Big Pharma, and the walls come tumbling down

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DOES THE USA RULING CLASS TURN ITS BACK NOW ON ITS BIG PHARMA MEMBERS ?

by Justice Lover

 

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From The Times

July 16, 2008

 

 

 

 

 

Barack Obama and John McCain go to war with Big Pharma

 

Carl Mortished: World business briefing

America has declared war on drugs, an industry that is bleeding the

nation dry. The drug kingpins are running scared and, for the first

time, the political mood on both Right and Left is in favour of

taking action. The presidential contenders Barack Obama and John

McCain have drugs at the top of the agenda and the stock prices of

the drug merchants are crumbling.

These are the legitimate drug barons - Pfizer, Merck and Britain's

GlaxoSmithKline (GSK). Selling lifestyle drugs and medicines to

alleviate the diseases of America's affluent society made

pharmaceutical companies rich.

But now the pool of available private cash is diminished - drained by

the credit crunch and real estate collapse. Government is feeling the

pinch and, for the first time since President Johnson signed the

original Medicare Bill in 1965, a serious discussion about socialised

medicine is beginning in the United States.

It is hardly surprising, because, despite what you may have heard,

the US Government is already the biggest buyer in the US

pharmaceutical market. Americans spend about #140 billion annually on

medicine, compared with #11 billion in the UK. According to World

Health Organisation statistics, American expenditure per head on

healthcare is double the amount in Britain and a large part of that

higher investment is related to the cost of drugs.

On average, for the same drug, an American pays twice that paid in

the UK. American insurers pick up a great deal of the bill and their

lack of efficiency is a big bone of contention, but the heaviest

burden falls on the taxpayer because 45 per cent of total expenditure

on healthcare in America is borne by government.

It's a colossal bill, but the American taxpayer doesn't get any

pricing power for his dollar. In Britain, most other European

countries and Canada, national agencies, such as the NHS, negotiate

with the pharma giants, bully suppliers and set tariffs for a list of

approved drugs.

In the US, such intervention is anathema - the US Food and Drugs

Administration (FDA) approves drugs for their safety, but price and

availability are market-driven and the drug barons argue that freedom

leads to choice, a multiplicity of products and more rapid

introduction of new medicines.

Into this jungle of corporate lobbyists, union activists and consumer

firebrands, the presidential candidates are taking their first,

tentative steps. Healthcare reform is dangerous territory. Hillary

Clinton failed at her first attempt, but the costs have risen since -

drug prices are rising at a rate of 7 per cent a year at a time when

Americans are feeling poorer.

According to polls, healthcare costs are a bigger issue than Iraq for

most Americans, hardly surprising given that it affects a greater

number. Still, it is alarming for the pharma bosses to hear the

Republican candidate bashing their industry, even supporting the

direct importation of cheap drugs from abroad.

Many pensioners fly to Canada in search of cheaper prescription

medicine and there is a continuing legal battle between state and

federal government as state employee health benefit organisations

seek to tap sources of cheap medicine north of the border.

Senator Obama also supports imports, but he wants to go further and

grasp the nettle of pricing. He wants Medicare to negotiate directly

with the drug giants, much as the NHS fixes drug prices in Britain.

This would be a disaster for Big Pharma - a federal agency setting

discounted drug prices for senior citizens, the disabled and the

poor. According to the Obama camp, it might save $30 billion (#14.9

billion) for the nation's taxpayers, a huge bite out of the

industry's earnings - and it would not end there.

If Medicare patients were able to secure supplies of Lipitor, the

bestselling Pfizer anti-cholesterol drug, at half-price, legions of

middle-class and middle-aged taxpaying Americans would ask themselves

why they were paying double.

The argument in favour of free market pricing in medicines would be

shredded on the rack of fairness and a host of employee benefit

organisations would combine forces and demand similar discounts. The

Obama cheap drugs plan would open a crack in the foundations of Big

Pharma's tower of cash and quickly bring it tumbling down.

It will happen, it is just a question of when. Monopsony power has

already taken root in the healthcare markets of most OECD countries.

You can see faith undermined in the share prices of the drug giants:

in the UK, AstraZeneca has lost a third of its value since October

2006, while GSK has shrunk by a quarter. Over the same period, Pfizer

has tumbled by 38percent and since December Merck has shrunk by 40percent.

In vain, the drug giants argue that without their US profits, the

research that brings new medicines to market would not be possible.

It is true that scientific research follows the money.

A big new drug is reckoned to cost $800 million in research and

development and Europe has been losing its pharmaceutical edge to US

labs, which generated two thirds of the new drugs launched in the

world over the past five years.

The problem is that the pipeline is thin and the blockbusters are not

emerging. This industry needs a new business model and, in the

absence of self-generated ideas, someone in the White House might

soon impose one.

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by Justice Lover)

 

 

 

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