As We See It Consumer Rape - LE Magazine, April 2002

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Friday, April 05, 2002 11:04 PM

As We See It Consumer Rape - LE Magazine, April

2002

 

 

- http://www.lef.org/magazine/mag2002/apr2002_awsi_01.html -

 

 

LE Magazine April 2002

 

 

 

 

William Faloon

 

Consumer Rape

 

At the end of this article, we are going to publish shocking information

that has never been divulged to the public. For the benefit of new members,

however, we will first provide a brief historical overview.

 

It is no secret that Life Extension has battled the high cost of

prescription drugs since the early 1980s. We knew 18 years ago that the drug

regulatory system was riddled with corruption and launched a media blitz to

expose it. Price comparison charts published in this magazine have been enlarged

before the House of Representatives to show how much more Americans pay for

drugs than Europeans. Life Extension has spearheaded consumer protests over the

monopolistic pricing power granted to pharmaceutical companies.

 

 

Drug companies enjoy a virtual monopoly of the American market because of

FDA over-regulation. FDA approval requirements make it too expensive for

widespread competition to develop. Even after a drug goes off patent, it still

costs too much money to obtain “generic” approval from the FDA. These regulatory

burdens strangle free market competitive forces and cause Americans to pay the

highest prices in the world for their medications.

 

How monopolies are created

 

Don’t be fooled when there are several “generic” companies competing on

price. Illegal drug company manipulation still results in severe price gouging.

A stark example of this occurred in 1998 when Mylan Labs increased the wholesale

price of a generic tranquilizer (clorazepate) from $11.36 per 500 tablets to

$377.00 in just one year! How could Mylan Labs raise prices 3,000% on an

off-patent generic drug? It turns out that Mylan conspired with the primary

producer of the active ingredient to enter into an exclusive licensing agreement

that cut off the competition. Mylan got caught red-handed and had to pay $100

million dollars to settle an FTC antitrust case.[1]

 

What consumers don’t realize is that the Mylan case is just the tip of an

iceberg of corruption that is only made possible by FDA over-regulation. A

recent settlement resulted in another drug company (TAP Pharmaceutical) paying

an $875 million dollar fine for illegally fixing the price of a drug called

“Lupron.” Prostate cancer patients use this drug to suppress testosterone

production. The cost for a four-month supply of Lupron is $2,200.00.[2] Since

there is another drug (Zoladex) that works as well as Lupron, TAP Pharmaceutical

resorted to some creative tactics, such as providing kickbacks to prescribing

physicians, to maintain this outrageous price.[3]

 

Even though criminal indictments have been obtained against Tap

Pharmaceutical officials, the price of Lupron remains grossly inflated. These

are not isolated cases. They are examples of how the drug industry commands

extortionist prices from desperate consumers. The solution to this problem will

be revealed later in this article.

 

A health-care cost crisis

 

Life Extension long-ago predicted that the exorbitant price of

prescription drugs would bankrupt the U.S. health care system. A recent report

from the Department of Health and Human Services says that health costs are

continuing to climb faster, even though the economy has been weak.[4] As a

result, it says, consumers will have to spend more of their own money on health

care, and employers will be less able to afford health benefits.

 

HMOs and other health insurance companies have gone out of business; this

trend is expected to accelerate as drug prices increase. Medicare is expected to

become insolvent by as early as year 2007.[5]

 

Remember, Life Extension predicted all of this in the 1980s. Today, we are

not alone in projecting that the U.S. health care system cannot afford to pay

for the many expensive new drugs entering the marketplace.

 

Why we need new drugs

 

Knowledge about the molecular processes involved in aging and disease has

grown exponentially over the past 20 years. Each new discovery provides an

opportunity to cure a human ailment. There are huge numbers of new compounds

being considered for submission to the FDA.

 

Regrettably, there are not enough economic resources to transform all of

these scientific advances into a drug that can be legally sold. The decision as

to whether to submit a new compound to the FDA is based primarily on the

strength of the patent, the potential competition, and whether the company has

the economic resources to make it through the FDA’s multi-year approval

labyrinth. Saving human lives is secondary in today’s upside down regulatory

environment.

 

Reforming the drug approval system is crucial if we are to develop medical

breakthroughs in time for those living today.

 

Does the FDA protect us?

 

There are more than 9,000 employees who work for the FDA. Some of them do

important work that results in consumer protection, while others go out of their

way to help out the pharmaceutical industry.

