The truth behind the cost of new drugs

As Americans, we develop more drugs than any other country. Not surprisingly, we lead the world in drug consumption as well. We also pay more for our drugs, as Americans are now spending hundreds of billions of dollars each year on our precious pills. Merrill Goozner, former Chief Economics Correspondent at the Chicago Tribune, compiled data from hundreds of sources in the writing of his book, The $800 Million Pill. While drug companies would have you believe drug prices mirror the millions they spend on research, Goozner builds quite the opposite case: American tax dollars finance the research, and then Americans must also pay exorbitantly high prices for those resulting drugs. This is a controversy that is currently raging throughout our country. Not only does The $800 Million Pill deal with drug prices, but it also touches on national health care, Medicare coverage, and what should be done about pharmaceuticals and developing countries.
As a preview of what was to come, Goozner began the book with the story of Amgen, one of the most successful biotechnology companies in history. Amgen’s big money-makers are artificial versions of naturally-occurring enzymes that had been identified and isolated well before the company began developing them (p. 3). The first big seller was Epogen, Amgen’s recombinant-engineered version of erythropoietin, the enzyme produced in the kidney that signals bone marrow to manufacture red blood cells. People who do not produce enough erythropoietin (Epo) cannot prevent themselves from becoming anemic without the medication. The second drug, Neupogen, is the artificial version of granulocyte colony-stimulating factor, which signals to the bone marrow to produce white blood cells. The drug has changed the lives of cancer patients undergoing chemotherapy, whose suppressed bone marrow is in need of extra stimulation.
I was rather shocked by this story, because before I read it, I had no idea where drugs were developed. I assumed in pharmaceutical companies’ labs – but I was wrong. Goozner explains in great depth the entire process, beginning with government grants through the National Institutes of Health (NIH). An enormous amount of research is conducted every year in universities and hospitals throughout the country, largely funded by American tax dollars. This made me wonder what drug companies really did, and I would soon find out.
Before we get there, Goozner discussed an interesting bit of history. Beginning in the 1980’s, hundreds of biotech companies were sprouting up, mostly in California, some on the East Coast, and a few in the Midwest. These companies were very different from anything that came before – nobody even had heard of a biotechnology company until the last quarter of the century. Scientists out of Californian universities founded a majority of the companies, and venture capital agencies seemed eager to lend out money. It was the age of start-ups and success stories, of which Amgen was a major contender. Although many scientists were genuinely interested in expanding the world’s knowledge of human biochemistry, most scientists longed to start the next Amgen. I don’t blame them. After all, $100 worth of Amgen stock in the mid 80’s would be worth over $1.5 million in 2001. Who would not want to be a part of that?
I was deeply touched by some of the selfless scientists described in this book. Probably most significant was the story of Eugene Goldwasser. He retired in 2002 after a 47-year career in biochemistry. He taught at the University of Chicago, and was involved in his own research as well. His first twenty years were spent in pursuit of a single hormone: erythropoietin. He knew that if he were able to synthesize the compound for mass production, it would be extremely beneficial to millions of people with kidney problems. As he struggled to prove his suspicions, he pleaded with drug companies to fund his research, but they all turned their backs on Goldwasser. He was on to something new, but nobody believed him. Once he discovered the hormone he had sought, he took his knowledge to a new company, Applied Molecular Genetics Inc., which would later be called Amgen. If it were not for Goldwasser, Amgen and the drug Epogen would never have become what they are today. In spite of this, Goldwasser never received much for his role in Amgen’s success, even with the extremely high price Amgen charged for the drug. Amgen argued that the high price, which was mostly paid by taxes through Medicare, was necessary to fund future research. Yet during the next 15 years, Amgen’s labs produced almost nothing of value.
That story alerted me further to the role of academia in basic research leading to drug creation. I was not aware that drug companies often had so little to do with the work preceding a drug’s release – it seemed they were only involved in collecting the profits, and charging a high price too.
Another hero, and they truly are heroes, is Roscoe Brady (p. 40). He has studied rare diseases at NIH in Bethesda, Washington, for nearly 50 years. A rare disease is a disease that affects less than 200,000 patients. Between five and six thousand rare diseases affect about 24 million Americans, a number that surprises me every time I think about it. Many of these diseases are genetic disorders, which require painstaking and tedious efforts to single out the compound that will cause the desired effect. Often this will be more than one compound. Scientists must then isolate the gene or genes that play a role in the creation of that protein, and figure out how to manipulate it. Another approach is to artificially create the protein, but either method is still extremely time consuming.
