The Washington Post reports that for years the benefits of a trio of anemia drugs, which made as much as $9 billion for drug makers Amgen and Johnson & Johnson, had been wildly overstated and that potentially lethal side effects had been overlooked. The multi-billion dollar rise-and-fall of the anemia drugs illustrates how the economic incentives embedded in U.S. health care can make the system not only inefficient, but potentially deadly.
Through a well-funded research and lobbying campaign, Amgen won far-reaching approvals from the FDA. The pharmaceutical companies conducted trials that missed the dangers and touted benefits that years later would be deemed unproven. The companies took more than a decade to fulfill their research commitments. And when bureaucrats tried to rein in the largest doses, a high-powered lobbying effort began until Congress forced the regulators to let the drugs flow.
In this case, the drug maker worked diligently to make sure that doctors had an incentive to give large doses - that the spread was large. The company lobbied Congress and Medicare bureaucrats to forge a system in which doctors and hospitals would be reimbursed more for the drug than they were paying for it. One of the drugs, Epogen, cost U.S. taxpayers as much as $3 billion a year for it.
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