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Big Pharma Is Pushing a Big Lie

People are dying because they can't afford necessary medications, but drug manufacturers say they need high prices to fund future breakthroughs.

Daniel Sorabji/AFP/Getty

In June of 2017, 26-year-old Alec Raeshawn Smith died on the floor of his apartment from diabetic ketoacidosis, a condition where, without insulin, the blood turns acidic and causes organ failure. His mother, Nicole Smith-Holt, found his body next to an empty vial of insulin. Just two months previously, Antroinette Worsham found her 22-year-old daughter, Antavia, under similar circumstances—dead and out of insulin.

Skyrocketing prices have led 1 in 4 insulin-dependent individuals to ration an essential medication, without a doctor’s supervision or approval, often with serious, and sometimes fatal complications. In reaction, the Food and Drug Administration (FDA) will hold a May 13 public hearing on the production of biosimilar insulins, the latest attempt by the federal government to explore ways to lower insulin costs.

Lawmakers have floated other measures to reduce the cost of drugs to consumers, such as capping U.S. list prices at the median in other developed nations, authorizing Medicare to directly negotiate drug prices, and allowing the personal importation of prescription drugs from Canada. The pharmaceutical industry has invariably responded to these proposals by blaming high costs on “middlemen” who don’t pass rebates to patients and by doubling down on the “innovation” myth—the unproven notion that high list prices are necessary to fund tomorrow’s breakthroughs.

For instance, at an April House Energy and Commerce Committee hearing on insulin prices, a representative of Sanofi, a French multinational pharmaceutical company, began her testimony with an anecdote about how Sanofi’s PCSK9 inhibitors (the latest generation of cholesterol drugs) saved the lives of her husband and 7-year-old son, both of whom have a genetic disorder called Familial Hypercholesterolemia (FH). In doing so, she inferred that the steep price of insulin and other drugs is necessary to advance medicine and protect future generations.

The trouble is Sanofi didn’t identify the PCSK9 gene or link this protein-regulating gene to FH. Nor did the company have the idea to develop PCSK9 inhibitors to reduce the risk of cardiac events in those with this condition. Researchers at public hospitals and universities around the world collaborated on these tasks. Realizing the potential for profit, the drugmaker shepherded the therapy through later stage trials and FDA approval. Until very recently, Sanofi’s PCSK9 inhibitor, Praluent, retailed at $14,000 per year and was not always covered by insurance. Like insulin, the drug was priced out of many patients’ reach.

It’s common for industry representatives to tell stories of individuals whose lives have been saved by innovation—or of individuals who are desperately waiting for a breakthrough. These emotional appeals should not distract from the facts: Big Pharma does not apply the majority of profits from costly medicines to research and development (R&D); Big Pharma does not drive innovation; and Big Pharma does not meaningfully invest in treatments for rare and neglected diseases. As industry representatives are sure to plug “innovation” again at the next hearing, and at other high-level discussions on drug prices, it’s important to understand the industry’s actual role in the development of lifesaving medicines.

Industry spending on R&D is a fraction of what it spends on marketing and lobbying, and as many academics and journalists have noted, it also pales in comparison to the drug manufacturers’ claims. Citing a 2014 report by the industry-funded Tufts Center for the Study of Drug Development, manufacturers have posited that it costs about $2.6 billion dollars to develop a new drug. The cost, according to consumer advocacy groups like Public Citizen, is actually closer to $161 million—an amount manufacturers can sometimes make back within days of introducing a product. For instance, drugmaker Novartis likely recovered R&D expenses for the leukemia drug Gleevec in less than two weeks. And drug companies’ contributions to R&D are even slimmer when considering government tax credits that come with these expenditures, which can reduce corporate costs by almost 50 percent.

Drugmakers would also have us believe that scientists in corporate laboratories conduct the “basic” or preliminary research for most new medicines. Their ads feature in-house researchers peering in microscopes and studying brain scans. In reality, it is the federal government that funds 84 percent of initial drug research, and charitable organizations additionally contribute on top of that. A recent study showed that all 210 of the new drugs approved by the FDA between 2010 and 2016 were funded by the National Institutes of Health. This taxpayer-funded agency was behind Sovaldi, a novel treatment for Hepatitis C; Gleevec, which treats chronic myelogenous leukemia; and Cervarix, Gardasil, and Gardasil 9, vaccines that protect against HPV.

It was scientists at the University of Pennsylvania who recently developed CAR T-cell therapy, a now-popular cancer treatment. Novartis took the drug through the FDA approval process and then slapped on a $475,000 price tag. Over at the Centers for Disease Control and Prevention, part of the Department of Health and Human Services, researchers found that an older drug, Truvada, can be used to prevent HIV infection. Since that drug was acquired by Gilead, taxpayers have not recovered a single penny for research costs, even though the government owns the patent. Examples like these have led many health care advocates to claim that Americans pay twice for their drugs—first as taxpayers and then again as consumers.

And while the drug industry purports to focus on cures for Alzheimer’s, rare cancers, and other neglected diseases, it actually prioritizes “me-too” drugs (tweaks of competitors’ medications introduced simply to gain market share) and drugs for non-life-threatening conditions like male baldness. Seventy-eight percent of patents recently approved by the FDA were for medications already on the market; and only 1 percent of R&D funding was allotted to rare and neglected diseases between 2000 and 2011.

It’s safe to assume, though, that we won’t be hearing about the plight of affluent, middle-aged men at the hearing. Instead, we’re likely to hear about a future in which people are dying because of a lack of commercial incentives to produce drugs without patent protections. One health care reporter recently described this threat as “the industry’s Soup Nazi justification for the status quo.” No high prices? Then no innovation for you.

These scare tactics are unfounded. Various blockbuster medicines, such as the polio vaccine, were developed with taxpayer money outside of the patent system. And too often, patents hinder innovation by deterring the creation of generics, restricting access to research, and stifling the free exchange of information. This is an underlying reason for the hearing on insulin biosimilars. Since University of Toronto researcher Frederick Banting developed the first insulin formulation nearly 100 years ago, manufacturers have gamed the system by “evergreening” patents, colluding to fix prices, and engaging in “pay-for-delay” schemes (paying generic manufacturers to delay bringing a product to market). Insulin manufacturers have gotten away with this the same way Calgene has gotten away with abusing patents for its $125,00-per-year cancer treatment Revlimid, and AbbVie with its $60,000-per-year arthritis drug Humira, and GlaxoSmithKline with its $9,600-per-year asthma medication, Advair Diskus: by appealing to “innovation.”

The make-believe pipeline from pharmaceutical laboratories to newer, better medicines has obstructed measures to put existing drugs within patients’ reach. By claiming credit for public labor, Big Pharma has insisted upon special treatment (like tax breaks and minimal oversight). As a result, an increasing number of chronically ill people are suffering and dying without needed medications.

Diabetics are experiencing complications like diabetic ketoacidosis, infection, vision loss, organ failure, and—as was the sad case with Alec and Antavia—death. Thousands of cancer patients are skipping or skimping on treatments like Revlimid. Nearly one-third of arthritis patients don’t adhere to treatment regimens, despite significant pain and mobility impairments. Some with asthma are struggling without needed inhalers. People simply can’t afford to metabolize glucose to live, walk, or breathe.

It is past time for policymakers to scrutinize the drug industry’s claims to ingenuity. Debunking the myth of innovation is a step toward protecting the hundreds of thousands of medication-dependent Americans who are being gouged for profits on drugs they likely helped pay to create.