How Congress Legalized the High Cost of Drugs in 2003

Rapid Growth of Drug Costs in US Compared to Other Countries

The rapid growth in drug prices and profits in the US over the past 12 years since the Medicare drug benefit law was passed in 2003, reflects what pharmaceutical companies believe they can receive from payers thanks to Congress and President Bush. And, the payers of prescription drugs are largely the federal and state governments, insurance companies and ultimately US taxpayers, employers and patients.

While the costs of drugs has been skyrocketing, Congressional leadership has done virtually nothing over the past dozen years to investigate price gouging or even allow Congressional discussions and votes on bills to modify and improve the Medicare drug law.


The costs of pharmaceuticals in the US is $1,000 per person compared to $500 per person for 30 other benchmark counties.

As a result of the rapidly rising prices set by drug makers, federal, state and local taxes and deficits continue to grow, insurance rates continue to escalate and unpaid medical bills are the largest reason personal bankruptcies.

In addition, a large percentage of people whose resources  become depleted and don’t file for bankruptcy, they become eligible for Medicaid and their medical expenses are then shifted directly to federal, state and local taxpayers.


As a result, Americans have substantially less access to affordable medications unlike most other countries around the world.

At the same time, Congress and many health care providers and researchers continue to accept millions of dollars each year from Big Pharma in support of their financial needs and interests.


How Other Countries Control the Costs of Drugs

As illustrated below, the 2013 Canadian Patented Medicine Prices Review Board’s (CPMPRB) Annual Report, indicates that the average price of drugs in the US is 100% more than in Canada and other benchmark European countries.

Canadian to Foreign Drug Price Ratios

The huge price differential is attributed to the role and commitment that other governments have in assuring that their citizens have access to affordable and effective health care including new therapeutic drugs.

In Canada and Europe, the national governments review and approve the drug makers proposed prices based on a number of factors including: their cost; the evidence of added clinical benefits and outcomes; the comparative price in other countries; and the evidence of added value that these new therapeutics provide to patients over existing drugs.

None of this occurs in the United States.

 Drug makers set their prices unilaterally and may offer discounts to large buyers with the exception of Medicare, which has 55 million beneficiaries. This is due to the legislation approved by Congress and President Bush in 2003.

Growing Backlash from Stakeholders and Advocates

Big Pharma’s years of monopoly, greed, unethical sales and marketing has finally reached a tipping point. It has resulted in a revolt by various stakeholders including internationally known doctors, medical centers, pharmacy benefit management companies, insurance companies, advocates, patients, state governments, the media and federal prosecutors.

Cancer Specialists Take the Lead in a Call to Action

According to the Wall Street Journal, the highly respected, Dr. Leonard Saltz, chief of gastrointestinal oncology at Memorial Sloan Kettering Hospital (MSKCC), used the June    conference of the American Society of Clinical Oncology (ASCO) that was attended by 25,000 to express his harsh and growing criticism of the ever-growing high cost of cancer drugs.

physician group

Dr. Saltz’s illustrated the issues with Bristol-Myers Squibb’s new experimental regime that combines two drugs for the treatment of melanoma. While he acknowledged that the benefits of these drugs were truly remarkable, he noted that they would cost about $295,000 a year per patient.

Dr. Saltz observed that if all patients in the US with metastatic cancer took drugs priced at $295,000 a year, it would cost $174 billion, just for one year and that is neither affordable nor sustainable.

He went on to add that the cost of cancer-drugs has more than doubled in recent years and the cost increases are not always related to their increased value or any substantial improvement in treatment outcomes.

Dr. Saltz also recommends that Medicare needs to change the way it pays doctors for infused drugs to eliminate the financial incentives and conflicts of interest, resulting in doctors using the most expensive versus the most cost-effective drugs.

In July, over 100 highly-respected cancer specialists from across the country published and signed a commentary in the journal, Mayo Clinic Proceedings. These oncology and hemotology clinicians voiced their outrage over the years of soaring cancer drug prices.

They called for new government intervention in regulating these costly therapeutics in the absence of any industry self-regulation or restraint.

They reiterated the need for Congress to repeal the provisions of the 2003 Medicare Modernization Act that bans Medicare from  negotiating prices directly with pharma companies (saving $16 billion a year) and to decriminalize the importation of drugs from Canada and other countries at a fraction of the cost charged in the United States.

The group also recommended the establishment of a new regulatory body that would help set drug prices after they received FDA approval and for Congress to reform patent laws that can restrict the timely development of less expensive generic drugs.

They also suggested that the newly created Patient-Centered Outcomes Research Institute and similar groups include the cost of drugs in their assessment of the value of treatment.

The cancer treatment leaders also urged other cancer specialists to critically consider:

  • the cost of different drug options and the financial burden placed on patients; and
  • the evidence of comparative benefits, side-effects, outcomes and limitations of different drugs when recommending treatment options to patients and families.