 

Life Extension long-ago predicted that the exorbitant price of

prescription drugs would bankrupt the U.S. health care system. A recent report

from the Department of Health and Human Services says that health costs are

continuing to climb faster, even though the economy has been weak.

 

 

For instance, the FDA warned pharmaceutical-giant Schering-Plough for

years that it needed to improve safety and oversight at its manufacturing

facilities and for years Schering promised to do so. Among Schering’s problems

were making asthma inhalers that did not have any medication inside. Acute

asthma attacks suffocate 5,438 Americans every year.[6] With no medication in an

inhaler, any asthma attack can be lethal. The FDA repeatedly found the same

problem with these asthma inhalers (no medicine inside), but it took Schering

years to correct the problem. Schering recently stated that they may be forced

to pay a $500 million dollar fine to settle the matter.[7]

 

It may appear that the FDA is coming down hard on Schering, but the fact

is that Schering was given numerous warnings by FDA inspectors and still failed

to consistently put medication into their inhaler product. In an article in this

issue entitled “FDA Attacks Alternative Clinics—Cancer Patients’ Lives

Threatened,” you will see the brutal tactics the FDA has taken against those

involved in alternative medicine. No warnings for these small guys. . . armed

SWAT teams and summary seizure of their property was how the FDA introduced

themselves.

 

Last year, American Home Products paid $30 million as part of a consent

decree involving manufacturing defects practices, while Abbott Laboratories paid

fines of $100 million in 1999 concerning manufacturing defects in scores of its

products.

 

The FDA tells consumers to beware of dietary supplements because they are

not “regulated,” yet regulated products kill over 100,000 Americans every year,

and seriously injure over 2.1 million people. This figure does not include

prescribing errors or drug abuse.[8] The FDA does inspect supplement

manufacturers and has not found the total breakdown of quality-control that has

occurred at some drug companies.

 

The FDA provides a veneer of protection, but the hard facts are that

Americans are paying for today’s inept regulatory system with their money and

their lives. With prescription drugs prices soaring beyond the ability of many

Americans to pay, a significant change has to be made in the current regulatory

structure that causes these drugs to cost so much!

 

The shocking truth about drug prices

 

Now here are the startling facts I promised would be revealed to you. Did

you ever wonder how much it costs a drug company for the active ingredient in

prescription medications? Some people think it must cost a lot, since many drugs

sell for more than $2.00 per tablet.

 

We did a search of offshore chemical synthesizers that supply the active

ingredients found in drugs approved by the FDA. As we have revealed in past

issues of Life Extension, a significant percentage of drugs sold in the United

States contain active ingredients made in other countries.

 

In our independent investigation of how much profit drug companies really

make, we obtained the actual price of active ingredients used in some of the

most popular drugs sold in America. The chart below speaks for itself.

 

WHAT DRUGS REALLY COST

BRAND NAME CONSUMER PRICE

(For 100 tabs/caps) COST OF GENERIC ACTIVE INGREDIENT

(For 100 tabs/caps) PERCENT MARKUP

Celebrex 100 mg $130.27 $0.60 21,712%

Claritin 10 mg $215.17 $0.71 30,306%

Keflex 250 mg $157.39 $1.88 8,372%

Lipitor 20 mg $272.37 $5.80 4,696%

Norvasc 10 mg $188.29 $0.14 134,493%

Paxil 20 mg $220.27 $7.60 2,898%

Prevacid 30 mg $344.77 $1.01 34,136%

Prilosec 20 mg $360.97 $0.52 69,417%

Prozac 20 mg $247.47 $0.11 224,973%

Tenormin 50 mg $104.47 $0.13 80,362%

Vasotec 10 mg $102.37 $0.20 51,185%

Xanax 1mg $136.79 $0.024 569,958%

Zestril 20 mg $89.89 $3.20 2,809%

Zithromax 600mg $1,482.19 $18.78 7,892%

Zocor 40mg $350.27 $8.63 4,059%

Zoloft 50mg $206.87 $1.75 11,821%

 

 

The astounding profit margin enjoyed by drug companies exposes several

facts. First, it shows why the pharmaceutical industry is the most profitable of

all businesses. But since large drug companies only make around 15% net profit

margins, it also exposes the incredible cost drug companies bear to comply with

today’s burdensome drug approval system. If the FDA relaxed its drug approval

standards, the cost of bringing new patented drugs could be reduced.

