Why Do Medicines Cost So Much in the USA?

or maybe thrive. So, David, can you explain a little bit about first, if you'd like to introduce yourself and explain what Patients for Affordable Drugs does and the role that you play there, that would be wonderful. I am the founder and president of Patients for Affordable Drugs. Were the only national patient organization that focuses exclusively on policies to lower drug prices. We're independent, bipartisan. We don't take money from any organizations that profit from the development or

distribution of prescription drugs. We do two main things. We uh collect patients stories and we amplify those stories to policymakers and elected officials. So we can bring home the human impact of ridiculously high drug prices on the people in the United States. And the second thing is that

we recruit and train patients to be advocates. UH. We teach them about the policies, give them coaching on presentation, UH, and UH prepare them two go tell their story and deal directly with the people who set policy in this country. And so we've had patients testify in state legislatures all over the country. We've had patients to testifying Congress on

many occasions. Just last week, one of our patients, who happens to be a Type one diabetic, I introduced the President of the United States in the Rose Garden in a speech the President made talking about the New Inflation Reduction Act and how it's going to help lower drug prices and out of pocket costs for people. So that that's our work. I do this work because I'm a patient. I have an incurable blood cancer. It's called multiple my looma.

It's incurable. That's not good, but it's treatable for some period of time with very expensive drugs. Right now, my oncologists have me on a four drug combination that carries a list price of more than nine hundred thousand dollars a year. These drugs are literally keeping me alive, and I'm very grateful to have them, but they're wildly overpriced and the the drug industry. Drug companies exploit UH patients everywhere in the world, but especially here in the United States.

They use us as a piggy bank to hit their targets for executive bonuses, to trigger executive bonuses, and they had profit targets for their shareholders. UH. And the unfairness is not acceptable. Anyway, When I got diagnosed and suddenly I found myself with a disease UH through no fault of my own, they required very expensive drugs. I began this journey, and the journey taught me a fundamental point, and that is that drugs don't work if people can't

afford them. And so I retired and decided to devote myself UH as a patient UH to trying to change a system in this country. There really is built to benefit the people who profit from it at the expense of the people that's supposed to serve. And I worked for free as a volunteer, and I've been doing it for six years. That's great. Yeah, let's say, I'm sorry to hear about your own wealth, but I think it's

a very admirable thing you've done. So, David, can you explain, because it does I think people sometimes maybe if they've only lived in the US, they might not realize, or perhaps they're extremely aware. Why are medicines so? Why can I travel sixteen miles right, go across the border, flash my passport at someone, have a bunch of scans taken right, go through a bunch of machines, and then buy medicines for less than half the price on any given day.

Why Why is it like that? It's like that because we are the only developed nation in the world that lets drug companies dictate the prices a brand name drugs to the to their citizens. Every other developed country in the world negotiates on behalf of their citizens directly with the drug companies to get a better deal. Uh, And we don't do that. The net result is that Americans are paying almost four times what other wealthy nations pay

for the exact same brand name drugs. And the impact is that three out of ten Americans report that they are not able to take their medications as directed because of the cost. This has a direct impact on health. Uh. And you know, I understand that you are the type one and that you're insulin dependent, and so you know this struggles and the high prices of insulin. But we've had five people confirmed dead because they tried to ration

their insulin in the United States of America. This happens because we grant the drug companies this incredible market power and we let them dictate the prices to US, prices that are completely unjustified. Uh. And patients suffer financially and worse because of their health due to these high prices. Yeah, I think it's it's heartbreaking this stuff, like, and I've known people have died from from lack of access to insulin,

and it's it's just it's pretty horrific stuff. And can you explain, because let's get into that lack of justification, right,

there's ways a drug. The things that make up the cost of a drug would be the research and development of the drug, the distribution of the drug, and the marketing of the drug, and maybe something else I'm missing, But can you explain, like, how do we arrive at this insane price for insulin which was synthesized in a lab more than a hundred years ago, Like what what makes up that price structure and how much would it actually cost to produce that insulin if we stripped away

some of those things. Well, you're asking a very intelligent question about what should exist but doesn't, and that is a framework to arrive at an appropriate price that will provide a reasonable return to the drug maker and ensure that drugs are affordable and accessible for the people who need them. We don't have a system like that. The drug companies charge as much as they think they can

