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Drug Makers Rip Off Consumers as They Take Price Gouging to a Whole New Level

May 1, 2006

Over the past ten years, consumers have been subjected to the most dramatic increases in prescription drug prices in history. Despite claims by the pharmaceutical industry to the contrary, watchdog groups, doctors, and many elected officials see this trend as a creation of the drug companies themselves. In addition, these disturbingly high prices have done little to ensure safer or more effective pharmaceutical products. 

When drug companies manufacture highly successful medications, the goal then becomes to market as many "me-too" drugs (similar drugs in the same class such as Celebrex, Vioxx, and Bextra or drugs that vary only slightly from already approved drugs) or combination drugs that merely combine two existing medications into one pill (such as Hyzaar and Vytorin).

In fact, the number of drugs designed to treat new conditions has not kept up with the number of medicines that simply provide treatment for conditions that is the same or similar to those already available.

In the past decade, the number of prescriptions has increased by over 60% to a whopping 3.5 billion annually.  Last year, the pharmaceutical industry took in over $250 billion in prescription drug sales. 

Consumers are even buying up over-the-counter (OTC) medications at a much faster rate than ever before.  Doctors and other experts see this trend in America as little more than "overmedicating."  Direct-to-consumer advertising (DTCA) has been responsible for creating artificial demands for any number of drugs that claim to treat every conceivable problem.  

This trend of overmedicating has caused consumers to demand prescription drugs that they may not really need and in many cases to take drugs for longer periods of time than is actually necessary. Older, safer, and less expensive medications as well as non-drug therapies are being ignored in favor of newer, more expensive, and potentially dangerous drugs.    

Another problem that is often a byproduct of high prices is rampant off-label prescribing of drugs for uses not approved by the FDA. Such off-label usage can be particularly lucrative for pharmaceutical companies by expanding the market for already approved. Sometimes, the temptation to boost sales in this way is so great that a drug maker will improperly encourage or indirectly promote the practice.  

Researchers at the Mount Sinai School of Medicine in New York have determined that long testing periods cannot be blamed for the rising prices of prescription drugs.  According to Dr. Salomeh Keyhani, the leader of the study, drug companies will give a new drug the highest possible price that the market will allow, regardless of how long it took to develop.  

The problem has gotten so bad that many senior citizens cannot even afford their medications anymore.  Seniors are also prescribed so many different medications that there is a higher risk of adverse drug interactions than ever before.  The United States is also far behind other first-world countries, such as Germany, in terms of having price controls for Medicare patients.  This is primarily because of the tremendous influence of the pharmaceutical lobby in Washington DC.

A report by the Commonwealth Fund, a private, health care policy foundation has found that there has been a significant rise in the percentage of moderate- to middle-income working age Americans who did not have health insurance for some part of the year.

In addition to having difficulties paying for their medical care is the fact that uninsured adults are likely (59%) to skip doses of important medications for chronic conditions like asthma or diabetes due to the inability to pay for these high-priced drugs.

One big problem is that the FDA has no control over drug prices and Medicare is not allowed to consider the price of a drug in its decision of whether or not to cover treatments. 

As prescription drug prices continue to spiral out of control, some lawmakers have proposed that the U.S. begin importing drugs from Canada, a country where all citizens have heath care regardless of their occupation or socioeconomic status. 

The Bush Administration, however, has done everything in its power to stop this from becoming a reality.  The FDA has also gotten involved, providing consumers with information that would make it appear as if prescription drugs from Canada are somehow unreliable and potentially dangerous. 

By keeping American consumers captives of U.S. drug prices, pharmaceutical companies are able to prey upon consumers, who are unable to purchase drugs from alternative sources. In this way the prices of some prescription drugs are "marked up" by a whopping 10,000% in some cases.  Americans pay more for prescription drugs than anyone else in the world. 

The FDA estimates that it can take more than 12 years and cost up to $1 billion to get a new drug approved and put on the market.  In the future, prescription drugs could become more tailored to fit individual needs, which could lead to even higher costs.  In addition, there has been a long debate over just how much companies should be able to charge for breakthrough drugs that are life-saving. 

