What will pharma do?

On Aaron’s suggestion, I read Marcia Angell’s The Truth About the Drug Companies: How They Deceive Us and What to Do About It. Since he has already posted a lot about the book and the issues it raises, I’ll focus on just one small piece of it. Angell wrote,

While the pharmaceutical industry is still a giant, it’s a struggling giant. What will it do? So far, it is searching ever more desperately for drugs to license from small biotechnology companies and universities. It is pushing its me-too drugs harder. It is engaging in a ballet of acquisitions and mergers to combine its dwindling pipeline, sell its marketing staff, and get some economies of scale. And it is filing more lawsuits to extend marketing rights and fight regulation — all the while promoting itself with increasingly extravagant public relations claims. But it cannot long continue on this course for the simple reason that its financial fortunes are predicated on ever increasing prices, and they are simply not sustainable. No one is willing or able to pay those prices anymore. The Medicare prescription drug benefit offers only a temporary reprieve. So big pharma will have to change. But how?

The book was published in 2004, well before the first white paper relevant to the Affordable Care Act was written. Angell could not have known that the Medicare drug benefit wasn’t the last law of the decade to lend some assistance to the pharmaceutical industry.

The ACA closes the infamous donut hole in that drug benefit. Yes, yes, drug manufacturers agreed to reduce the prices they charge to help close that hole. But they have ways of fudging that. Of course the donut hole closure will help beneficiaries afford drugs. And, in many cases, that will be health improving. But what the donut hole closure also does is remove one huge barrier to the flow of money to drug companies. Instead of beneficiaries splitting pills and doing without or switching to cheaper generics — all of which cost the industry potential revenue — they will be more likely to fill prescriptions for highly profitable brand-name drugs. (Again, this may be good for beneficiaries. But it is also good for drug companies. A win-win, taxpayers excluded.)

To that, add, as of 2014, the massive influx of Americans newly insured for drug benefits, among others, and you can see why the ACA is an awesome deal for pharma. This is not a new revelation. I just raise it to update this small portion of Angell’s book. At least through 2014, and maybe for a few years beyond, perhaps the industry can put off addressing some of the problems it faces. Good for them. Far less so for the rest of us.


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