get away with. Period. This was shown just last year when one of the drug companies named Biogen tried to bring a drug to market for Alzheimer's and proposed to sell it at fifty six thousand dollars, even though there was no proof it worked. And after it got big pushback and no one wanted to pay for it, the government, private employers, uh, they cut the price to twenty eight thousand dollars. Now was it worth fifty six thousand. If it wasn't, then why didn't you just price it at

twenty eight thousand to begin with? Why? Because they thought they could get away with fifty six thousand dollars a year for this draw now where insulin is concerned, it's very unfortunate. There is an insulin cartel. Three companies control of the global insulin market in the world and here in the United States as well. And it's some people would say, correctly, you know, you have to call it correctly an alaga belie a small number of producers and

sellers who are controlling the market. Uh. At what happens as a result of that problem. Well, insulin costs roughly ten dollars of vile to produce. It sells for more than three hundred dollars of ivisle. It has gone up in price more than six in the last twenty years because of this cartel that literally controls the insulin supply in the world. I'll give you another example. I take a drug. It's called for my cancer. It's called palmer List.

It's an oral drug that I get under Medicare Part D. Palmerlus costs less than one dollar per capsule to make. It sells for almost one thousand dollars per capsule. Christ you cannot justify. You cannot tell me that there's justification for a thousand percent margin. It's just ridiculous. But because we do not use our power, our market power to negotiate for a better deal. Um, they can get away with it, and they do. And there there are many

examples of this. Now all of that is about to change with some new legislation that has been enacted into law. It's about to start to change. I should be more precise. Um uh, And we can talk about that. Yeah, let's talk about that. One thing I want to get into first,

I think is this. I think sometimes we have this impression, certainly with new and novel compounds, that there's this massive lab and it's entirely funded by the money that's made from selling other drugs, and in that lab people are just all day cooking up curious to the MOOTI virus or these various very deadly conditions. And so I wanted to explain. I wanted you to explain who pays for the R and D for the most part, and who decides what that R and D focuses on, because I

think those are both very important topics. Yeah. Well, it turns out that every single drug approved by the FDA from two thousand ten to two thousand nineteen was everyone was based on in some part on science paid for by taxpayers through the National Institutes of Health, another organization and the government called BARTER, and another organization in the government called DARPA. DARPA's who invented the Internet, for example,

and GPS. UM. UH, we pay taxpayers billions of dollars every year to finance basic scientific research that lays the found anation for all these drugs. And when a drug company sees the drug that has promised UH, it will try and acquire from the NIH or the other government agencies that do this work fund this work UH the intellectual property UH, and then they'll finish the job of running UM late stage clinical trials and going through the process of gaining FDA approval. I'm gonna say a couple

of things here that are critically important to understand. To try and illustrate this, the drug industry TIES tries to take credit for the m r NA vaccines that were developed to fight COVID nineteen and these are the vaccines that are marketed by Visor and its partner in Europe,

by on Tech, and by Moderna here in the United States. UM. It turns out that in the eighties, nineties, and early two thousand's drug companies weren't investing in vaccines because it didn't produce They didn't produce a big return, so the federal government invested through a ni H dar Ambarda. All of them two developed the technology that we now call m r n A so that when the virus hit, that technology was ready for MODERNA and Visor to run with.

But they didn't make the big investment. We did, we being taxpayers, to get that technology ready to go. And in the case of MODERNA, we paid for everything. And I'm not exaggerating. They had never produced a drug, so we stood up manufacturing capacity for them, We paid for their late stage clinical trials, and we signed advanced purchase agreements to completely de risk the enterprise. But they will tell you that they saved us, It's not true. We

saved ourselves. There's a reason that the president, who cares deeply about trying to reduce the death toll from cancer, has to have this new organization called h which is going to be funded with billions of dollars to try and do something to accelerate cancer research. Why, DoD, Why do we have to pay for that? Because the drug companies will not pay for the high risk, early stage research that goes into getting really breakthrough new drugs to market. So who who does this? Who pays for it? By

and large, taxpayers are underpinning all the basic science. Drug companies are taking drugs that show promise, acquiring the intellectual property, and then charging whatever they want for the drugs. Um. So that's our system in the United States of America. It's completely screwed up. Uh. We need to have a process more like what you described imposing this question, which is, well, shouldn't we look at what the government invested, what the

company invested? Uh? You know what would be what does it cost to manufactured the drug and distribute the drug and all of that, and then arrive at a price that provides a fair return uh for investment in risk to the drug company, but not any price they want to dictate. That's what we have not is they get the drug from us and they get to dictate the press.

