TCS Daily

Dark Days Ahead for "Big Pharma" -- and You

By Gilbert Ross - March 12, 2009 12:00 AM

When all three branches of the federal government target an industry, you know it's in big trouble. The hapless companies under the gun are our pharmaceutical manufacturers, but we will all be victims in this crusade.

The Obama administration has taken up the cause of encouraging drug importation. No one in the administration seems to know -- or care -- that importing cheaper drugs will not only expose Americans to sub-standard, counterfeit, and toxic copies of American-made brand name drugs, but will simultaneously import foreign price controls (if Congress really wanted to conserve healthcare dollars, they would pass tort reform and reduce the insidious costs of defensive medicine).

Such artificial price-fixing was a major factor in the decline of European pharmaceutical research and the concomitant revival of our own. But that was then, this is now: a bipartisan coalition of Senators is trying to poke holes in the dike that the FDA had erected against cheap, but unreliable, imported drugs. The dual threats of counterfeits and price controls are coming to a pharmacy near you.

The Obama health plan also includes over $1 billion to institute "comparative effectiveness" criteria for new drug approvals. This means drug trials will have to show that a new drug is not merely effective and safe, but somehow better than its older competitors. Currently, getting a new drug approved for marketing consumes over a billion dollars and ten to fifteen years. To show superiority to drugs already on the market will take longer and be more expensive. This will exert a chilling effect on drug companies that are considering testing new drugs without clear blockbuster potential, since failure to attain FDA approval leads to massive financial losses. Recently, Pfizer scrapped testing of two new drugs in late-stage clinical trials. Were these drugs effective? We'll never know: the world's largest drug maker stated that there was insufficient evidence that they were better than currently marketed drugs, and thus they feared investing millions more in a dead-end trial.

Another front in the anti-pharma crusade is the Medicare drug program. Those now in charge of revamping our health care system plan to make drug companies "negotiate" with Medicare to determine drug prices, due to Medicare's recent expansion into prescription drug coverage. Official and patients agree that this expansion -- Medicare part D -- has been working out even better than predicted. However, drug formulary managers will soon have to accept the prices Medicare dictates: you cannot "negotiate" with an adversary who controls the terms of the discussion. This amounts to another foray into price-fixing. Perhaps Congressional Democrats perceive that this program is working well for seniors and want to put their thumbprint on it before Republicans claim all the credit.

Now, the unkindest cut of all: federal pre-emption of state tort action against drug-makers is off the table. The U.S. Supreme Court ruled 6-3 that Wyeth is indeed responsible for an adverse reaction to one of its injectable drugs -- even though the negligent physician-assistant did not follow the FDA-approved labeling instructions. Wyeth had argued, in Wyeth v. Levine, that the FDA-mandated label pre-empted state tort law. The Justices disagreed, and the pharmaceutical industry is now more susceptible to state actions for negligence and inadequate warning labels -- even though they are legally required to adhere to the FDA's dictates on what should, and should not, be included in the label. Anti-business media headlined, "High court finds against Wyeth." In fact, this decision is against all of us, as pharmaceutical companies brace for the onslaught of litigation and new drug development stalls. Forget about new vaccines against HIV or bird flu, as well as new cancer treatments, despite the President's alleged commitment to a new "war on cancer."

Taken together, these various assaults foretell the decline of the American pharmaceutical industry -- which had been one of our major growth engines over the past twenty years. I believe it may take a wake-up call in the form of an American drug company being taken over by a foreign entity to bring the real costs of pharma-bashing home to our leaders.

The regulatory and legal strictures impeding new drug development will redound to our detriment, as our pharmacopoeia stagnates. Even before this crescendo of bad news, the last two years saw a historically low number of new drug approvals. Do we really want our children and grandchildren to accept 2009 drug choices in 2020 and beyond?

Gilbert Ross, M.D., is Medical Director of the American Council on Science and Health (



Similar but different
Many drugs, even though they have similar effects over all, have differing side effects, or will work differently on different people.

For most chronic conditions, a doctor will first try one drug, then another, to find the one drug, or the combination of drugs that will work best on this patient.

In anti-biotics, it pays to have a large number of drugs, that all work differently due to the ability of microbes to adapt to the affects of anti-biotics. Individual drugs may or may not be better at killing a particular pathogen, but that isn't what matters, having a large arsenal at hand is.

This demand that drugs need to be "better" before they can be approved is something that only a beaurocrat could come up with, and will, like most govt requirements, end up killing people.

