Sanders and Warren Behind Act to Control Prescription Drug Costs
Improving access to affordable prescription drugs would significantly lower costs of health care and allow the government to fund clinical drug trials and produce generics says Dean Baker of CEPR
SHARMINI PERIES: It’s The Real News Network. I’m Sharmini Peries, coming to you from Baltimore.
Fourteen Democratic senators introduced a bill last week to improve the Affordable Care Act, by reining in escalating prescription drug prices. The bill, which is supported by Senator Bernie Sanders, Sherrod Brown, Al Franken and Elizabeth Warren, among others, would allow Medicare to negotiate drug prices. It would permit the import of cheaper drugs from countries with similar drug safety measures as the United States, and it would make the manufacturing of generic drugs much easier.
Joining us now, to talk about improving access to affordable prescription drugs act, is Dean Baker. Dean is the co-director of the Center for Economic Policy and Research, and is the author of, “Rigged: How Globalization and the Rules of Modern Economy Were Structured to Make the Rich Richer.”
Thanks for joining us, Dean.
DEAN BAKER: Thanks for having me on.
SHARMINI PERIES: Dean, have you been following this bill — no doubt. It introduces a wide variety of measures to control prescription drugs. What do you think are the most important features of it?
DEAN BAKER: Well, the points you mentioned, these have been raised many times, the idea of importing drugs from other countries. We pay the highest prices of, basically anyone in the world, so if you got drugs from Canada, Germany, they’d typically be around half as much.
Also having Medicare negotiate drug prices, the Veterans Administration does that, pays one-third, even half as much, one-third less, or 50% less than what Medicare… what’s paid for Medicare drug benefit. Those have been said before. They’re good policies.
But what’s really new, and important in this bill, is that it proposes having the government pay for the research itself, so that the drugs could be available as generics. And this is enormously important, because the point about drugs is they’re almost invariably cheap to produce. They’re cheap to manufacture. They’re expensive to develop.
So, it costs a little money to do the research and development, but at the point that people are buying them, we’ve already paid for that. And it’s a very perverse policy, where we say, “Okay, we’re going to give drug companies patent monopolies, so they could charge huge amounts of money to recover their research costs.”
This is like, if we had firefighters getting paid when they showed up at our burning house with our family inside, and said, “Hey, do you want to pay us $2 million to save your family?” I mean, it’s kind of crazy. No one would think that’d make sense, but that’s in effect what we do with prescription drugs.
So, what this bill does is, it proposes paying for research up front, two mechanisms: one is to have the government buy up the patents; the other one, which I think is more important and better, is have the government pay for clinical trials. They would buy up promising chemicals, promising drugs, pay for the clinical trials, and then as soon as it’s been… the trials, if they’re successful, and it goes through the Food and Drug Administration’s approval process, it’d be sold as a generic, and they’d be cheap.
So, to my view, that’s fantastic. This isn’t about the past Congress vote; this is the debate we have to have.
SHARMINI PERIES: Right. Now, I know the cost of drugs is so much higher here in the U.S. I have medical coverage in Canada. And when I get prescriptions, I make sure I’m in Canada, and get the price that’s been negotiated by the Canadian healthcare system with the pharmaceuticals. And it’s usually one-quarter, if not less of the price.
You can also go to places like Venezuela, where I lived, and gotten those generic drugs coming from Cuba, and they’re… the same thing, you would pay $25 for here; you’d pay just $2 for. So, in terms of access prices around the world varies.
So, in terms of this kind of bill, not having taken root here, and we’re just considering it here, what have been the driving factors driving the prices of drugs up so much in the United States, that it’s unaffordable for ordinary people?
DEAN BAKER: Well, we’re pretty much the only country in the world that basically gives drug companies a patent monopoly, and has no check on the other side. So, on the one hand, we give them a monopoly and say charge whatever you feel like, and we don’t do anything to rein in that price, to negotiate it.
So, if we look across other wealthy countries –- Canada, the countries in Europe –- they all have some sort of negotiation process where they limit the ability of a company to charge a really high price for its drug. And the point here, it’s very central, that if you have a disease, and Pfizer or some other big company has the drug you need to keep you in good health, or even to keep you alive, well, you’ll pay whatever you can, because it’s a life or death equation.
As I say, I was making the analogy with the firefighters showing up at your burning house, and in many cases, that’s a pretty appropriate analogy. If you have the money, and your family’s inside, well, you’ll pay them. It’s a very perverse way to pay firefighters. It’s a very perverse way to pay for drug research, but that’s what we’re doing now.