 

These exorbitant profit margins also provide incentive for drug companies

to get their patented molecules approved by the FDA, whether they kill people or

not. Horror stories abound of how drug companies have egregiously falsified data

to obtain FDA approval.[9]

 

Many consumers are nervous about the FDA becoming less stringent, but the

facts are that today’s regulatory system is allowing lethal drugs on the

marketplace and also acting as a disincentive for drug companies to develop

novel drugs to save lives.

 

Take the cholesterol-lowering drug Baychol, for example, which was removed

from the market after killing 100 people.[10] Baychol is a “statin” drug that

works via a mechanism similar to that in Mevacor, Zocor, Lipitor, Pravachol,

etc. Was there a need for tens of millions of dollars to be spent developing

“another” statin drug when the market was already saturated? Drug companies

think so, because the FDA readily recognizes “statin” drugs, so they are easy to

get approved.

 

The problem is that no life was saved because of Baychol. Anyone who may

have benefitted from Baychol could have obtained the same results from other

“statin” drugs. So when drug companies justify the high price of drugs because

of research costs, remember that most of the so-called novel compounds they

develop will not save a single life, as they are no different than what is

already available.

 

Now that you know the outrageous profit margins on prescription drugs, you

can understand why drug companies do almost anything to prevent competition from

developing. Large drug companies intensively lobby Congress to pass laws that

give them extra time of exclusivity, file lawsuits to delay generic competition,

petition the FDA to stop the importation of lower cost medications, and go as

far as to pay off generic companies to not compete.

 

Drug companies spend big dollars protecting their illicit monopoly, all of

which is reflected in the price consumers pay for their prescription drugs.

 

Reforming this flawed system

 

The healthcare cost crisis could be resolved if the FDA allowed any

company with OTC manufacturing licensing to produce generic drugs without first

obtaining formal FDA approval.

 

To follow is an explanation of how this deregulated structure would save

consumers big dollars and stave off the pending economic collapse of the health

care system.

 

 

An OTC-registered lab would buy the active ingredient of an off-patent

drug like Prozac (fluoxetine) and package it into 20 mg capsules. The raw

material cost for a one month supply would be 34 cents. Add another $1.50 per

bottle for quality-control and packaging, and the total cost to make this

product would be $1.84. The OTC-manufacturer could then mark up the price three

times and sell this to pharmacies for $5.52. The pharmacy could then mark this

up two times and sell it to the consumer for $11.04. So instead of the consumer

paying $61.80 for a one-month supply (30 capsules) of generic Prozac[11], their

price would be reduced to only $11.04…an 82% savings.

 

The one stipulation would be that the label of this OTC-lab version of

Prozac would have to state that this generic is NOT approved by the FDA. This

would enable consumers to decide if they want to pay $61.80 for an FDA-approved

generic, or $11.04 for a non-FDA approved generic.

 

Some would argue that these unregulated generics may not be equivalent to

the name brand. For many drugs, however, it is only a matter of putting a

certain number of milligrams of active ingredient into each capsule. This is not

a difficult feat to accomplish.

 

Another way of saving money on prescription drugs is for consumer groups

with competent medical advisors to identify generic drugs that work almost as

well as newly patented drugs. These low-cost, non-FDA approved generics could be

suggested for those who cannot afford to buy the expensive patented drugs.

 

For example, the drug Prilosec is about to come off patent. The company

making Prilosec has patented a new molecule that appears to work via the same

mechanism to suppress stomach acid production. The company plans an aggressive

marketing campaign to convince the public to buy its new patented version

instead of generic Prilosec. The monthly cost for this patented version is

expected to be over $100.00, yet a non-FDA approved generic could be profitably

sold for well under $38.00.

 

I want to state that the prices I estimate for non-FDA approved generic

versions of Prozac and Prilosec are on the high side. Once the full force of

free market competition emerged, you could rapidly see the non-FDA approved

generic Prozac, Prilosec and other drug prices drop much more sharply.

 

Under this free market program, a senior citizen paying $800.00 a month

for their drugs could obtain the same benefit for less than $200.00 a month. As

competition intensified, the cost could drop to $100.00 a month or lower.

 

Under the proposal, those who could afford the higher prices could choose

the greater degree of perceived protection FDA-approved generics offered. For

the growing number of Americans who are unable to afford their medications,

having the option to use non-FDA approved generic drugs could mean the

difference of being able to afford the medication at all.

