Focus on Cutting Drug Costs

Send this article to a friend.

Printer friendly version.

Focus on Cutting Drug Costs

By retired pharmacist Duane C. Hess

The following op-ed was published on September 8, 2002, and is reprinted with permission from West Hawaii Today newspaper.

The fight against the high cost of prescription drugs is not new. Some 40 to 50 years ago, Senator Estes Kefauver was a tireless campaigner against the high cost of prescription drugs. Since his time, much attention has been focused on the problem, but prices for prescription drugs have increased substantially.

Take the case of two popular drug products—Prilosec and Nexium. Both are very successful products, and both are “expensive” drugs. Prilosec received FDA approval in 1989, and it is one of the best selling drugs in history. Sales in the last 5 years have amounted to $26 billion. The prescription price is approximately $4/tablet. It has been reported that General Motors alone spends $55 million/year for Prilosec that is used by its employees and retirees.

Prilosec was scheduled to have lost its patent protection in 2001. Generics would have been available at lower cost, but manufacturer AstraZeneca (AZ) was able to extend the patent protection for approximately 15 months, partly by lawsuits that some thought were frivolous, and partly by testing that product for use in children—which is permitted by US laws. For each day that the patent protection was extended, AZ gained approximately $10 million in revenue. Had generics become available, it is projected that they would have sold for about $1/tablet.

Patent protection did recently expire, but the product has not yet been approved for non-prescription sale.

Knowing that the patent was scheduled to expire in 2001, AZ began a program in 1995 to either extend the protection, or to develop a successor product. Efforts were successful. A new drug named Nexium, received FDA approval in February of 2001. Nexium could be marketed while patent protection for Prilosec was still in effect. During 2001, it has been reported that AZ spent $478 million in promotion of Nexium. (Perhaps you’ve noticed the numerous TV ads for “The Purple Pill”). Prilosec was also heavily advertised during it’s product life. Nexium is also priced, on prescription, at approximately $4/tablet to the consumer.

Prilosec more or less replaced two earlier drugs for the same purpose, Pepcid, (Merck) and Tagamet (GlaxoSmithKline), both of which had been very successful drugs during their product life. These drugs were both changed to over-the-counter status several years ago, and are now available at much lower prices than either Prilosec or Nexium. Both Pepcid and Tagament continue to be widely used.

Congress is considering bills to assist seniors with high drug costs. Most of the bills set up an insurance program under which seniors would pay less than full price for their prescriptions, but would pay premiums toward the insurance. It is questionable how much either bill would help the basic problem.

Under this type of program, drug prices might actually increase. No disrespect, but it is possible that the purpose of both bills was more to gain political advantage for the November election than to solve the high cost of drugs to senior citizens.

Perhaps Congress could focus their attention on other ways to solve these problems, something better than insurance programs, which are of questionable benefit. For example, review the advertising budgets, and place some limit on them. Should large advertising budgets be permitted to enter into pricing of the product? We often hear the claim that drug prices must permit the companies to recover the costs of developing the products. Are drug prices ever reviewed to determine whether the prices, on that basis, are excessive? If the development costs are “paid off” after a certain period, like the first five years, should prices then be reduced?

I think we should all recognize that the emphasis should be on solving this problem, rather than on gaining some questionable political advantage.

January 2003