drug had risen to $146,000. Nothing changed about the drug during that interval. Production costs were the same; no additional research was necessary. Patients, however, were economic captives. Greed works.

Human life is priceless. That was the theme of a pharmaceutical video ad from a couple years ago. The implicit theme was that if your friends and family were unwilling to pay $100,000 for a drug for an extra year of life, they were obviously heartless, unethical atheists. Recall the drug sofosbuvir for hepatitis C, the $1000 per pill drug. Gilead Sciences bought the drug for $11 billion from a small research company. Sales of the drug in year one came to $10.4 billion, thereby recouping the entire cost of its “research.” It cost $10 per pill to make the drug. Gilead could charge $100 per pill, which yields a profit of 900%. However, human life is priceless, so it is more ethical to make a profit of 9900%. Greed is clever.

More than 90 targeted cancer therapies have FDA approval with costs per year or per course of treatment from $100,000 to $250,000 or more. They treat metastatic cancer; none of them is curative, generally yielding gains in life expectancy measurable in months, not years. For example, palbociclib (Ibrance®) is used to treat hormone-receptor positive advanced breast cancer. In treatment-naïve patients the cost per Quality-Adjusted Life-Year (QALY) gained is $768,498, while in patients who failed earlier treatments the cost per QALY is $918,166. These are cost-effectiveness figures.

In the United States, an intervention is judged cost-effective below $100,000 per QALY. The National Institute for Health Care Excellence (NICE) in the UK initially refused to include palbociclib as a covered medication in the National Health Service, but reversed that decision after price concessions. Congress, however, is prevented by law from permitting the use of cost-effectiveness as a basis for excluding a drug from Medicare coverage. This law was a product of intense lobbying by the pharmaceutical industry in 2006 using as an “ethical argument” that no patient should be denied access to a safe and effective drug merely because of price. Medicare was also forbidden by law (same lobbying effort) from either dictating the price of a drug or using its 44 million covered lives to extract huge price discounts from pharmaceutical companies in the way European countries do. Greed is politically savvy.

Pharmaceutical companies claim massive research costs. The Tufts Center for the Study of Drug Development claimed a successful cancer drug costs $2.6 billion. Dr. Jerry Avorn, faculty in the Division of Pharmacoepidemiology and Pharmacoeconomics at Harvard Medical School, has critically assessed that work and concluded a more honest number is about $650 million. These debates make it appear that enormous analytical accounting work goes into justifying the price of a drug. However, the Wall Street Journal (no apologist for left-wing anti-pharmaceutical rhetoric) reported how the price of Ibrance was initially set at $9,850 per month in 2015. A bunch of executives sat around a table, looked at what insurance companies were willing to pay for comparable cancer drugs, and set the price accordingly. Before that price was made public, these executives noted that the price of everolimus (Afinitor®) had just been raised by $1,300 per month ($14,350). They were concerned they had set the price too low. Greed fell short there.

Overall, however, greed is amply rewarded. Researchers Vinay Prasad and Sham Mailankody looked at ten cancer drugs with development costs of $9 billion. Those ten drugs have generated revenue of $67 billion thus far, with years remaining on their patents. Greed pays well.

Pharmaceutical companies have purchased expensive academic talent to justify the cost of their drugs, such as Precision Health Economics (PHE), founded by Tomas Philipson, Dana Goldman, and Darius Lakdawalla, all full professors at the University of Chicago or the University of Southern California. In one article, “The Long-Term Impact of Price Controls in Medicare Part D,” associates of PHE found that proposed price controls would reduce the life expectancy of the cohort born 1991-95 by two years. In addition, “We find that price controls would reduce lifetime welfare by $5.7 to $13.3 trillion for the US population born in 1949-2005.” (Moreno G et al.) Those are scary numbers, relative to which cost-effective numbers of hundreds of thousands of dollars for various cancer drugs are economic crumbs. PHE has been intensely criticized in one ProPublica essay. Greed is seductive.

It is hard to imagine Big Pharma being inundated with warm fuzzies from the general public. However, Big Pharma has millions of zealous adherents ready to mount the legislative barricades on their behalf. 83% of patient-advocacy organizations received funding from the pharmaceutical industry and 36% have an executive from one of these firms on their board. Efforts to control drug prices are denounced as rationing or as threats to further life-saving innovation. Further, these drug companies are perceived by patients as being generous and compassionate because they provide coupons worth thousands of dollars each to patients faced with high co-pays. If a patient needs a $65,000 drug and has an unaffordable co-pay of $15,000, it is good business sense to cover that $15,000 cost to obtain $50,000 from the insurance company for a drug costing $5000 to produce. Greed is compassionate (toward the insured).

Compassionate greed has become a political, economic, and ethical reality, perfectly congruent with the Gospel of Prosperity. Health and wealth will be yours if you have unshakeable faith in the innovative grace of Big Pharma and respect their God-given right to price drugs at heavenly prices. If you prefer not to pray at the altar of Big Pharma, consider sending a copy of this essay to your member of Congress.

Leonard M. Fleck, PhD, is a Professor in the Center for Ethics and Humanities in the Life Sciences and the Department of Philosophy at Michigan State University.

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References

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