never been a study showing that they are more effective at relieving
symptoms of joint pain and inflammation than all these other
medicines that have been available for many, many years and are much
more affordable," said Dr. Matt Handley, a physician with Group
Health Cooperative, a nonprofit managed-care organization in
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On top of the $532 million spent every year on over-the-counter
drugs, consumers spent $90 billion more on prescription drugs last
year than the $64 billion that was spent just six years ago.
And yet, there is little evidence that the huge increase in
spending is dramatically improving the health of Americans. Are
consumers getting their money's worth?
$802 Million for One New
Why do prescription drugs cost so much money?
According to a Tufts University study, on average it costs $802
million to bring one new medicine to market. The high cost of drug
development is the industry's justification for the high price of
"The $802 million figure is used by pharmaceutical firms, I
believe, to help explain the enormous challenge involved in bringing
a new product to market," said Ken Kaitin, who runs the Tufts Center
for the Study of Drug Development. "These are extraordinary costs to
bring individual products to market."
While it is not possible to look at a breakdown of research costs
— companies aren't required to make this information public — their
profits are public, and the drug industry is the most profitable
industry in the country.
"Their R&D [research and development] costs could be $15
billion, $15 trillion, $15 gazillion, and it wouldn't matter if
their profits are double that," said Dr. Marcia Angell, a former
editor of the New England Journal of Medicine.
The drug industry claims its high profits are necessary in order
to conduct expensive research and development. It spends more on
research than any other industry.
The federally funded National Institutes of Health may be the
drug industry's biggest benefactor. This government agency alone
will spend more than $23 billion on research this year. And much of
the research benefits the drug industry.
"There's no other industry in which you have so much public
investment in the fundamental knowledge that enables … the
development of the commercial industry itself," said Dr. Bernadine
Healy, who used to run the NIH.
And how important is this publicly funded research to the
industry? The NIH looked at the five top-selling drugs of 1995 in a
report. It found that "NIH-funded research played a critical role"
in discovering each one of those drugs.
But however much it may actually cost to develop a drug, which
drugs are consumers getting for their money?
Similar to Existing Drugs
A closer look reveals that much of the profits from prescription
sales are not derived from breakthrough drugs, but rather from drugs
that are similar to already popular medications.
When a drug company submits a drug to the Food and Drug
Administration for approval, the agency tries to determine how
important the drug may be. And the FDA divides all drugs into two
categories: "priority" drugs — which are believed to be a
"significant improvement" over what already exists, and "standard"
drugs — which are similar to what exists.
But, adding up all the drugs approved over the past six years, 80
percent of all those drugs were deemed by the FDA to be similar to
what already exists. In other words, not a significant improvement.
"I think the level of innovation that we're seeing from the
pharmaceutical industry is really mixed," said Nancy Chockley, who
runs an institute funded by managed-care organizations. In a new report, NICHM
found the percentage of new, innovative drugs coming from the
pharmaceutical industry is actually decreasing.
"What we found is that over the last 12 years that there's really
been a shift in the type of new drugs being approved by the FDA,"
said Chockley. "And we found that most of the growth was really in
drugs that did not show any significant clinical improvement."
Extending the Patent Life
The patent system gives companies an exclusive monopoly for the
length of the patent — meaning they can make huge profits. That is
the incentive drug companies have to continually invent new drugs.
Then, when the patents on those drugs expire, other companies can
copy the drug, make a generic version, and the new competition in
the marketplace lowers the price. The FDA says the generic drugs are
just as good as the original drugs.
That's the way the patent system is supposed to work, but that is
not the way it always works. The drug industry's lawyers and
lobbyists have created or found so many loopholes in the laws that
some generic drugs are often delayed or never get to market.
BuSpar is an anti-anxiety drug manufactured by Bristol-Myers
Squibb. After the company had had a monopoly on the drug for years,
the patent on BuSpar was set to expire on Nov. 21, 2000, which meant
a cheaper generic version was supposed to be approved by the FDA and
available to consumers the next day.
And then, just hours before its patent on BuSpar expired,
Bristol-Myers Squibb got a new patent on what the drug becomes after
you swallow it. And the law is written in such a way that
Bristol-Myers was able to then keep the generic drug off the market,
claiming that it would violate its new patent. There was no
innovation involved — only an innovative legal strategy.
Dr. Carol Ben-Maimon, who has worked in the drug industry for 15
years and is chairwoman of the Generic Pharmaceutical Association,
believes that Bristol-Myers was in this for profit and not public
health. "I don't think there's any question," she said. "They didn't
do anything to the product to improve it. "
Bristol-Myers was sued by the generic companies, which claimed
that the last-minute patent filed with the FDA should not keep the
generic drug off the market. It took four months for a court to rule
in the generic companies' favor.
"During those four months, Bristol-Myers continued to have the
exclusive right to sell this product on the market, no generic
competition, and I believe this product is about, over a $700
million-a-year revenue product for Bristol-Myers," said Rob Funston,
an attorney for a company that produced the generic version, Watson
Labs. "So during those four months, they made approximately $200
When asked several times to discuss its strategy to extend the
patents on BuSpar and on other drugs, Bristol-Myers refused.
Many experts believe the industry, in general, is producing fewer
"If I'm a manufacturer and I can change one molecule and get
another 20 years of patent rights, and convince physicians to
prescribe and consumers to demand the next form of Prilosec, or
weekly Prozac, instead of daily Prozac, just as my patent expires,
then why would I be spending money on a lot less-certain endeavor,
which is looking for brand-new drugs," said Dr. Sharon Levine, the
associate executive director and a pediatrician for the Kaiser
Permanente Medical Group. She is responsible for assessing the best
resources for the medical group, including helping decide which
drugs are used.
But with so many drugs for each of these conditions, how are
consumers supposed to know which drugs are the best? Surprisingly
enough, the FDA says a new drug does not have to be any better than
what already exists. "All you have to be able to prove is that the
drug is better than nothing," said Levine.
The rules by which this hugely profitable industry operates do
not always serve customers adequately. The Federal Trade Commission
is investigating whether drug makers illegally delay generic
competition. Some members of Congress are trying to close the
loopholes in the law to make it easier for generic drugs to become
However, the drug industry has enormous influence in Washington.
The pharmaceutical industry has more registered lobbyists than the
number of senators and congressmen combined.