 

Remember, the FDA would still inspect the manufacturers of non-FDA

approved generics to make sure the proper active ingredient was being put in,

that the tablets were disintegrating, sanitary conditions were being met, etc.

The difference would be that hundreds of potential generic competitors would

emerge to preclude the kind of illegal shenanigans occurring today.

 

Some of these egregious violations involve large drug companies paying off

smaller companies to NOT offer lower generic versions of drugs coming off

patent.12 If any OTC laboratory could offer a non-FDA approved generic, then

this free market environment would drastically limit the ability of large drug

companies to monopolize the market.

 

Abolishing this pillage

 

Most of the information reported in this editorial has already been

reported by the media. The problem is that no organized group has gotten

together to petition Congress to change the law to make affordable drugs

available to the public.

 

According to the Department of Health and Human Services, it cost an

average of $4,637 per person in healthcare costs in year 2000. Healthcare

accounted for 13.2% of the nation’s total output in year 2000, and prescription

drug price increases consistently outpace the rate of inflation. Concerned

American citizens can no longer tolerate watching this country falter

economically because of antiquated laws that serve the special interests of drug

companies.

 

You now know that the price you pay for prescription drugs has nothing to

do with the cost of the active ingredients, and that drug companies have engaged

in multiple illegal practices to maintain artificially high prices. It is time

for citizens to shed their apathy and rise up against the bureaucrats who enable

drug companies to economically rape the American consumer.

 

A new organization called Consumers Against High Drug Prices has formed.

Their objective is to mobilize millions of American citizens into a cohesive

army that will force Congress to change the law so that a free market can emerge

to obliterate the high cost of prescription drugs.

It costs nothing to register with this organization. When proposed

anti-FDA/anti-drug company legislation is drafted, you will be informed and

asked to contact your Congressional representative to support it. You can

register with Consumers Against High Drug Prices by logging on to

www.stopfda.com. If you do not have a computer, you can register by sending your

name and address to:

 

Consumers Against High Drug Prices

P.O. Box 13166

Silver Spring, MD 29011-3166

 

The FDA and pharmaceutical giants hope that Americans will remain

lethargic to this issue and allow the economic plunder to continue. Please stand

up for your rights by enrolling with Consumers Against High Drug Prices so that

we can avert the looming health care cost crisis that is a threat to us all.

 

For longer life,

 

 

 

 

 

William Faloon

 

 

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References

 

1. FTC Press Release, November 29, 2000. “FTC Reaches Record Price-fixing

Settlement to Settle Charges of Price-fixing in Generic Drug Market.”

 

2. Price quoted by Hollywood Discount Pharmacy in Hollywood, Florida on

Jan 15, 2002.

 

3. Associated Press, October 4, 2001. “Drugmaker to pay $875 million

fine.”

 

4. Robert Pear (New York Times News Service). “Health spending jumps

6.9%—Main factors: hospitals and drug costs, managed care resistance, The

Herald, Tuesday, January 8, 2002.

 

5. Faloon William, “Dying from Deficiency,” Life Extension magazine,

October 2001.

 

6. National Vital Statistics Reports, Vol. 48, No.11.

 

7. Wall Street Journal, December 24, 2001, pp- A3, “Schering Fines Could

Total $500 Million.”

 

8. http://www.cnn.com/HEALTH/9804/14/drug.reaction/Chicago CNN. “Study:

Drug reactions kill an estimated 100,000 a year,” April 14, 1998.

 

9. David Willman, “The Rise and Fall of the Killer Drug Rezulin,” Life

Extension magazine, September 2000.

 

10.

http://news.ft.com/ft/gx.cgi/ftc?pagename=View & c=Article & cid=FT3HZ3AFMWC

& live=true & tagid=IXLHT5GTICC & subheading=heal By David Firn in London, “More

deaths linked to Bayer’s Lipobay,” January 18, 2002. 19:44 | Last Updated:

January 18 2002 19:48.

 

11. www.drugstore.com January 22, 2002.

 

12. http://www.herald.com/herald/content/docs/business/018326.htm JOYZELLE

DAVIS, “Miami’s Ivax fights Taxol patent,” Miami Herald, Tuesday August 22,

2000.

 

 

 

 

 

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All Contents 1995-2002 By The Life Extension Foundation

 

 

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