DOSE OF REALITY: BIG PHARMA’S YEAR OF BAD BEHAVIOR — PART II

Part II: Pushing Debunked Innovation Rhetoric to Oppose Rx Solutions

Despite unprecedented attention on the crisis of prescription drug affordability, Big Pharma maintained the industry’s profits-over-people approach in 2021. From repeatedly hiking drug prices, engaging in anti-competitive tactics to undermine competition, price-gouging patients and taxpayers for unproven treatments and pushing debunked innovation rhetoric to oppose drug pricing solutions — Big Pharma had a bold year of bad behavior.

Big Pharma’s audacious approach to business-as-usual over the last year helped the industry score blockbuster profits and bank more than $1.7 trillion in cash — even as more than one-quarter of Americans faced financial uncertainty affording their medicines.

On top of this year of bad behavior, Big Pharma can be expected to maintain an annual tradition of ringing in the New Year with a fresh round of price hikes on brand name prescription drugs beginning on January 1. In the countdown to these New Year price hikes from Big Pharma (the fourth major round of Big Pharma price hikes during the COVID-19 pandemic), CSRxP’s “Dose of Reality” series will explore the egregious actions of the industry over the past year, as a reminder, that policymakers in Washington must act to hold Big Pharma accountable and lower drug prices for the American people.

Today, we’re examining how Big Pharma continued to push debunked innovation rhetoric to oppose prescription drug pricing solutions.

BIG PHARMA RELIES ON DEBUNKED INNOVATION RHETORIC TO ATTACK RX SOLUTIONS

As unprecedented momentum built for policymakers to lower drug prices and hold Big Pharma accountable this year, the branded drug industry continued to rely on debunked rhetoric claiming drug pricing solutions would stifle innovation and hamper investments in research and development (R&D). Just a handful of examples throughout the year include:

• In an April statement, the Pharmaceutical Research and Manufacturers of America (PhRMA) said solutions to lower drug prices would “cede our leadership in life sciences, and stifle the development of new treatments.”
• In August, a PhRMA spokesman claimed drug pricing solutions “would stifle innovation, research and development” and “lead to fewer new cures and treatments and less access to medicines.
• In September, PhRMA President Stephen Ubl claimed drug pricing solutions “would lead to less research and development of new treatments and limits people’s access to medicines once they come to market.”
• And in November, Ubl said drug pricing solutions “will stifle continued innovation after a medicine is first approved.” 

PRICE HIKES UNCONNECTED TO CLINICAL IMPROVEMENTS

For far too long, Big Pharma has used the excuse that research and development costs justify out-of-control prescription drug prices and that solutions to lower prices threaten innovation into new breakthroughs. These tired arguments, which Big Pharma wields like a shield to protect the industry’s anti-competitive and price-hiking practices, simply don’t hold up to scrutiny.

Multiple studies have found that Big Pharma’s price hikes have little to no connection to the cost of its development or improvements in drugs’ efficacy. In other words, brand name drug companies set launch prices and hike prices to maximize profits — not because there is any connection to innovation.

The U.S. House Committee on Oversight and Reform found in a December 2021 report, based on a nearly three-year investigation, that Big Pharma’s price hikes and pricing practices were tied to executive compensation benchmarks and earnings targets and had little if nothing to do with clinical improvements. The committee’s investigation also found that a significant portion of brand name drug companies’ research budgets are dedicated to finding ways to extend patent protection to undermine competition instead of investing in true innovations.

An April 2021 report from the nonpartisan Congressional Budget Office (CBO) confirms that pharmaceutical R&D costs do not relate to the prices drug companies set on their products. In the report, CBO determined that “when drug companies set the prices of a new drug, they do so to maximize future revenues net of manufacturing and distribution costs. A drug’s sunk R&D costs—that is, the costs already incurred in developing that drug—do not influence its price.”

BIG PHARMA’S SPENDING PRIORITIES: PROFITS AND MARKETING, NOT R&D

The December Oversight Committee report also undermines Big Pharma’s repeatedly debunked rhetoric that high drug prices are justified by the need to fund R&D. The committee found brand name drug companies spent significantly more investing in advertising and stock buybacks than in funding research and development.

The report found four of the Big Pharma companies examined spent more than $2.6 billion in direct-to-consumer advertising from 2015 to 2018 on just four drugs. AbbVie spent over $1.5 billion advertising its blockbuster drug Humira over that time period while Pfizer spent over $750 million on marketing for Lyrica. In addition, the committee report showed that over the last five years, the top 14 drug companies spent almost $577 billion on stock buybacks and dividends – a whopping $56 billion more than on research and development

An October study from America’s Health Insurance Plans (AHIP) found that Big Pharma continued to spend more on advertising and selling its products than investing in R&D, even amid an unprecedented focus on the development of new treatments during the COVID-19 pandemic. AHIP’s study found that “of the 10 drug manufacturers examined, seven of them spent more on selling and marketing expenses than they did on research and development. For this group of 10 companies alone, selling and marketing expenses exceeded R&D spending by $36 billion, or 37 percent.”