We don't have a system like the one you referenced. Yeah, and it's it's much to a detriment, right, And I was that It's interesting you talked about how like this profit driven model tends to focus on certain conditions and not others. And I know that you focus mainly on the United States. But perhaps we could get into a little bit what that means for neglected diseases on a

global scale. Right, how looking at only patients who can afford to pay these inflated prices means that we're drug companies are sort of tacitly saying, well, we're okay with people dying from conditions that people don't get in America. Are you comfortable talking about that a little bit? Well, we only work in the United States because that is

a big enough challenge for us. I will say that drug companies want to invest only in drugs that produce a big a turn their profit maximizers their corporations, and we don't have a way that we balance that out where we say yes, but but, but but taxpayers are are doing the foundational research that leads to these drugs, and and these are in that sense public goods, and we need to figure out how, yeah, you can have a fair return, but we also make sure that they're

priced to maximize affordability and accessibility. And in this plays out of overseas with neglected tropical diseases which you reference, which you know, drug companies don't want to spend a lot of money on because those countries don't have a lot of money to pay for them. Because all the companies care about is honest to god, you know, they they want us to believe that they're all about looking

after our well being. They are corporations, and corporations by law have to maximize profits for their shareholders shareholders, and that's what they do. Um. You know who invests in neglected tropical diseases, The Gates Foundation and other foundations that put the money out to do that early stage research that changes the pricing equation. Should should change the pricing equation, um, so that we can still develop the drugs that people

abroad would benefit from tremendously. Uh if if only we made the effort and made the investment, which they're not inclined to do. You then answer your question yes, very well, very well. I think people are like looking for evidence on this. They could look at the speed at which we started to develop a bola treatments of vaccines once that became a threat to us versus once it became

a threat to people in the global periphery. By the way, I will say one more thing, Yeah, of course not the drug companies only hurt people in poorer countries in the world. It is that drug companies insist on high prices everywhere. And for example, UM, the disease system fibrosis is incurable, and UM there are new drugs that help

people live longer UH. They are marketed by Vertex. Interestingly, the gene that all of these UH drugs are built on, the genetic component, was identified by the former head of the ni H, Francis Collins, when he was doing research paid for by the NIH at the University of Michigan. His his discoveries were seminal UH, but still the drug

companies wouldn't invest. So the Systic Fibrosis Foundation raised money from its community to do more early stage research, and when it showed promise, Vertex bought the intellectual property from them UH and UH brought these drugs that are built on that genetic discovery to market. But in countries that have said, we can't afford the price you're demanding because we only have so much money to pay for our

citizens for healthcare. Because we provide health care to all our citizens, Vertex will let people kids because it generally affects kids and younger adults, will let them die if the company if the countries won't agree to the price that they are insisting on, literally let them die and say, look, you know, if you won't strike a deal that has high and the price for us, we're not going to sell the drug in your in your country. So it isn't only the poor people, uh, you know, the poorer

countries around world. It's patients who are stuck with a drug disease that requires a high class drug and maybe they can't get access to it because it's not affordable for their country or them. Yeah, it's it's pretty pretty bleak stuff in that sense. Let's get onto a little bit then, of how we can make this better. And I know that there are approaches that are incremental and their approaches that are more revolutionary or sort of making

these big leaps. So let's let's start with talking about how this legislation that we've just seen, the Inflation Reduction Act, does that make a difference. How much of a difference does it make, and how does it make that difference. The Inflation Reduction Act is really historic legislation that is going to save millions of people in America millions of dollars over time. It does for big things it does