You can't have this both ways...although you might want to...
Dr. Ross said "a bipartisan coalition of Senators is trying to poke holes in the **** that the FDA had erected against cheap...imported drugs."

He also makes the argument that imported drugs are inherently "unreliable...counterfeits"...although we seem to be able to manage the flow of toys into this country with the smallest traces of lead...often with on-site factory audits regarding ISO compliance...but somehow we would be less diligent with medicines.

Nevertheless, the author complains that the government is seeking to weaken the FDA and its enforcement programs. He urges that the government should remain very rigorous.

Then Dr. Ross said "The regulatory and legal strictures impeding new drug development will redound to our detriment, as our pharmacopoeia stagnates."

Therefore, the author also argues that the FDA is already too tough on the ethical pharmaceutical houses here and should relax its policies in an effort to encourage drug development...regarding clinical trial licensing qualification. Of course, the proposition that this might also lead to "unreliable" drugs on the US market does not seem to concern Dr. Ross quite as much.

Our drug and medical device companies make a great deal of money here in America. That much is clear. It is in their interest to hold onto their monopoly spite of compelling data that our actual health as a nation is below a number of countries who spend a lot less...and who make and use many of the medicines we can't buy here.

Tightening up the flow of competitive generics from foreign pharmaceutical houses would be very good for US companies. Loosening up the clinical trial standards for FDA approval would also benefit US companies. This article is not about making the practice of medicine "better, faster and cheaper" for the people of the United States. This article is about making more money for the American Health Care Industry.

Makes one wonder who the big supporters of the American Council on Science and Health might be.

No Subject
"...although we seem to be able to manage the flow of toys into this country with the smallest traces of lead..."

Toys maybe, but except for children licking them, I'm not worried.

But the govt. sure has its hands full when it comes to food from China. The WaPost reported:
(By Rick Weiss Washington Post Staff Writer
Sunday, May 20, 2007; A01)

"...FDA "refusal reports" filed by U.S. inspectors: Juices and fruits rejected as "filthy." Prunes tinted with chemical dyes not approved for human consumption. Frozen breaded shrimp preserved with nitrofuran, an antibacterial that can cause cancer. Swordfish rejected as "poisonous."

In the first four months of 2007, FDA inspectors -- who are able to check out less than 1 percent of regulated imports..."

So, I wonder where the other 99% which was NOT inspected.

Now I don't buy the "unreliable drugs" line at all and I'd like the option to purchase a legal product from any vendor.

I just wonder how the dem-congress will manage to screw it up and then claim it was carl rove or bush who really caused the problem.

government created monoplies
When drug companies can patent a drug for 17 years, the goverment is artificially creating a monopoly. So why are we concerned about even MORE government intervention.

If we remove protection of patents it will also solve a lot of problems.

A redundant term.
Monopolies can only exist with government force.

Why should anyone invest significant time and money into a product if a competitor can copy it without paying for the investment?

Drug companies could follow the path of Coca Cola and keep their formulas secret.

well said
But I think it is easy to reverse engineer a drug. I still get a bad taste in my mouth when I talk about Patent law. Mostly because I am an IT guy, and the software Patents out there range from idiotic to dangerous.

I am no audiophile...
but if you want people to make movies, music, etc. there must be some legal means to protect their private property rights.
Intellectual property is even more valuable today than physical property.
We seem to have a 'free' SW market with many open source applications to compete with 'licensed' products.
Why should I buy Word when Open Office is free?

Differential pricing is both a PR and a political problem
Drug companies have been selling at cheap extorted prices to the socialized economies. They've maximized their short term profits but they've both benefited the extortionists and harmed themselves in the long term.

What we need is a law making it illegal to sell overseas at a lower price than the lowest volume U.S. price. If Canadians, Brits, etc find themselves not able to get the drug from their national systems they will either buy it remote on their own hook or else go to war with their own bureaucrats.

Meanwhile the pharmas would stop the bleeding which comes of the average American's very justifiable failure to understand why he's paying $10 a pill while some Canuck is getting it for $5.

If patents are removed, a VERY BIG incentive to spend Billions will be gone
The PROCESS to award patents may be faulty and the products and processes that are being patented may be ridiculous, but to say that there should be NO patents is NO WAY to encourage more innovation and thus solve a lot of problems.

Wrong on many counts
1) The author did not argue that the FDA should be less strict. He argued against a new standard that the FDA wants to use. There is a big difference between the two statements.

2) Drug companies do make lots of money on the few drugs that are big hits in the market. There are many more that barely break even, and even more that lose lots of money, and many more that never make it the market in the first place. Drug companies as a whole do not make "a great deal of money".

