Spam Journalism: The spurious use of sensational headlines to add spice to an otherwise pointless article.
“Drug company bosses have been secretly recorded boasting that they are selling regulated prescription drugs that cost “pennies” for hundreds of pounds.
“The revelations could have consequences around the world.”
There is, of course, no “scam” here, despite the over-enthusiastic UK Health Secretary ordering a fraud probe. While one may not like what goes on in the pharmaceutical world (and the MacDoctor counts himself in this group) there is little doubt that the vast majority of Big Pharma will be conducting legitimate (if cut-throat) business.
It is quite true that pharmaceutical companies charge like a wounded bull for their products. This has much more to do with the peculiarities of the pharmaceutical market than any nefarious dealings of their marketers. the Pharmaceutical industry is probably the most research intensive industry of all. Massive research funding is the only way to produce new drugs.
Firstly the basic science needs to be ironed out and chemical pathways in the body mapped. Then a new drug has to be synthesised – usually requiring a multitude of promising drugs that are whittled down by experimentation to the actual few that have the desired effect. Then come the animal trials – endless hours of torturing mice, rats and the odd monkey. Then there are the stage one human trials where they iron out the immediate side-effect profiles, then small pilot studies, then, finally, large scale trials with thousands of volunteers. Then there is the final hurdle, the drug administrations around the world.
All this is hugely expensive. Coupled with the fact that perhaps only one drug in several thousand ever makes it to production, you can see why there is no relationship between the cost of a drug and the final price set by the company. It may indeed cost pennies to make, but this is not relevant to the end price.
It is easy to understand the jubilation of the marketers for pharmaceuticals. With a cost margin like this and a massive underlying expenditure in R&D, the marketing budgets for working pharmaceuticals are almost limitless. As are the opportunities to lobby government buying departments to purchase their (new, improved?) product.
Theoretically, all of this massive source of cash comes to an end when the drug patent runs out. Generic companies will start to produce the drug and the price will rapidly fall, initially sharply and then precipitously. The ever popular Viagra (sildenafil) will set you back nearly $100 dollars for 4 tablets. Recent generic versions retail for about $30 for 4. You can buy 50 tabs for $100 from Canada, where the patent has been expired longer. And we won’t even talk about the price of generic sildenafil in India or China where the patent was essentially ignored…
A drug patent is normally 20 years. At least half of that time is spent testing and registering the drug, giving companies a small (sometimes very small) window of opportunity to make a profit. Drug companies use this argument to squeeze governments into extending patents (couched as “we haven’t had time to recoup our losses” rather than”we need a few more years to price gouge so we can make a huge profit”). This might be a scam, but it is legal. The US and the UK routinely extend drug patents out to 25 and 30 years in response to all those expensive lobbyists and election donations. This is the reason why new drugs remain so expensive and why pharmaceutical companies are amongst the largest and riches companies in the world. Not the excessive prices they charge for new drugs, which is reasonable and legitimate, but the unnecessary routine extension of drug patents beyond the standard 20 year term. This is also the reason why Big Pharma hates Pharmac so much. New Zealand rarely extends a drug patent and Pharmac is quick to access cheaper generic drugs.
One final point. Doctors are creatures of habit and tend to prescribe the trade name of the original product for many, many years after the patent expires. Pharmac essentially forces New Zealand doctors to prescribe generics (because they are the “funded” option) but most countries do not have a Pharmac. The original drug company makes premium prices on its products well beyond the expiry of its patent. A good example is Viagra again. Now the patent has expired the company markets in New Zealand both Viagra and Avigra, a “generic” at a third of the price. Avigra is actual Viagra tablets placed in an Avigra box (which looks like a Viagra box). Why have identical products? Because many doctors will still continue to prescribe Viagra, so you need to still have this product available to collect the premium price tag. But you also need to undercut the generic market, in order to have a place there when the Viagra market finally dries up in 10-20 years time.
Apparently this is not a scam. This is marketing.