many Moore, but for big things. One, for the first time ever, Medicare is going to be able to use it's it's purchasing power as the largest purchaser of drugs in this country to UH negotiate lower prices for people on Medicare. For the first time ever, we are going to curb price gouging by forcing companies that raise prices faster than the rate of inflation to pay a rebate UH to Medicare. We're gonna that will curb their their

price increases. H Third, we are going to limit the amount of out of pocket annually a Medicare patient can pay under the Medicare Party prescription drug down fit. Right now, there is no annual out of pocket limit I pay for that drug I described to you before the costs of almost a thousand dollars of capsule, I pay out of pocket more than sixteen thousand dollars a year. There will be a limit of two thousand dollars. No Medicare beneficiary will pay more than two thousand dollars out of

pocket for Medicare Party drugs. And four for the first time, starting next year, people who depend on insulin in Medicare will pay no more than thirty five dollars per prescription per month for their insulin um. These are all truly significant changes UH and begin to shift UH drug policy UH in this country, begin to uh break the dictatorial

pricing ability that the drugs drug companies have. And I wanted to take a minute to explain why Medicare negotiation in itself is such a big breakthrough very quickly, when the Medicare prescription drug Benefit was enacted into law in two thousand three, the drug companies, in the dark of night got stuck into that law something called the non interference clause that said that the Secretary of Health and Human Services could not negotiate directly with drug companies period.

It got stuck in in the dark of night by a man named Billy Tausend, who was then share of the Energy and Commerce Committee in the US House of Representatives. And within months after doing that at the behest of the big drug companies, he went to work to run the big trade association for the drug companies it's called Pharma,

at a salary of two million dollars a year. Another words, they bought the prohibition on Medicare being able to negotiate, and they have spent hundreds of millions of dollars to keep that prohibition in place ever since then, just in the last two years, in fighting to not let Medicare negotiate over any drugs ever directly with the drug companies, they spent uh north of two hundred million dollars to

try and stop that legislation from passing. UM. So these are all big, significant, important changes, they are not enough. Uh if if if we wrote the world, we would have written legislation that negotiated over more drugs and the pricing for which extended into the private sector and to

people without insurance. But we had to do that. To extend it to the private sector and people without insurance, we needed sixty votes in the Senate because of the filibuster rules, and we couldn't get one, not one Republican vote, So it had to be passed under a special procedure called reconciliation. The Democrats used it. They stood up the pharmah and they passed the bill. God bless him. Uh We in the course of it had um a vote trying to extend the thirty five dollar insulin monthly co

paid to the private sector. We could only get seven Republican votes um and so we couldn't take it all the way there. So there's much more work to do, but this breakthrough is truly historic. Yeah, it's good. It's it's good to see some progress because there hasn't been

progressed for a very long time. Let's talk about the difference in between a cost and a cope because I think it's easy for politicians sometimes you know, tweet and to them will cost you x, and in fact it only costs you x if y and is that are true? So can you explain for folks what a co pay is and why sometimes these claims are made about co patients as are not the same as costs. Well, the

big difference is the word price versus cost. In our system, we in order to lower out of pocket costs for people, we have to lower price. Why if you we're paying a hundred dollars out of pocket for your medicine and we zero that out to nothing, but we don't lower the price. The overall price that hundred dollars has to be paid for it by someone, And what happens is patients wind up paying higher premiums or higher taxes or

getting less money in their paychecks. You know, half of more than half of all Americans get their drug coverage and healthcare through their employers. So if that hundred dollars still has to be paid by somebody, then we wind up paying for it either with higher premiums, higher taxes, or getting less money in our paycheck because someone needs to absorb that hundred bucks. This is very important for people to understand. There's no free lunch unless we lower prices.

That's why pharma will always say, the big drug companies will always say, well, what we need to do is we just need to lower everybody's out of pocket make it zero and let them have all the drugs they want and let us continue to charge any price we want. But that's not there's there's no free lunch. It would still have to be paid and UM so we fight very hard at pages for affordable drugs to help patients

and policymakers understand that we need to do both. We need to or out of pocket costs for people and we need to lower the price in order to do that. Co payments. Co payments are what you pay when you go to UM the pharmacy counter and they tell you that your share of this prescription is five dollars or ten dollars or twenty dollars. And lots of times employers and the insurance companies they hire to run their programs will use co payments to try and steer you to

a less expensive drug at generic. Right, So if you want a brand, you're gonna have to pay fifty bucks, but if you'll take the generic, you pay five bucks. For example, they're trying to steer YouTube and equally effective drug. Generics are by definition the same exact drug, and they are trying to steer you to the less expensive but equally effective drug. The problem with our country big time is that some times they are not used for that purpose.