3) Are you seriously arguing that there is no such thing as an excessive regulation? Especially when it comes to health?

It will remove the need for an FDA.
As no company in it's right mind would spend the 100's of millions of dollars needed to bring a new drug to the market.

FDA is the problem.
The FDA requires companies, as a part of the approval process, to release the formula.

Patent System
When it comes to patents, its anathema to defend them in some libertarian circles, but the ability to enjoy an exclusive right to control the producion of something that involves a significant amount of design effort has been with us from the beginning and it has producing amazing results.

We can argue about the totality of the exclusivity or the length of the patent (other IP laws, such as copyright, are worse) but if government serves any purpose at all, otherwise many of the things we take for granted would not exist.

If you want to see a world without patents, try the old Soviet Union-they produced nothing domestically and didn't respect the IP of foreign nations. It was amusing to hear that their perfection of replication without understanding was so pervasive that they would reproduce integrated circuits with the exact same metal path- i.e., right angles were right angles-where as more sophisticated IP pirates would round the corners to make a superficially distinct item. They simply didn't understand whether a rounding a right angle would affect the functional performance of the chip.

Nailed It

Screw those that want to piggypack off our efforts to produce better outcomes than they could ever hope to achieve without our efforts.

I'm sick of hearing how great socialized medicine is by those who fail to account for the free rider and cross-subsidization problems.

Open office has fewer features and is slower. I have it, use it and don't own stock in M$. However I realize its hardly a perfect substitute.

The point is a commercial product needs to be worth the price.
Given 'free' competition.

They could save that for any wrongful death lawsuits and still be ahead.
No doctor would proscribe a treatment that would kill the patient. Bad for business.
Same for any drug company.
Even black market drug companies have incentives to keep their heroin, cocaine and mj as 'safe' as possible.

A patent is a protection of private property rights.
Why would libertarians not defend such rights?

Orphan drugs
If drug companies don't make money, what incentive do they have to develop any product to cure 100 people out a population of 7 billion?

Of course such effort may lead to spin-offs and profit, but if the financial incentive is not their and FDA rules inhibit testing and evaluation, why would they do it?

Certainly no company would be interested in a drug to make Bruce Banner stop changing into the Hulk.

That's because most CANNOT THINK CONCEPTually. But BOTH sides (of the political aisle) share blame
Most people – the so called “common men” – can’t think conceptually. Their life is guided by perceptual knowledge. They have almost ZERO concept of Concepts.

But BOTH sides (of the political aisle) share the blame for this sorry state of affairs. Both sides are united against the fact that human mind is capable of knowledge acquisition and concept formation.

What an arrogant SOB!
"Most people..."

You are CERTAINLY one of THEM Marjon. Your ad hominem attack dragging my MOTHER into it, PROVES it

No different than the socialist 'elites'.
Like you, they feel most people are too stupid to take care of themselves and like you believe that government must do the job, with people like you in charge, of course.

You prove it a 2nd time with YET another ad hominem attack. Why are you EVADING the issue of my Mom?

expected decline of Big Pharma
Of course we can expect its decline; the whole countr is declining anyway, so why shouldn't big pharma match it. It was expected to from the meddling they've done in Europe over the years. Remember how Germany was the main pharma country? No more, soon it will be the same in the States.
But there is a silver lining in it all because the left wing MSM and intelligencia, and now government,
only want to make people think the worst of this industry too to make private enterprise not look so good; that way government can be looked to for all solutions and people will more readily accept the socialist paradigm.
They're really working hard on those 10 pillars, that's why the US is getting to look more like the old USSR. Too bad.

Why the arrogance?

Why so sensitive?

Claiming and/or implying to be a CHRISTIAN, Marjon continues to bad mouth an old woman he never met

And you acknowledge your socialist elitism

Since Ayn Rand is your political mother, I do bad mouth Rand.
Reading this selection sounds just like you. Even the SHOUTING!

This bit sounds just like you.

"One illustration will be sufficient: suppose Mr. Smith, a customer of Government A, suspects that his next-door neighbor, Mr. Jones, a customer of Government B, has robbed him; a squad of Police A proceeds to Mr. Jones’ house and is met at the door by a squad of Police B, who declare that they do not accept the validity of Mr. Smith’s complaint and do not recognize the authority of Government A. What happens then? You take it from there."

And you do the same thing Rand does, refuse to take it from there.

I and many others have taken from there and demonstrated that free market solutions do exist and provide a better incentive than the state for 'police' to do their job.

"Remember that forcible restraint of men is the only service a government has to offer. Ask yourself what a competition in forcible restraint would have to mean."

