November 8, 2004
By Dan Kurland

Pharmaceutical Cost Management Council deserves support

Last weekend, I attended a yearly roundtable that brings movers and shakers from throughout the health-care scene together to address an aspect of the health-care crisis. The goal is to produce a final-consensus statement.

In full disclosure, I attended under the category of “spouse.” My wife was the invited participant. Still, it was a chance for me for listen in on debate and discussion, and a chance to see friends again.

Like many health conferences, this one is supported by the drug industry. Yes, I have friends who are drug reps, and drug reps who are friends. It’s my dirty little secret. But they have their job to do, and I have mine.

One of these friends was a vice president of a major drug manufacturer. We were discussing the fact that nongeneric drug prices in Canada are roughly half those in America.

Without getting into why Americans have to pay more for the same drugs, or whether we should import drugs from Canada, he lamented: “If we don’t sell drugs in Canada at the Canadian price, we don’t sell them in Canada.”

For the industry, the issue is sales volume and market share — at whatever the price. And presumably the manufacturers are still making a profit on Canadian sales.

I raised the issue of states fighting for lower prices with another friend at the conference, a public relations director from another major manufacturer. I had suggested that the drug companies have a serious image problem justifying current prices when industry leader Pfizer just spent as much buying back stock ($5 billion) as it did on research and development in 2002. (On that very day, Pfizer announced a second buyback of the same size.)

My friend suggested any attack on existing prices would affect stock prices. Any cuts, he reasoned, would lower corporate income, which would lower stock value, which would lower the ability to raise capital — you get the point. Research would be cut, he argued, and people would suffer.

Isn’t it interesting that drug companies never talk of cutting back expensive TV ad campaigns (allowed only in the United States and New Zealand) or of hiring fewer lobbyists. In 2003, the drug industry had more lobbyists in Washington than there are senators and representatives — at a cost of around $100 million. But they got their money’s worth!

Medicare accounts for at least 30 percent of American drug purchases. The new Medicare law relies on private health plans to deliver pharmaceutical benefits. Government “may not interfere” in negotiations with drug companies, the law mandates — resulting in an estimated $139 billion (with a B) additional profit for drug manufacturers.

For years, of course, the federal government has utilized its bargaining power when freely negotiating prices for the Department of Veterans Affairs and other agencies. The result is the Federal Supply Schedule, or FSS, which has prices averaging 42 percent below current retail — somewhat on a par with Canadian prices.

Where are we, then, once all is said and done?

As the Republican representative from Minnesota, Gil Gutknecht, once said: “There’s nothing wrong with the word profit, but there is something wrong with the word profiteer.”

The pharmaceutical industry is big business. It has power and influence. But it must play by essentially the same rules as anyone else.

Which brings us back to affecting volume and market share. Judging by the new Medicare law, the newly re-elected administration has no intention of using its leverage to lower prices. West Virginia, however, is on the brink of doing just that.

Recommendations of the state Pharmaceutical Cost Management Council, which might come before the Legislature in special session, do not involve mandatory cost controls. They do not create a new government bureaucracy. They do not propose untried procedures or untested policies.

The proposals are simply an attempt to level the playing field, to allow the state to coordinate prescription drug purchases in a way that streamlines those purchases and assures the greatest bargaining leverage — setting the FSS prices as the starting benchmark for negotiation.

Their recommendations are reasoned and appropriate. They deserve our support.

Kurland is a Charleston artist and health action coordinator for Covenant House

© Copyright 1996-2004 The Charleston Gazette