BIG PHARMA PROFITS FROM TAXPAYER-FUNDED R&D

Big Pharma leaves out of their innovation rhetoric the fact that taxpayers carry much of the risk and cost of researching and developing new cures.

• “The U.S. taxpayer has funded research for every single one of the 210 new drugs that the FDA approved between 2010-16. Yet the companies that have access to this research are increasingly viewing pharmaceuticals in the same way that banks view their financial product — opportunities for short-term returns.” (“Big Pharma Is Hurting Drug Innovation,” The Washington Post, October 17, 2018)
• “More than $100 billion in NIH funding went toward research that contributed, either directly or indirectly, to the 210 drugs approved between 2010 and 2016. That’s roughly 20 percent of NIH spending since 2000.” ( “NIH Funding Contributed To 210 Approved Drugs In Recent Years, Study Says,” STAT News, February 12, 2018)

Brand name drug maker Gilead offers a case study in how Big Pharma capitalizes on taxpayer-backed innovation to fuel profits — and then engages in price hikes on these products the company had no role in developing.

• Gilead Sciences Did Not Invent Its Blockbuster Hepatitis C Treatment Sovaldi, Rather It Acquired The Product From A Small Company, Much Of Whose Work Was Federally Funded. “Gilead Sciences did not invent its blockbuster treatment for hepatitis C, sofosbuvir (Sovaldi), which it priced at $1,000 per pill. Rather, it acquired the product from a small company founded by the drug’s inventor, a faculty member at Emory University, much of whose work on the usefulness of nucleoside viral inhibitors was federally funded. Gilead paid $11 billion in late 2011 for the rights to market Sovaldi, an amount it totally recouped in its first year of sales after approval of the drug in late 2013.” (“The $2.6 Billion Pill – Methodological And Policy Considerations,” New England Journal of Medicine, May 14, 2015)
• Gilead Recouped Its Investment In Sovaldi In Its First Year On Market. “Gilead paid $11 billion in late 2011 for the rights to market Sovaldi, an amount it totally recouped in its first year of sales after approval of the drug in late 2013.” (“The $2.6 Billion Pill – Methodological And Policy Considerations,” New England Journal of Medicine, May 14, 2015)
• $84,000: The cost of a single course of treatment for Gilead’s blockbuster Hepatitis C Drug Sovaldi. (“Wyden-Grassley Sovaldi Investigation Finds Revenue-Driven Pricing Strategy Behind $84,000 Hepatitis Drug,” U.S. Senate Committee on Finance Report, December 1, 2015)
• Taxpayer Funded Research Also Contributed To Gilead’s Blockbuster HIV Prevention Treatment Truvada. “Thomas Folks spent years in his U.S. Centers for Disease Control and Prevention lab developing a treatment to block deadly HIV in monkeys. Then San Francisco AIDS researcher Robert Grant, using $50 million in federal grants, proved the treatment worked in people who engaged in risky sex. Their work — almost fully funded by U.S. taxpayers — created a new use for an older prescription drug called Truvada: preventing HIV infection. But the U.S. government, which patented the treatment in 2015, is not receiving a penny for that use of the drug from Gilead Sciences, ­Truvada’s maker, which earned $3 billion in Truvada sales last year.” (“An HIV Treatment Cost Taxpayers Millions. The Government Patented It. But A Pharma Giant Is Making Billions,” The Washington Post, March 26, 2019)
• Taxpayer Dollars Funded “Much Of The Preclinical And Clinical Research” Behind Gilead’s COVID-19 Treatment, Remdesivir. “The research outlined below demonstrates how the U.S. Army, the Centers for Disease Control and Prevention (CDC) and the National Institutes of Health (NIH)/National Institute Allergies and Infectious Diseases (NIAID) either conducted or funded much of the preclinical and clinical development of Remdesivir. (“Role of the Federal Government in the Development of Remdesivir,” Knowledge Ecology International, March 20, 2020)

In the New Year, policymakers must see through Big Pharma’s bogus innovation rhetoric and advance market-based solutions that hold brand name drug makers accountable and lower prescription drug prices.

Read more on market-based solutions to hold Big Pharma accountable HERE.

CLICK HERE to read: “Dose Of Reality” Big Pharma’s Year of Bad Behavior Part I: Price-Gouging An Unproven Treatment, Setting Out-of-Control Launch Prices.