Hedge fund manager turned pharmaceutical CEO Martin Shkreli became instantly infamous when his company, Turing Pharmaceuticals, purchased a lifesaving drug (used by AIDS patients, pregnant women, and many others), then increased the price to an unconscionable $750 per pill.
But it’s not just Shkreli: the entire pharmaceutical industry makes obscene profits by simply buying up old drugs, giving them a brand name, and setting a sky-high price tag.
Shkreli defended the 5,000 percent price hike with an old pharma industry lie: that these prices are necessary for his company to recoup the cost of researching and developing new drugs.In reality, the federal government funds a whopping 84% of the basic research required to develop new drugs.1 Pharma companies reap the benefits of that research with “me too” drugs, which duplicate the actions of existing medications. 2
So where is Big Pharma spending all its cash? Lobbying and advertising, of course. The pharma industry spends about $19 on marketing for every $1 spent on research3, and spends more on lobbying than any other industry. And all that lobbying really pays off when it comes to Medicare.4,5
With its vast purchasing power, Medicare should be able to negotiate lower prices — much lower. But it is is prohibited from doing exactly that by a 2003 law that the pharmaceutical industry and its legion of lobbyists rammed through Congress.
So our nation’s seniors pay at least $16 billion more per year than they would if Medicare could negotiate fair prices with the drug companies.6 And many simply go without medications they need.
Giving this negotiating power to Medicare wouldn’t just lead to more affordable medications for our seniors; it would also force a sea change in the way Big Pharma does business.
Sources and Further Reading:
1. “The Make-Believe Billion.” Slate, March 2011: slate.me/1Ny2TCc
2. “Pharma companies spend millions wooing doctors to prescribe ‘me-too’ drugs.” MinnPost, January 2015: bit.ly/1Qk3cBp
3. “Pharmaceutical Companies Spent 19 Times More On Self-Promotion Than Basic Research: Report.” Huffington Post, August 2012: huff.to/1Ix2Bt7
4. “Uncle Sam barred from bargaining Medicare drug prices, Senate candidate Tammy Baldwin says, blaming rival Tommy Thompson.” Politifact, September 2012: bit.ly/1N4tB5u
5. “How Much of Big Pharma’s Massive Profits Are Used to Influence Politicians?” Truthout, September 2015: bit.ly/1O2yZFy
6. “U.S. Could Save up to $16B if Medicare Part D Prices are Negotiated: Paper.” The Wall Street Journal, July 2015: on.wsj.com/1CSVPNe
Lobbying Spending Ranked by Industry on OpenSecrets.org: bit.ly/1s0rtkb