Being Held Accountable

Drug prices are out of control.



No one really disputes it, and the real question is, Do we have the political will to do anything about it? 


A classic case is the cancer drug Gleevec, which in 2013 cost roughly $6,200 per month in the United States but only $1,100 in Canada. Similarly, Sovaldi, the drug for hepatitis C, listed in the United States for $84,000 for a 12-week course of treatment but only $46,000 in Germany. 


There are countless other examples. Last year drug prices in the United States went up almost 14% despite health care inflation falling to historic lows. 


If you look for answers from the pharmaceutical industry, the answer you get is simple: Research. As one Pfizer executive put it:   "Here's the reality: Most of the medicines we develop in our labs will not make their way to patients ...

To make up for the risk and expense inherent in creating new medicines, the few medicines that are successful must cover the research and development costs of the many clinical failures that will never earn a single cent.

It's easy to forget that profits serve an important purpose: they allow businesses to invest in the innovations of the future."

Makes sense, right? Consumers are paying for the overall cost of developing different therapies for different illnesses. 


Except that this rationale doesn't come close to explaining what actually drives drug prices.


When cameras and mics aren't around, pharmaceutical executives acknowledge that research costs don't determine drug prices. 


Speaking at the 2014 annual meeting of the American Society for Clinical Oncology, AstraZeneca Vice President Gregory Rossi, Ph.D said:   We do not solve for [the] price [of a drug] on 'how do we basically return our investment?'... 

We don't solve for price based on how much we have sunk for [research] costs...We solve for price based on a number of factors associated with market and value.

This private rationale is much closer to the truth. Just look at the regular and sizable price increases for drugs that have already been brought to market, where the research is already completed. 


Every year like clockwork, Biogen and Teva have increased the prices on their multiple sclerosis drugs not because they are doing more research on the drug but to maintain revenue and profits with shrinking market share.

Fraud by Any Other Name

Indian generic drug-maker Ranbaxy Laboratories recently pleaded guilty to seven federal criminal counts of selling adulterated drugs with intent to defraud, failing to report that its drugs didn't meet specifications, and making intentionally false statements to the government.

As part of the proceedings in Baltimore federal court Monday morning, a whistleblower lawsuit against Ranbaxy was also unsealed. The company will pay a total of $500 million in criminal and civil penalties to resolve the criminal case and the whistleblower suit.

Ranbaxy has been grappling with quality issues for years. In 2008, the Food & Drug Administration took a highly unusual step, barring the importation of 30 drugs from two of Ranbaxy's plants in India. The FDA slapped the company with what's called an "Application Integrity Policy," halting the review of new drug applications from one of the company's Indian facilities until Ranbaxy proved its truthfulness.

The U.S. Department of Justice added more restrictions in January 2012, when it placed Ranbaxy under a sweeping consent decree. This time Ranbaxy was barred from selling drugs in the U.S. that were made at several of its Indian plants until the quality could be verified. The Justice Department also required the company to undergo independent auditing.

Despite the ongoing regulatory and legal travails, in November 2011, the FDA allowed Ranbaxy to proceed with exclusive first rights to sell a generic version of the anti-cholesterol medication Lipitor. One year later, Ranbaxy recalled 41 lots of generic Lipitor after glass particles were found inside them. In March of this year, the FDA permitted Ranbaxy to resume sales of the drug and the U.S. Dept. of Veterans Affairs recently signed a large contract to buy the Ranbaxy drug, according to a company insider.

Ranbaxy Laboratories Limited (BSE: 500359) is an Indian pharmaceutical company that was incorporated in India in 1961. The company went public in 1973 and Japanese pharmaceutical company Daiichi Sankyo gained majority control in 2008.  Ranbaxy exports its products to 125 countries with ground operations in 43 and manufacturing facilities in eight countries.  In 2011, Ranbaxy Global Consumer Health Care received the OTC Company of the year award.

Ranbaxy was started by Ranbir Singh and Gurbax Singh in 1937 as a distributor for a Japanese company Shionogi. The name Ranbaxy is a portmanteau of the names of its first owners Ranbir and Gurbax. Bhai Mohan Singh bought the company in 1952 from his cousins Ranbir and Gurbax.