US drug price gouging probed

The chairman of the Senate Special Committee on Aging has written to the makers of the USA’s 12 most-prescribed drugs, asking them why Americans pay twice as much on average for prescription drugs as consumers in other industrialized nations.

“While I firmly believe that drug quality should not be sacrificed for cost, the large discrepancies in the cost of identical drugs cannot be explained by differences in production or manufacturing,” wrote Democratic Senator Herb Kohl, in letters sent to AstraZeneca, GlaxoSmithKline, Lilly, Novartis, Pfizer and Sanofi-aventis.

Sen Kohl pointed out to the companies that, according to the Organization for Economic Cooperation and Development (OECD), the US spends an annual average of $878 per person on prescription drugs, while the average for other industrialized countries is $446. “These differentials are dramatic and often put American consumers at a severe disadvantage globally,” he wrote, and went on to ask the firms what percentage of their operations are based in the US and how much they spend on marketing their drugs each year.

According to local reports, the companies’ responses to Sen Kohl’s letter have cited other countries’ price-lowering factors such as currency values and government price controls. They also point to the free and discounted drugs programmes which the industry offers to the uninsured and other needy people in the US, and emphasise that Americans have the greatest access to the newest treatments.

Also last week, the Senate Aging Committee held a hearing to examine the rise of prescription drug prices in the US and look at what is happening in the rest of the world. Senator Bob Corker, the Committee’s ranking (Republican) member, noted that other countries directly set prices for drugs and devices which they see as a part of their internal health systems, not a normal market subject to international trade rules.

These nations typically have some form of socialised medicine and require artificially low prices on drugs and devices to balance their budgets, which means Americans are subsidising their “free” or “inexpensive” health care, he said, adding: “many of these countries like Canada, Australia, the European countries and Japan have the resources to pay market price, but refuse.”

“I have met with the US Trade Representative under both President Obama and President Bush and consulted with numerous trade experts about what we can do to end this unfair practice. I still have not found an answer,” said Sen Corker.

Democratic Senator Bill Nelson pointed out that the 30 most commonly prescribed drugs cost 27% less in Canada and 66% less in New Zealand in the USA, and approximately 50% less in the UK, the Netherlands and France.

However, he added: “while pharmaceutical companies are giving other countries deep discounts, they’re still able to maintain a tidy profit due to their high prices in the US. Between 2006 and 2009, the profits of top drugmakers grew by up to 201%. I’m afraid that the drug companies are laughing all the way to the bank, while seniors and taxpayers are picking up the tab.”

Sen Kohl - who also chairs the subcommittee of the Senate appropriations panel which has jurisdiction over the Food and Drug Administration (FDA)’s budget - asked: “why must American consumers pay so much more, when the bulk of drug research and innovation happens here in the US and much of it is subsidized by the federal government?”

He added: “the Aging Committee looks forward to taking a look at the answers to these questions later this spring.”

By Lynne Taylor

PharmaTimes