To assist cancer specialist, doctors at MSKCC have created a DrugAbacus calculator to assist in the education of clinicians and patients. The calculator currently provides information on 54 cancer drugs and calculates the relative value of drugs by adjusting the price to reflect both side-effects and benefits that they bring in extending life.

Finally, the cancer treatment leaders encouraged a public education campaign regarding these issues and a grassroots effort to protest the high cost of drugs and to demand changes that are in the best interests of patients.

Negative Media Exposure

In an October, 2014 60 Minutes interview, Dr. Saltz, MSKCC, provided the example of when the new patented drug, Zaltrap, was approved by the FDA for treating advanced colon cancer. He compared Zaltrap to Avastin, a similar drug that had been on the market and concluded that both deliver the same result – extending the median survival by 42 days. However, Zaltrap cost $11,000 a month, more than double the cost of Avastin. As a result, MSCC took the unprecedented position to reject  using Zaltrap over Avastin at MSCC due to its substantially higher costs and lower value.

Dr. Saltz added that the high cost of drugs has negatively impacted patient care and high insurance co-payments have forced some patients to forego effective therapies because of the financial burden it imposes on them and their families.

Op-Eds and Editorials critical of Big Pharma’s pricing practices and its negative impact on public health and the plight of individuals have appeared in various media including 60 Minutes, The New York Times, The Wall Street Journal, USA Today, The Washington Post, Bloomberg, News, CNN and a variety of professional and public publications.

The High Cost of Other Specialty Drugs

The controversy surrounding high-priced patented drugs and biologics in the US is not limited to cancer treatment. It is also present with drugs for the treatment of other debilitating chronic diseases such as AIDS, diabetes, hepatitis C, multiple sclerosis cystic fibrosis, and various mental illnesses that affect millions of Americans.

Pharma Net Profits 2005-2012Bloomberg Business and the professional journal Neurology have reported that old brand-name medications for MS have become more expensive with each new therapy that has been developed.

Medications for MS that were introduced years ago now cost as much as newer, high-priced therapies. Now, all the MS drugs cost between $50,000 and $65,000 a year including the ones that were sold for less than $10,000 when they were first introduced.

Express Scripts, a large pharmacy benefit management company (PBMC) just reported that for the fourth consecutive year, medications to treat diabetes (which affect 29 million Americans) were the most expensive traditional therapy class.

The annual spending for drugs increased 18% in 2014, primarily from a 16% increase in specialty drugs.

Gilead’s new Hepatitis C drugs: Sovaldi and Harvoni are sold in the US for $1,000+ a pill and up to $100,000+ for a course of treatment. However, Gilead sells the same drug in the United Kingdom, where prices are regulated, for 33% less

In 2014, Gilead cashed-in more than $12 billion in sales revenue just from these two Hepatitis C drugs. And, there are more than 3 million Americans that have Hep. C, an infectious disease that can lead to cirrhosis, cancer and liver failure.

Forbes estimates that Gilead could make $227 billion, if it just treated all the US cases of Hep.C.

Other examples include Vertex’s new drug, Kaydeco for cystic fibrosis costs $300,000 a year and Cegene’s drug for multiple myleoma costs $150,000 a year.

Impact of High US Pharmaceutical Prices on Patients, Taxpayers, Employers and Governments.

According to the Health Research Institute (HRI), only 4% of patients currently use specialty drugs, but those drugs account for 25% of total US drug spending.

The impact of the unregulated, US pharmaceutical industry’s pricing is increasing taxes and adding consumer and government debt as spending for drugs has gone through the roof.

To illustrate, the number of people in the US with prescription drug expenses greater than $100,000 a year has tripled in 2014 according to Express Scripts.

The dramatic increase in budget-busting government spending for prescription drugs is reflected in financial reports of the US Departments of Veterans Affairs and Defense; Cities, Counties, States; prisons and jails; Medicaid, Medicare; and public and private employers.

When spending for drugs becomes so inflated, individuals, employers and governments spend disproportionately more for health care and drugs, and have to cut back on spending for other sectors of the US economy as well as go into debt.

These enormous expenses have also resulted in insurance companies and employers cutting back/eliminating/shifting health insurance expenses to their subscribers, employees and government to pay. Some private insurance companies and the VA have also had complaints filed against them for rationing and denying the use of expensive drugs.

According to Kaiser Health News, over 70% of Americans say “the costs of prescription drugs are unreasonable”. And, about 25% report that they or their family members ‘have not filled prescriptions in the past year and/or have skipped or cut pills in half because of these high costs.’

These high costs have also resulted in substantially higher insurance premiums with higher subscriber deductibles/co-pays and growing rates of unpaid health care expenses and personal bankruptcies.


Taxpayers and the US economy are being badly hurt by Congress’s irresponsible actions and preferential treatment of Big Pharma over patients, taxpayers, employers and other stakeholders.

This situation is very damaging to Americans and has grown to crises proportions. Congress needs to begin acting in the public interest like other governments in Canada and Europe.

A future blog will highlight some the promising actions underway aimed at reducing the these problems.

I look forward to your comments.

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