SHARMINI PERIES: Right. This was one of the points that Donald Trump made during his campaign, that we here, in the United States, don’t actually negotiate the price of drugs. And being the businessman he is, and he can negotiate the price of drugs. And through this bill now we have an opportunity to do so, is there any chance of this bill being supported by Congress and Senate in a bipartisan way?
DEAN BAKER: There is some chance. I mean, this is a very, very popular issue, because this is one that everyone sees. Most people have someone in their family that has to take drugs on a regular basis. And even if you have good insurance, you’re still very often left with very large co-pays. Particularly if you have a disease like cancer, where the co-pays can often run into the thousands, even tens of thousands of dollars, a year.
So, this is an issue that people feel in their pockets, and it does cross party lines. And again, Donald Trump was saying this because he knew it was popular. People were unhappy.
So, I wouldn’t bet that you’ll see Republicans join in something like this, but I also wouldn’t rule it out, because they’re politicians, they want to get re-elected. And they know this has real appeal.
SHARMINI PERIES: Right. And if you remember, one of the recent issues where the cost of accessing drugs in this country was… showcase was the case about the EpiPens, and the cost of it, and the need for it out there.
Can you give us some specific examples of how this might… the bill might help our lives?
DEAN BAKER: Well, I’ll give two stories. One, the EpiPen story, you had a company that essentially had a monopoly. This is actually a generic, but they in effect had a monopoly on the production of it. And EpiPen, of course, is something asthmatics need because they need to be able to counteract, if they’re going into an asthmatic fit, that they need to be able to counteract that quickly, and EpiPen’s very effective that way.
But here you have a sole producer. So, if you had the government negotiating, they could press down the price and say, okay, we’re not paying you -– I forget –- I think they were charging $500 for a packet of two –- they used to charge about a tenth that much, and their cost of production, I’m sure, is a 20th or 30th that much. So, they could certainly lower their price, and still earn a very good profit.
The other, Sovaldi, the hepatitis C drug, has a list price of $84,000. You get a high quality generic in India for $300. Now, if you had the government paying for the clinical testing, suppose they had bought rights to the drug, they pay for the clinical testing, they produce it, bring it through the Food and Drug Administration’s approval process, well, it’d sell through here for $300, or something close to that.
So, when it’s $84,000, we have this big sort of moral dilemma. We have 3 million people with hepatitis C, some of them were intravenous drug users, they’re on Medicaid, should the government picks up the tab, or your co-insurers. You know, people debate that.
If we’re $200 or $300, this would be a non-question. Of course, you would pay it. You’re talking about saving… restoring someone’s health, saving someone’s life, that would really be a non-question.
SHARMINI PERIES: Where does it go wrong? I mean, it seems to me it’s even cheaper to fly to India, and get medical care there in a case like hepatitis that you were citing here. But how did it get so out of control, $84,000 versus $300?
DEAN BAKER: Well, that’s what happens when you give a company a monopoly on something that, again, is essential for people’s health and often their life, because hepatitis C can be a fatal disease. So, they will charge whatever they think they can get away with, which is obviously quite high. So, again, if you had $84,000, and you had hepatitis C, you would pay that.
SHARMINI PERIES: And is that the kind of prices that the drug insurance companies are paying for these kinds of drugs now?
DEAN BAKER: They negotiate a discount. So, odds are, if you had insurance that covered it, they might end up paying $50,000, maybe $55,000, so they wouldn’t be paying $84,000. I suspect very few people actually pay $84,000. I always cite that as the list price, and if I have someone who’s sympathetic to the pharmaceutical industry, they’re always quick to correct me.
I don’t mind the correction, because that just brings out more of the point: we shouldn’t have to play games. When you go to buy -– I don’t know –- you go to buy a chair in the furniture store, you don’t play games. You know, that’s the price of the chair: it’s a hundred bucks. They don’t go, “Oh, well, you know, if you do this, you do that; it’ll be 50 bucks.”
That’s a waste. And I’m saying that as an economist. We don’t want people playing games, and the last time on earth you want to be playing games is when you have someone who’s seriously ill with a possible fatal condition. That’s not when you should be playing games.
SHARMINI PERIES: Noted. Thanks so much for joining us today, Dean.
DEAN BAKER: Thanks a lot for having me on.
SHARMINI PERIES: And thank you for joining us here on The Real News Network.