Brady discovered the cause and treatment for Gaucher disease, rare metabolic disorder that affects about ten thousand people around the world. Gaucher sufferers have a defective gene that fails to produce the enzyme needed to break down the fatty remnants of exhausted blood cells. Those fats accumulate in the spleen and liver, leaving the patients in terrible pain. Brady also discovered the causes of similar disorders: Niemann-Pick, Pompe, Tay-Sachs, and Fabry. All of these are genetic, inherited diseases, and result in organ destruction and early, painful deaths. Brady and his colleagues helped Genzyme overcome every obstacle in development of Gaucher treatment – then when confronted about high prices in the 90’s, it took sole credit for the development.
Stories like that leave me feeling very angry. I feel like I need to do something about it, but I don’t know what. For now I will try to convince people to read this book – not because everything in it must be correct, but because it brings to light many issues that I had never even thought about.
Next the author ventures into the debate about what type of research the federal government should fund. Many scientists feel the NIH should be involved only in basic science and biochemistry research, with no specific focus on curing disease. The NIH says it simply must play a role in both basic science and in treatments. While NIH’s budget does mostly fund basic research, it is a fact that many of the researchers at NIH are driven by the longing to cure diseases. This approach unfortunately results in drug companies stealing the credit for the research behind the drugs they sell.
I do not know enough about basic science versus drug development arguments to form an educated opinion, but if I had not read this book, I would not even know a debate existed.
In the chapter titled “The Source of the New Machine,” Goozner offers a detailed explanation (p. 61) of the events leading up to June 26, 2000. The Whitehouse declared this day Human Genome Day, and held a large celebration to honor three individuals that played vital, if not controversial, roles in unraveling the human genome: James Watson, the argumentative geneticist who had co-discovered DNA’s double-helix structure a half century earlier; Francis S. Collins, a gene hunter who discovered the cystic fibrosis gene a decade earlier and instantly became a top genetic scientist; and J. Craig Venter, the former government researcher who had launched Celera Genomics, with the blatant intent to beat the government to the finish line. The government spent over three billion dollars pushing the Human Genome Project.
At that time, President Clinton was in office. He somewhat successfully honored the men, glossing over the real controversy. At least two of the three intended to or had become rich due in great part to government funding. Clinton decided to honor the achievement, ignore the debate, and set the tone for the future use of the human genome – a future which has so far yielded nothing much, aside from thousands of patents on genes which nobody has any idea how they may be useful.
I personally feel that companies should not be able to file patents on genes, but on very specific medications, and only after the clinical use is thoroughly discovered and researched by the company seeking to patent it. By allowing mass patenting of genes, smaller companies are blocked from much of the possible medications to develop. The author explains both sides of this argument throughout the book, and often points out how the pharmaceutical companies are simply looking out for themselves, with little regard to the care of the patients, their customers.
One section of the book (p. 93) was particularly troubling. This section dealt with the way private companies and the public influence each other. The example that Goozner used was the HIV epidemic. Beginning in the 80’s, HIV and AIDS were sweeping many areas of the globe, especially third-world countries in Africa. As usual, the main reason a medical therapy was even developed for HIV was because of a few dedicated individuals, again working in universities and funded by the government. Pharmaceutical companies had no interest in funding research, or even marketing the result, because it would not be worth it to them and their shareholders. At the time, the majority of patients were in Africa, and the HIV-positive people that were in the US were portrayed as gays being punished by God. Since the drug companies were not willing to sell drugs to Africans for little or no profit, regardless of how many millions were dying, the drugs took a long time to be developed.
The main catalyst that finally led to the pharmaceutical companies’ giving in was the media attention brought on by a large grassroots effort. People across the world, and especially in the US, demonstrated against drug companies, and also pleaded and begged. Slowly but surely, the drug companies started to gain interest – which I’m sure had nothing to do with the fact that most have the preliminary research had by that time been completed by taxpayer-funded researchers. It was also becoming more socially acceptable to market HIV drugs because more and more of the victims were young women, not gay men.
Even with the wheels finally moving in Big Pharma, not many drugs were making it to Africa, where they were most needed. Even if it meant saving potentially millions of lives, drug companies would not sell discounted drugs to Africa. Again, due to grassroots efforts and lobbying, drug companies were slowly being persuaded to sell drugs to African nations at a reasonable cost.
I think that this means several things. Obviously it seems immoral for the drug companies to act how they acted, but I will not judge them on that point. I think everyone can agree, however, that the past is evidence enough to warrant more federal control of Big Pharma, because when left to act how they wish, the pharmaceutical companies think of nothing more than their bottom line.
