A new report from the Center for Economic and Policy Research (CEPR) describes the high costs associated with the mis-marketing of prescription drugs, both in dollars and in health consequences.
Spending on prescription drugs has consistently been the fastest growing component of health care spending, with $373.6 billion spent on prescription drugs in 2014 (approximately 12 percent of national health expenditures). Pharmaceutical companies are doing everything they can to maximize profits, often by wielding patent protection to charge high price for protected drugs.
Drug companies argue that patent protection—which grants the exclusive right to market a drug for a certain number of years—spurs innovation and research. They say they need the protection so they can recoup the costs of bringing a new drug to market. But patent monopolies also provide incentives for companies to engage in “rent-seeking behaviors,” extracting payments from others.
In the report, CEPR examined five drugs—Vioxx, Avandia, Bextra, OxyContin, and Zyprexa—each of which had faced legal actions over the concealment or misrepresentation of evidence on the safety of the drug. In all five cases, there was either a court ruling against the company or a large settlement paid by the company. The cumulative costs associated with the increased morbidity and mortality associated with just these drugs was $382.4 billion from 1994–2008. The costs associated with all mis-marketed drugs are far higher, but these five are representative of the problems.
Avandia (rosiglitazone), manufactured by GlaxoSmithKline, was approved in 1999 to treat Type 2 diabetes. In 2007, researchers discovered that Avandia was associated with a significant increase in the risk for myocardial infarction and other cardiovascular incidents. The FDA estimates that the drug was responsible for approximately 83,000 excess heart attacks between 1999 and 2007, but the information was withheld by the company. Ultimately, the company reached a $3 billion settlement with the Department of Justice in 2012.
Zyprexa (olanzapine) represents a somewhat different type of mis-marketing. Zyprexa, an atypical antipsychotic drug, is approved for the treatment of schizophrenia and bipolar disorder, but Eli Lilly marketed the drug for patients groups not approved by the FDA, including children and the elderly. The company also downplayed serious side effects like diabetes and obesity, CEPR says. Lilly urged the use of Zyprexa to sedate elderly patients in nursing homes although the drug increases the risk of sudden death, heart failure, and serious infection in this population. In January 2009, the company reached a $1.4 billion settlement with the DOJ for off-label marketing.
The advocacy group Public Citizen found 239 criminal and civil settlements greater than $1 million reached with pharmaceutical companies between 1991 and 2012. Penalties for off-label marketing and other improper practices totaled $30 billion. CEPR concludes that “profit margins from off-label marketing are apparently large enough that fines of this size are inadequate to put an end to the practice.”
CEPR says “drug manufacturers need to provide all available safety data for a given drug and respect the law when marketing drugs,” but patent protection “enables and encourages manufacturers to conceal adverse safety data that might harm sales and to seek approval for the narrowest indications for use, especially when they can promote the drug for off-label uses post-approval.”