While life-saving drugs certainly come with a high price tag, the exorbitant prices of many other prescription medications bear no rational relation to their cost or use:

  • Clarinex: This allergy medication, manufactured by Schering-Plough, can cost patients up to $69 a month even though it has not been proven to be any more effective than Claritin, the OTC medication with a similar active ingredient.
  • Cymbalta: This antidepressant, manufactured by Eli Lilly, can cost patients up to $100 per month. This drug has still has not been shown to have any proven advantage over less-expensive drugs such as Prozac. While it may be cheaper than Effexor, another antidepressant, there is no data that suggests that Cymbalta successfully treats aches and pains associated with depression.
  • Nexium: This well-advertised ulcer drug, otherwise known as "the purple pill", can cost consumers about $123 per month. Manufactured by AstraZeneca, Nexium shows no significant advantage over Prilosec, an OTC alternative.
  • Zelnorm: Zelnorm is prescribed to treat irritable bowel syndrome (IBS) and can cost patients up to $154 per month. Zelnorm is manufactured by Novartis and has only a small proven benefit over a placebo pill.
  • Erbitux: This drug, used to treat colon cancer, can cost patients anywhere between $18,000 and $38,000 per treatment. Manufacturers Bristol-Myers Squibb and ImClone Systems argue that the drug was expensive to develop and that they are currently trying to make sure that all patients can afford it. Yet some doctors who tested the drug have criticized its price, especially since there are still no proven benefits.
  • Matulane: Roche Holding AG, the original manufacturer of this drug used to treat Hodgkin's lymphoma priced it at a mere 60 cents a pill. When the drug was sold to Sigma-Tau Group of Italy, that company's U.S. unit raised the price to $6.50 in 2004, and then to an unbelievable $55 a pill in 2005. Although widely criticized for this unconscionable price increase, Sigma-Tau did nothing to adjust the price.
  • Thalidomide: Citing the need to raise research funding and the high price of similar drugs, Celgene Corp. raised the per-pill price from $6 to over $30.
  • Nutropin: A growth hormone from Genentech costs $70,000 PER YEAR.
  • Genzyme Corp. of Massachusetts charges an average of $300,000 per year to treat a genetic disorder known as Gaucher disease.
  • Tysabri: The controversial MS drug from Biogen and Elan that is awaiting re-approval by the FDA is predicted to generate annual sales that will ultimately top $1 billion; an easy target when you consider the $23,000-plus cost for one year of treatments. At that price, even without inflation and price increases, 30 years of Tysabri will cost only one MS patient almost $700,000.

Another drug with a ridiculous price tag is Mustargen, a medication used to treat a rare form of lymphoma. One patient experienced first-hand the dramatic increase in price.  Her first prescription cost her $77.50 but when she went back two weeks later to fill it again, the price had gone up to $548.01. 

This drastic increase occurred when Merck, the makers of Mustargen, sold the drug's manufacturing and marketing rights to Ovation Pharmaceuticals.  The company has justified this price increase by explaining that the market for the drug is surprisingly small and therefore they need to charge more per patient to try and cover the manufacturing expenses. 

Avastin, a cancer drug manufactured by Genentech, is another example of a highly expensive treatment.  The drug is currently approved to treat colon cancer, but Genentech has now announced that it will charge up to $100,000 per year for Avastin when it is used to treat breast cancer or lung cancer. 

That is almost twice the price of the drug when it is used to treat colon cancer.  While most pharmaceutical companies claim that higher drug prices reflect the increase in research and development costs, Genentech says that Avastin has a high price because of its life-saving ability.  When the drug is used to treat breast or lung cancer, higher doses are needed and thus Genentech wants to charge more for the treatments. 

In the case of Avastin, many patients will not be able to afford the treatment not only because of the high price but because when Avastin is prescribed to treat breast or lung cancer, this will be considered an "off-label" use. 

Insurance companies are reluctant to cover off-label treatments.  Doctors are also concerned that Genentech's decision to raise the price of Avastin may prompt other pharmaceutical companies to do the same with their cancer drugs, or any other "life-saving" medications.  This trend that has doctors, patients, and consumer advocates concerned that life-saving treatments will soon be beyond the reach of poorer patients or those without prescription drug coverage.

Many experts see charging more for a drug (or raising its price beyond all rational limits) simply because it saves lives as an ethical issue. This is especially so when some patients will undoubtedly choose to forego a chance of saving their own lives in order to prevent their families from financial ruin.    

Some observers predict that the major drug companies will continue to merge until there are just a few mega-companies that control the pricing of all prescription drugs on the market.  If left unchecked, these giant conglomerates will become virtually uncontrollable with respect to pricing regardless of what condition a drug is designed to treat.

Pharmaceutical companies are poised to become "giant marketing machines" according to Dr. Marcia Angell, a senior lecturer at Harvard Medical School.  Dr. Angell argues that the promise of lower costs and better medications is a thing of the past.

Unless the public, consumer groups, and elected officials meet this problem head-on, drug prices will keep increasing until people will have to choose between food and the medicines they need, or even worse, whether to live or die.

As always, if you believe you or a loved one has been injured by any prescription or over-the-counter (OTC) medication, please do not hesitate to contact Parker & Waichman at for a free consultation. Our firm is currently engaged in, or investigating the possibility of, litigation involving several prescription and OTC drugs. We invite you to review the extensive materials provided on our award winning Web site with respect to any particular drug or medical device profiled there.
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