In my case, I have co payments on all my drugs, right, but I don't have a choice. I don't have a cheaper chair. I gotta I gotta take the drugs they're telling me to take. Um. And so when we misuse co payments like that, we are hurting patients. Uh, And it's how we also need to change. It points to how we also need to change our benefit design in this country. If if we can steer a patient to a healthier or as healthy least less expensive option, that

makes sense. But if you're charging me for something that I can't do anything about, that makes no sense at all. Uh. And so these are changes that we at p F a D work on and will continue to work on in our benefit design in this country. Yeah, I can see that trying to give you a price incentive to what no by you a drug in your case or be poor or or be sick because you can't afford it, which is not the function of the incentive, And it's silly. Can you explain how why do some drugs have generate

since some don't. So, boy, you're asking some really good questions. Um, you're going right to the heart of our system. Thank you. A long time ago in the eighties, eight three or eighty four, a bill was passed called the Hatch Waxman Bill, and since then everyone effer refers to a concept called

the Hatch Waxman barbin. And the bargain is this, if you're a drug company and you bring a valuable new drug to market, you get a period of exclusivity along with your you have a patent already probably, but upon approval, we give you a period of exclusivity where for sure no matter. If your patent is old and only has a year left, we give you additional years of exclusivity where you have a monopoly on that drug. But at the end of that period of exclusivity, generics and biosimilars.

Biosimilars are the generic name or the name for generics for biologic drugs, they're more complicated drugs. But at the end of that period of exclusivity, a generic I'm not a generic. Generics and biosimilars come to market, and we use the competition from the generics and biosimilars to drive down the price. When you have one generic that comes to compete, the price goes down about fifteen or two generics,

the price goes down three generics. You know, by the time you get five generics in the market, the price is roughly five to of the original brand name price. So the Hatchwaxon argain was you got a good drug, you bring it to market. We give you a time where you you can charge whatever you want. You have exclusivity in the market, but at the end of that we have competition from generics and biosimilars to lower price.

Why aren't there generics and biosimilars that was your question for all drugs, while some drugs are still in their period of exclusivity. But the drug companies don't let competition come to market the brand dr companies they fight, they file additional patents. They they sign deals with generic companies not to bring a drug to market, a competitive to market and pay them not to um uh it. They make small changes in the drug and then file additional patents.

There is something called a patent thicket. Um Humorra, the best selling drug in the world, has like a hundred and thirty two patents, a hundred and thirty two which were filed after the drug came to market. What are they for, Well, they could be for the packaging, the instructions, the color of the capsule, the patent everything and why because Generica buys some other competitor has to fight its way through all of them to bring a drug to market.

So we call them patent thickets. You know, if you grew up anywhere near you know a place where there were thickets, you know, it's very hard to get through a thicket. Um. And so in some cases there is no competitor. Guys, they're in the period of exclusivity. But in far too many cases, there are no competitors to drive down the price because the drug companies are manipulating our system. And they're very good at manipulating our system. Yeah, yes,

they are exceptionally good, and that has terrible results. Okay, So we've spoken about that, the way that they've manipulated this system, the way that maybe that's beginning to change. One thing that I'm interested in I've written about it a little bit is these ways that are perhaps more revolutionary, if not always as like a cast iron safe. And one of those is obviously people making their own medicines, which is something that will see unfortunately increasingly in this

country because of bands on access to reproductive healthcare. And I wonder how you think that has the potential to change this that's we've seen, like the epipencil, we've seen these homebrew abortion drugs, things like that. Do you think that has the capacity to change access? Remember I'm a patient, mm hmm and um it scares the hell out of me. Yeah. And the reason is there was a time in the United States and in most of the world when drug

