Keywords: USA, PhRMA, Drug prices, Rebates, Medicare

USA’s PhRMA refutes NYT story on drug prices

Article | 18 November 2009

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Pharmaceutical Research and Manufacturers of America (PhRMA), the USA drug industry lobby group, has strongly contested the allegations in a front page New York Times story that suggested that drugmakers raised their prices by 9% this year in order to cushion themselves from the steep cuts in drug spending that are included in the country’s health reform plans. That will add more than $10 billion to the nation’s drug bill, which is on track to exceed $300 billion this year. By at least one analysis, it is the highest annual rate of inflation for drug prices since 1992, the NYT article claimed.

That is not the case, PhRMA senior vice president Ken Johnson said in a statement, quoting Mark Twain’s comments about “lies, damned lies and statistics,” saying that, “unfortunately, today’s New York Times only tells half a story, using selected statistics to make a flawed assumption that an increase in drug prices must somehow be tied to health care reform.”

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“In truth, price increases are the natural result of market forces. All companies make their own independent pricing decisions based on many factors, including patent expirations, the economy, and the huge, sunk R&D costs which typically exceed $1 billion for a single medicine.

“But here is a key part of the story that the Times ignored: according to Forbes magazine, 58,000 jobs in our industry have been lost so far this year because of the economy and sluggish sales, due - in large part - to a rapid increase in the use of generics. What’s more, financial results for a dozen of our companies show zero revenue growth in the third quarter and -3% year to date. And, one of the same studies cited by the Times forecasts only a 2% revenue growth over the next five years. Of course, that wasn’t reported. In fact, revenues generated by our industry help to fund the discovery and development of innovative, life-saving medicines, which benefit patients worldwide and advance medical progress.

“So, focusing only on prices, as the Times did, can present a misleading picture of our sector. In some ways, it’s like trying to project annual US auto sales by adding up sticker prices. That’s not reality. How many people in America actually pay full price for a car?” he asked.

Rebates to Medicare average 20%-30%

Similarly, said Mr Johnson, “drug manufacturers often offer steep discounts and rebates through negotiations with large payers such as insurance companies. In fact, government reports show that rebates in the Medicare prescription drug program average 20%-30% for many brand-name drugs and those rebates have actually increased in recent years. Simply put, discounts and rebates can significantly lower the cost of many brand-name drugs, benefiting patients nationwide. But you wouldn’t know it by looking at pharmacy prices – or reading the New York Times.

“Here is another important fact lost in the story: every single one of the pricing reports cited by the Times relies solely on pharmacy transaction data, which do not capture off-invoice rebates. In other words, the Times is trying to do the political calculus by adding up sticker prices again. It’s wrong and it’s misleading. Today, prescription medicines account for 10% of health care spending in America – the same as it was back in 1960.

“And what’s happened since 1960? For one thing, new cutting-edge medicines have helped to dramatically increase life expectancy rates in America and have allowed patients with cancer, heart disease, diabetes and other devastating chronic diseases to live longer, healthier and more productive lives. Unfortunately, medicines are always looked at as a cost and never seen as a savings – even though medicines often reduce unnecessary hospitalizations, help avoid costly medical procedures and increase productivity through better prevention and management of chronic diseases.

“As we enter the homestretch of the health care debate, there are going to be a lot of last-minute political attacks designed to sabotage reform. We believe smart, common-sense Americans will be able to differentiate between the lies, damn lies and statistics,” he concluded.