Medicare Drug Price Negotiation: Big PhRMA Claims of Harm “Overblown”

by | Nov 11, 2021 | Editorials and Opinions

By Judy Gordon, DPSC Secretary

Remdesivir is the COVID-19 drug that can shorten hospital stays. Gilead, its developer, received $162 million in federal funding for clinical trials and other assistance to accelerate its market availability.

Gilead also benefited from billions of dollars in government funded basic research. Today, remdesivir sells for $3,120 for a five day course of treatment.

Americans pay two to four times more for brand-name drugs than residents of other high-income countries. It’s no surprise that a July poll found 81 percent of those surveyed are in favor of allowing Medicare to negotiate drug prices.

In September, in an attempt to squelch Democratic attempts to obtain reasonable drug prices, the Pharmaceutical Research and Manufacturers of America (PhRMA) announced a seven-figure ad campaign against proposals to lower prescription drug prices.

The group also released an open letter signed by the heads of all of its member companies claiming that Medicare price negotiation will “…threaten patients’ access to medicines and sacrifice future medical advances.”

On the same day PhRMA published its letter, Democratic Reps. Scott Peters of California, Kurt Schrader of Oregon, and Kathleen Rice of New York joined all Republicans in voting against this critical piece of the President’s Build Back Better package in committee. Decreased drug company innovation was cited as a rationale. Over the course of their tenure in Congress, Peters and Schrader together have raked in $1.5 million in contributions from the pharmaceutical and health products industries.

Many analysts disagree that lower prices will stifle research and development. A recent investigation by the House Oversight and Reform Committee found that between 2016 and 2020, large makers of brand-name drugs spent more on stock buybacks, dividends, and executive compensation than on R&D. In its review of 14 large drug makers, the committee found they spent $577 billion on stock buybacks and dividends, $56 billion more than they spent on R&D over the same period. Committee Democrats concluded that this perennial PhRMA scare tactic is “overblown.”

Other studies find that the excess revenues pharmaceutical companies receive from higher prices in the US are substantially more than the companies spend globally on their research and development.

A study by the National Academy of Medicine reported that between 2003 and 2015 expenditures on marketing and administration, including executive pay, increased noticeably and exceeded research and development investments by up to 80 percent.

In many cases, large pharmaceutical companies do not actually develop many of the drugs they sell, instead acquiring them from research conducted in universities and other academic centers or the purchase of other pharmaceutical companies, often small startups.

Exorbitant spending on stock buybacks and dividends, as opposed to investing in R&D, is a pharmaceutical company choice, as are inflated spending on marketing and bloated executive pay.

Members of Congress also have a choice: they can prioritize our health above the health of the pharmaceutical industry’s bottom line and its millions in campaign contributions, or they can allow life-saving prescription drugs to remain out of reach of countless Americans in need.

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