‘Gray Panthers’ File Suit as Drugmakers’ ‘Healthy’ Profits, High Prices ‘Irk’ Consumers

The nation's leading drug makers posted "sharply higher earnings" this week -- a "bright spot" in an "ailing" economy -- but consumers, "already upset about high prices," point to the industry's "healthy results" as a "signal" for reform, the Los Angeles Times reports. On Thursday, the Gray Panthers, an advocacy group for seniors, sued Bristol-Myers Squibb Co. over "tactics" the company used to block "cheap knockoffs" of BuSpar, a popular anti-anxiety drug, from entering the market. Bristol-Myers declined to comment, but in the past has "denied any wrongdoing." In addition, Sens. Charles Schumer (D-N.Y.) and John McCain (R-Ariz.) plan to reintroduce legislation next week that would "make it tougher" for drug firms to extend patents on "top-selling" drugs by closing loopholes in the Hatch-Waxman Act that have allowed companies to block generic competition.

Pressure Is Building
The Times reports that "[p]ressure" on the industry has "accelerated" since March, when five leading makers of AIDS drugs "slashed" prices in sub-Saharan Africa, a move that suggested "huge profits are built into prices of vital medications." Stephen Schondelmeyer, a pharmaceutical economist at the University of Minnesota, said, "What the industry has told us is the actual cost of making the medication is only 10% of the price," adding that about one-third of the price charged for drugs in the United States represents advertising and marketing expenses. According to the Times, the "arithmetic irks" seniors, who purchase one-third of all prescription drugs. "We're taking matters into our own hands," Gray Panthers President Tim Fuller said, adding, "We're not stopping until we get reform." However, the industry maintains that "it has gotten a bad rap." The Pharmaceutical Research and Manufacturers of America said that although pharmaceutical expenditures have increased, the "actual cost" of drugs has not risen. Americans spent 14.9% more on prescription medications last year than in 1999, but drug prices rose only 3.9%, the group said. In addition, the drug industry "argues" that although Americans have "shell[ed] out more on drugs, it is money well spent." PhRMA spokesperson Jackie Cottrell cited a recent Tufts University Center for the Study of Drug Development study, which found that doctors have "increasingly" used prescription drugs to treat chronic diseases rather than "more costly" hospital care.

Profit-Mongers?
Analysts said that "higher demand" for drugs to treat "chronic and lifestyle" conditions has boosted earnings for pharmaceutical companies, but the industry's "public relations problem over pricing," as well as expiring patents on "strong-selling" drugs, may put firms "under pressure" in the future, the Times reports (Gellene, Los Angeles Times, 4/27). According to the Wall Street Journal, however, the "industry is the picture of health," with drug makers' sales likely to "continue to rise for some time." American Home Products Corp., Bristol-Myers and Pharmacia Corp. reported "double-digit" Q1 profit increases, citing "strong growth in prescription medicine sales." AHP reported a 15.5% growth in income and an 8% rise in sales, while Pharmacia posted $250 million in Q1 net income -- up from a net loss of $171 million a year earlier (Los Angeles Times, 4/27). In addition, Pfizer Inc. enjoyed a 34% profit increase in Q1, while revenue rose 7% (American Health Line, 4/19). Fortune also reported last week that the pharmaceutical industry, "largely immune to the economic gyrations" that shook several other industries, proved "more profitable than any other" last year, posting an 18.6% return on revenues and a 17.7% return on assets (Kaiser Daily Health Policy Report, 4/20).

No Pressure for Big Pharma?
AHP Chair and CEO John Stafford said that he "isn't swayed" by those who maintain that the drug industry will face a pricing "shake out," concluding that "[p]ressure to cut prices won't amount to much." According to Stafford, drug companies "must be free to set prices as they please" to cover the cost of their "expensive and risky development efforts." However, critics "complain" that "it's unfair" for drug companies to reap "double-digit" profit increases while millions of Americans lack health insurance. Johnson & Johnson Chair Ralph Larsen defended the company's pricing policies. "We are obviously very concerned about pharmaceutical pricing in the United States and the rest of the world," Larsen said, adding, "We're sensitive to the issue, we have wrestled with it for hours ourselves." Meanwhile, Sister Mary Anne Katlack of the Sisters of Charity of Saint Elizabeth's in Convent Station, N.J., raised the pricing issue with drug company executives at an annual AHP meeting, maintaining that "rising concerns" about the number of Americans who cannot afford prescription drugs could "produce protests on college campuses." However, Stafford said that critics have "unfairly targeted" drug companies, pointing out that "even though drugs are a relatively small part of the total health care bill, it's more visible" (Schwab/Fitzgerald, Newark Star-Ledger, 4/27).

'Drug Mafia' Stifles Reform
Still, many Americans have had to "drive all the way to Canada" for prescriptions or purchase antibiotics from "veterinary sources" to afford the additional costs, Amy Pagnozzi writes in a Hartford Courant opinion piece. She maintains that the "pharmaceutical Mafiosi and their political enforcers are still in league together," maintaining a "monopoly on our health." Although Pagnozzi admits that drug companies "invest a bundle" to develop new "breakthrough drugs" and "deserve to profit prettily," she asks, "An American patent of up to 22 years -- is that really fair?" She points out that the "drug Mafia" spent $230 million on lobbying, issue advertising and political campaign donations during the 2000 election cycle, asking, "Is it any wonder that no matter how much pro-consumer regulation gets written, nothing ever becomes law?" In addition, she writes that many states have developed their own drug assistance programs, while "national leaders hide behind wads of monopoly money stacked up so high that they couldn't see the suffering if they wanted to" (Pagnozzi, Hartford Courant, 4/27).