This is why you like government? This places you in good company with the socialists.

CHRISTIAN Marjon is PROUD to call an old woman he never met a b!tch; and bears false witness too
When did I talk about Rand?

And when did you answer the dilemma of the proverbial materially disinterested honest Third Party in “anarchy”?

Still hiding behind your mother?

CHRISTIAN Marjon can’t STOP calling an old woman he never met a b!tch; and can’t STOP EVADING
And cant’ STOP bearing false witness.

When did I talk about Rand?

And when and how did you resolve the dilemma of the proverbial materially disinterested honest Third Party in “anarchy”?

Still hiding behind your mother?

CHRISTIAN Marjon RELISHes questioning the CHASTITY of an old woman he never met

look who shills for Pharma - old Doc Ross
I'd say this article qualifies as propaganda.

For one, isn't competition a good thing?

I understand the doctor likes to get his kickbacks, but those of us who need pharma drugs don't really enjoy paying exhorbitant costs so he can get them.

This is just ideological claptrap from the bad doctor, more fear mongering from the right. Big surprise.

Really unfortunate, because MD's are geting squeezed in the middle between Pharma and Insurance in the great Money Grab that has become our health care system. The money has to be going somewhere, its not going to doctors or hospitals. Lets stop protecting the crooks and see what happens.

"Lets stop protecting the crooks"
All the crooks? Even the Treasury Secretary, Rangel, ......

Giuliani arrested the panhandlers, minor offenders, true, but he made an impact that helped clean up the town.

Joe Arpaio in enforcing immigration law in Maricopa County and the Feds are now attacking him. Napolitano, the former governor is now in charge of DHS, but did not have the courage to go after him as governor.

Yes, lets stop protecting the crooks, all of them.

Food production is very different...
Actually we import an immense amount of prepared food into America but food is processed in myriad factories that are not subject to our inspection disciplines. If we refused to allow such goods into the country due to the risk of contamination then we would still probably have enough to eat over here...and at reasonable prices.

Drugs to be exported to the United States, however, might be bonded at the production facility and rigorously controlled all the way over here. China itself might not actually be such a great supplier of generic ethical pharmaceuticals for our markets anyway. Therefore, we need not necessarily reject out of hand foreign competitors regarding health care goods and services just because we have had some bad experiences with China.

Excessive Regulation...
I have an informed opinion. Although I am probably wrong a lot. Nevertheless, I worked at Merck as a research scientist when we were qualifying vaccines and at Abbott Laboratories as the project manager as we were transitioning a diagnostics system (TDx) out of R&D into full production while we were completing our FDA submissions in time to launch. As demanding as this process was in the 1970's it is much more rigorous today. One of my daughters has been in the clinical studies game for more 10 years already.

Whether or not we have excessive regulation is a matter of opinion. However, the barriers to entry have been raised so high today that competition is seriously constrained and the time to market has been so expanded that products reaching patients are at least one generation behind the best work by the time they are released and important design improvements are routinely held back in order not to delay approvals. The science is compromised and the medicine itself is weakened by all the red tape.

We pay a great deal for our health care products and services in America because the cost to do business here is too high for these players not to demand a premium return. Competitive formulations from alternative vendors...whose products will sometimes not be approved because they aren't substantially better than similar medicines already on the market...are kept out of the game. But for all of this our outcomes are measurably inferior and our life expectances are shorter than those in many other places.

In the end we cannot afford to spend more and more for health care goods and services as projected. Insofar as the FDA, the AMA and many others are making the practice of medicine in America too expensive for many of us to actually go see a doctor as much as we should...something is certainly excessive. We are more wealthy than ever before here in the United States but our quality of life in this regard is deteriorating.

You said "Drug companies as a whole do not make a great deal of money."

Yeah. Well they are not General Motors...collapsing into oblivion...either. In fact they seem to have the billions of dollars needed to consolidate their industry even a moment when no one else in the world can find enough money to keep our various economies alive and well.

Something is excessive? What?
Can't you make a decision?

Here are some ideas
"John Vernon of the University of Pennsylvania’s
Wharton School finds that the larger
the proportion of a firm’s pharmaceutical sales
that are subject to price regulation, the smaller
its R&D expenditures will be as a proportion of
its sales. Price controls and other equivalent regulations
clearly reduce the expected return on
investment. Vernon estimates that if U.S. policy
mandated price regulation that was identical to
the “average” degree of price regulation present
in other pharmaceutical markets outside the
United States, it would lead to an approximate
46.5 percent reduction in drug industry R&D
investment intensity and correspondingly high
costs in terms of foregone medical innovation.