This is further evidenced by how the drug companies conduct clinical trials (p. 129). After several drugs for AIDS were developed, first AZT, and the others, it became clear that the human immunodeficiency virus was a virus unlike any other. It was a retrovirus, meaning its genetic material is comprised of RNA, not DNA (p. 89). It reproduces in a backward fashion – after invading a white blood cell, it produces a matching DNA strand for its own RNA, and that DNA strand replaces the DNA of the cell. This causes many problems for treatment, and any treatments that do work are short-lived: the virus mutates around almost anything thrown at it, and it does this more quickly than almost anything else known to man.
Motivated by their bottom lines, pharmaceutical companies did all they could to “show” that their drugs were the best. It was clear that any one drug could not be the solution, but the drug companies resisted clinical trials involving drugs from several companies, or combination therapy. In the limited number of such trials, it was shown that two drugs kept the virus at bay much longer than one drug (p. 141). HIV’s genetic code is 10,000 base pairs long, and with more than a billion new viruses entering the blood every day, every single base pair is transcribed incorrectly thousands of times a day. That means it is almost a certainty that one drug will become ineffective within hours. With two or three drugs, however, five or six specific base pairs would have to be mal-transcribed simultaneously – odds of which are much closer to impossible.
Despite the evidence, drug companies resisted combination therapy for years, as Goozner shows (p. 145).
Another instance of a pharmaceutical company stealing government credit was exhibited in the National Cancer Institute’s massive screening efforts. NCI sifted through hundreds of thousands of natural compounds in search of a cancer-fighting substance. Very few promising compounds were found, and only one became a popular drug. The bark of the Pacific Yew yields a compound that was synthesized and named Taxol. Bristol-Myers marketed the drug, and then charged a very high price for it, even though the NCI discovered it and developed the drug.
There is so much more depth to this argument that I can not even begin to explain – which is what makes The $800 Million Pill such a great book. It really reveals so much depth, from many viewpoints. The author does insert his opinion by how the book is laid out, but one cannot argue that the book is one-sided.
The last major part of the book describes the current activities of Big Pharma. Goozner asserts that drug companies today are almost solely in the business of “me-too drugs” (p. 217). Drug companies charge a huge sum for their products, claiming that the amount is necessary to support future research. Where, then, are all of the new drugs from this research? For the most part, there aren’t any. Almost all drugs in development today are simply copies of other companies’ drugs. In many cases, new drugs are even copies of another drug by the same company. Once a drug is released, it is only protected by patents for a certain number of years. For example, Astra developed a drug called Prilosec, and the patent was set to expire in 2001. Astra did not want generic drug manufacturers to steal its market-share, so what did they do? Astra developed a new drug, Nexium. This drug is virtually the same as Prilosec, except it has a very minor chemical difference. It functioned no better than the older Prilosec, in fact, some studies showed it was not even as effective as Prilosec. Regardless of the facts, Astra marketed Nexium to patients and doctors as a much better solution than Prilosec. The result: as soon as the FDA approved Nexium, people using Prilosec switched to Nexium, which also happens to be higher-priced.
This illustrates how tainted Big Pharma really is. Drug companies seem to care about money, and nothing else. It does not seem to matter how effective a drug is. If they can sell it for more and spend the least developing it, they do it.
Speaking of spending money on developing, one last section in The $800 Million Pill is particularly striking. The Pharmaceutical Research and Manufacturers Association (PhRMA) and Tufts University Center for the Study of Drug Development estimate that it currently costs $802 million to develop a new drug. Several organizations, including the NCI and NIH, however, claim that number is grossly wrong. One possible reason the private-industry clinical trials cost so much is the sheer number of trials private industry conducts – most of which are solely aimed at marketing already-existing drugs, and not developing new ones.
After reading this book, I am thoroughly disgusted with the drug industry. I had previously not been aware of the vast majority of arguments presented in this book, and I am glad I read it. Every generalization made was well-supported and cited. Goozner obviously put huge amounts of time and energy into his arguments, and he took the time to back them up with verifiable facts. For all of these reasons, I recommend this book to anybody concerned with the cost of drugs or healthcare in our country.
Though Goozner presented many angles on most of the debates he discussed, I generally got from this book that he thinks drugs are extremely over-priced. Also, because Big Pharma seems to be benefiting so much from government research into drug development, Goozner also seems to be making the case that the government should only fund basic research. This becomes apparent by his last sentence: “When the scientific knowledge about a cancer of Alzheimer’s disease or a rare genetic disorder matures to the point where a therapeutic intervention becomes possible, there will always be somebody ready and willing to develop it (p. 260).”
Goozner, M. (2004). The $800 Million Pill. Berkeley and Los Angeles: University of California Press.