companies were not regulated. Uh, and they brought patent medicines uh and uh, you know, mix it at home, bruise and sold them, and we had no way to make sure that those didn't hurt people. They killed people in

some cases. Uh. And then uh. In the twentieth century, the government realized and and our Congress and our elected officials realized we needed a way to regulate this industry, which would you know, sell poison in some cases, and they created what is now called the Food and Drug Administration. Food and Drug Administration is charged with making sure drugs are safe and effective. I'm a patient. I want the Food and Drug Administration to do its job. I want

drugs that are safe and effective. I do not like drugs that are not subjected to some scrutiny um to make sure that they do what those who are selling them claim they do. So Remember, I'm not big on taking chances with my life. Uh. And I if the drugs don't work, I'll die. That's that simple. I'll die of cancer. Not not to mention, I could drive to die from a drug that's no good. Some drugs cause harm, you know, even drugs approved by the FDA cars harms sometimes. So I am I am. I am not a fan

of homebrew drugs. I'm a fan of a system that protects me and ensures that drugs are safe and effective.

But that's one man's perspective. Yeah, and I think it's reasonable to say that, like, we have a way to make drugs that are safe and effective, and it's the lord legislation or a system that's getting in between people and the life saving medicines that they need, and we should certainly struggle to fix that instead of looking for ways around it, even though I understand why, especially with things like reproductive healthcare, that doesn't seem like it's getting

fixed anytime soon. Sadly, No, it's it's terribly sad. It's heartbreaking. Yeah, this whole thing is extremely and I know you've obviously seen it too, but my previous life, I've worked with one of someone who works for you now in diabetes nonprofit and seen firsthand the consequences of this, and it's really heartbreaking stuff to look at, and I wish it just seems so unnecessary in the world where like these

pharmaceutical companies make we should say, like billions of dollars. Right, It's it's not as if these people are driving to work in a second hand toy to Corolla, like they they are doing very well for themselves of this system, right, yep. People will be familiar with like farmer Bro Martin Screlly the guy. Yeah. Yeah, but it's just one example of a very problematic industry. I think you've done an excellent job of explaining it. David, Is there anything else you'd

like to get to before we finish up here? Just Martin screll you call to mind. I won't take you back to MODERNA and the m RNA vaccine effect that we not only developed the m r A technology to taxpayer money, but we brought the MODERNA vaccine to people with textpayer money. And in the course of doing that, we minted three new MODERNA billionaires. Um, you're talking about I'm not driving to work and you uh, you know secondhand Toyota Corollas. Oh, far from it. Yeah, these are

the people whose yachts I've see in the bay. I think that's disgusting. Three new millionaires off the back of billionaires billionaires. God? Yeah, God, it's grass, isn't it. Yeah. It can't be said enough. Not only does the NAH fund their research, but often the taxpayers will fund the lab. Right if it's at a university, you pay for it twice before before you try and pay for it again at SEC. Yeah, it's a very broken system, David. How can people find p F A D How can people

find us? Our website? Twitter? Facebook? Where should they go? Go to our website Patients for Affordable Drugs dot org. Just like it sounds, you can leave your story if if you or someone you love care about has struggled with high drug prices, give us your email address. We don't ask patients for money, but the stories and email addresses are our power. Uh. There the there the currency we trade on to make sure that the voices of people in this country are heard, uh, to counter the

propaganda ana lies that are put out by the drug companies. Okay, yeah, that's that's very important stuff that people can hopefully do. Even if they are struggling sort of materially to afford their drugs. Maybe they have some time. So that's great. It's four f O R right, not the number four. That's correct. All right, great, Thank you so much, David. It's been a pleasure. You've done excellent job of explaining a very convoluted and broken system. Thank you, James, your

your patient. Man. I try to be sometimes I'm very much not that, but yeah, I do appreciate your time on this Monday morning. Thank you very much, David, Thank you. It Could Happen Here as a production of cool Zone Media. For more podcasts from cool Zone Media, visit our website cool zone media dot com, or check us out on the I Heart Radio app, Apple Podcasts, or wherever you listen to podcasts. You can find sources for It Could Happen Here, updated monthly at cool zone media dot com

slash sources. Thanks for listening.