"Fix the FDA: Fully, Fundamentally, and
The current political spotlight on prescription
drug prices has drawn attention
away from a more important issue—regulatory
barriers to the availability of the best medicine.
The most “unaffordable and unavailable”
drugs are those that carry no price tag,
because the FDA keeps them off the market.
The starting point for improving access to
the drugs of today and tomorrow should be
reducing government barriers that inflate
their development costs and thus their eventual
market prices.283"

"By a conservative estimate, FDA delays
in allowing U.S. marketing of drugs
used safely and effectively elsewhere
around the world have cost the lives of
at least 200,000 Americans over the
past 30 years. That figure does not
include deaths that might have been
prevented by the use of drugs such as 5
Prozac, which is associated with the
decline in suicides of individuals suffering
from depression.295"

"There is good reason, then, to treat the
FDA, as Michael Tanner of the Cato Institute
suggests, as “one of the most destructive of
all federal government agencies,” a bureaucracy
that “is clearly an unnecessary burden
to the American health care system.”314 At the
very least FDA decisionmaking should be
decentralized and streamlined further.315"

"The Progress and Freedom Foundation
proposes allowing private entities to become
FDA-licensed “Drug Certifying Bodies” and
“Device Certification Bodies” to oversee
pharmaceutical and product development,
though the underlying legal standards of
efficacy and safety and FDA enforcement
would remain unchanged.317 Congress could
choose to accept approval by selected foreign
nations: For instance, Peter Barton Hutt of
the law firm Covington and Burling suggests
giving the FDA three months to review the
administrative record of the European
Medicines Evaluation Agency, after which it
would have to specify evidence that a drug
was unsafe or ineffective, or else the drug
could be sold.318 Or certification could be left
even more directly to other private bodies
competing in a free market.319 Unapproved
drugs could be marketed as such, with doctors,
pharmacists, hospitals, and insurers all
operating as gate-keepers to advise patients."

"Demonizing Drugmakers
The Political Assault on the
Pharmaceutical Industry
by Doug Bandow"

What version are you using.
I hate to say that comments like that denigrate the experience of Open Office. It is faster then word, and the orthogonal documents are wonderfull.

The trick is don't use Word formats at all. Use the native Open Office document structure.

The healthcare paradox
Still no one has every answered the big question.

If you require the care of all humans because of ethics, then you must pay for those who can not pay.

This creates the problem of more and more resource being drawn from those who do pay, which is mostly corporations. They are more and more removing health benefits because they can not afford them, which makes the problem worse. It becomes a downward cycle.

Then corporations in this country have to compete in countries where companies pay no direct health costs.

It creates another deep problem...

There are two ways to fix this problem.

1. Stop covering the poor or
2. Socialize medicine

Number one is so distasteful to the public I doubt any one will care till the system collapses. No one would support babies dying outside of emergency rooms because they can not pay.

Number two is also distasteful but is the more likely solution that will be accepted by the public in general. The longer we fight this solution the more it will cost in the long run.

Please tell me some other way to fix it, in reality?

look who shills for the communist point of view
competion is good, except when those you are trying to compete against are being subsidized by govt.

It used to be called charity, the third way.
But now government 'ethics' will force Catholic charity hospitals to kill babies.

Before nimrod start complaining about religion there used to be civic organizations that provided such care.

thats hilarious mg
Is that what communism is now, a point of view that seeks the best options/actions for people? May as well be, all your bogeymen are invented. You would have nothing without them.

I challenge you to name an industry that isn't subsidized in some way. Other than illegal drugs. But you can argue illegal drugs are subsidized too, they are illegal therefore prices are inflated. You poor fool.

What happended to mutual aid societies?
They inspire the notion people don't need big government to take care of them and must be eliminated.

Subsidization is a good thing?
I support ending government subsidy for any industry. Do you?

Step back and be honisty.
Would charitable contributions really cover the cost of uninsured people in emergency room?

When it comes to catholic churches, I don't know the facts of what you are referring to, but if I give money to any business or charity I expect the ability to enfluence they way they do business. If they don't want to they they must not need the money.

Why are people forced into emergency rooms?
Because the government forces hospitals to treat everyone in an emergency room.
CVS, Walgreens and Walmart are setting up low cost, in store clinics. No reason a charity hospital or group can't do the same.

Since the government claims killing babies is acceptable it must force that upon those who believe it abhorrent?

Religious hospitals must then turn away all government subsidized patients. Who loses?

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