Drug companies playing at more patent games

Cancer Patients Challenge the Patenting of a Gene (NY Times)
Companies like Myriad, based in Salt Lake City, have argued that the patent system promotes innovation by giving companies the temporary monopoly that rewards their substantial investment in research and development.
Richard Marsh, Myriad’s general counsel, said company officials would not be able to comment on the lawsuit until they had fully reviewed the complaint.
The coalition of plaintiffs argues that gene patents actually restrict the practice of medicine and new research.

Walmart: $4 footlong...

Well, not really. But, on a personal note, I have decided to transfer my prescription, generic happy pill to Walmart, big box be damned. Paying almost $140 for three months vs. $10 for the same amount of time...Wow. With that $130 saving, I could have gone to see Chaim Topol's final tour with Fiddler on the Roof, not to mention, sprung for a prix fixe dinner at Cosmos.

Don't misunderstand me: I understand the "Big costs of Big savings," but I also know that our prescription drug industry has inflated drug prices beyond the means of most people. When retirees have to choose between a drug that makes their lives more comfortable and eating, there's something wrong.

What I don't understand, is if Walmart has the ability to manhandle such prices with its huge bargaining clout, why can't the US government?

Walmart Pharmacy

Revenue from a prescription.

The average pharmacy reimbursement across all payers in 2007 was $69.91 per prescription. Of this amount, about 80% ($56.06) represents the amount that the pharmacy pays to the manufacturer or a wholesaler to purchase the drug. The remaining 20% ($13.85) is used by the pharmacy to pay for operating and overhead costs such as salaries, rent, utilities, computer systems, complying with state and federal regulations and other expenses. From this amount, pharmacy retains a net profit of less than 2% ($0.84) per prescription.



S G & A = Selling, General & Administrative expense (i.e. marketing and administrative costs.)

Graphs of IMS Health industry sales data

IMS Health is an international consulting and data services company that supplies the pharmaceutical industry with sales data and consulting services. In addition to their work analyzing the U.S. industry, they look at international trends.

Total U.S. prescription market over 7 years.

Top therapeutic classes by U.S. sales for 2008.

Top pharmaceutical products by U.S. sales for 2008.

Top pharmaceutical corporations by U.S. sales for 2008.

Top prescription drug distribution channels by U.S. sales for 2008.

U.S. direct to consumer advertising spending over 5 years.

Fortune 500 2009 currently has the industry ranked 3rd most profitable in the nation, with profits at 19.3% of revenues. The industry is behind internet services and retailing (19.4%) and network and other communications equipment (20.4%.) (http://money.cnn.com/magazines/fortune/fortune500/2009/performers/industries/profits/)

3 Quick Reasons for high Drug Prices

Patents - New drugs are protected by patents, and after tweaking the drug or making simple changes manufacterers can often get 20 years of exclusivity. This type of monopoly allows for total control of prices.

Insurance - Different insurance companies cover different pills. But, if brand name drugs are more popular even with higher prices, insurance companies will cover them. This way a consumer doesn't actually feel the pinch in their wallet personally but the cost is still there.

Medicaid - Despite their huge buying power they can't negotiate prices. This means the government is essentially paying sticker price for something they could bargain down.

What does this mean?

Pharmaceutical manufacturing was the most profitable industry in the U.S. from 1995 to 2002, and continues to be on the top of this list. They have huge profit margins hovering around 18%. These profits are after research and development costs and go straight to investors. Is the drug industry really looking out for the public's health or just money like most companies?

"Price Controls On Prescription Drugs Could Have Adverse Effect On Life Spans, Study Says"

Ready for the kicker? If you read down to the bottom, it suggests that "a better approach to moderating prescription drug prices would be to cut drug insurance copayments by 20%, which by 2060 would increase life expectancy in the U.S. by half a year because more people would take needed drugs and drug industry profits would motivate further innovation."

And where exactly do they think this loss in copayment monies is going to be subsequently recouped? Ahh, right, by the consumers, who, will instead of paying this 20% "out-of-pocket," will lose it directly from their paycheck.

Paul Dragsten Interview

In this podcast we interview Paul Dragsten. Paul is the Vice President of Research and Development for Biomedical Frontiers, a small Minneapolis based bio tech company working on an orphan drug to treat thalassemia, a genetic defect that causes them to make defective hemoglobin.