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“Drugmakers Add Insult To Injury”: They Know How To Make Government Work For Them

It’s one thing for Pfizer to renounce its U.S. citizenship, moving its official residence to Dublin, Ireland, as a tax dodge — all the while continuing to run the business in the United States. That disgusting tactic happens to be disgustingly legal, thanks to our indolent Congress and its failure to fix the corporate tax laws.

It’s quite another to insult the public with blatant phoniness that avoiding billions in U.S. taxes gives the company “the strength to research, discover and deliver more medicines and therapies to more people around the world.” Those are the words of Pfizer’s chief executive, Ian Read, an accountant by training.

The Pfizer deal involves a merger with a much smaller Allergan, an Ireland-based company that happens to do its business in New Jersey. Wall Street analysts scoffed at the notion that the deal had any purpose other than to let the company avoid billions in U.S. taxes — billions that other American taxpayers will have to replace.

Since Read took the helm in 2010, Pfizer has slashed its research and development budget.

We assume the company will expect the United States to continue subsidizing research through the taxpayer-supported National Institutes of Health. We assume it wants the U.S. government to continue defending its intellectual property rights.

Pfizer made headlines more than a decade ago when it persuaded the city of New London, Connecticut, to use eminent domain to seize a working-class neighborhood around its shiny new headquarters — and replace it with an upscale shopping, hotel and office complex more to the company’s liking. Actually, it was a condition of its move to the city, according to The Day in New London.

The Supreme Court gave the controversial plan a green light in 2005. Four years later, Pfizer abandoned New London.

Yes, the drugmakers know how to make government work for them. Their lobbying group, the Pharmaceutical Research and Manufacturers of America, leads efforts to ensure that Americans pay far more for their products than citizens of other countries.

The drugmakers’ crowning achievement was getting a Republican-controlled Congress to write a Medicare drug benefit law to their specifications. While funneling billions in taxpayer subsidies toward helping the elderly buy drugs, it forbade the U.S. government to negotiate the prices on behalf of said taxpayers.

No other Western country lets drug companies charge whatever they think they can get away with. This is why the government of Norway pays about $460 for an injection of the asthma drug Xolair and our Medicare pays about $860.

(Pfizer also lobbied against proposals to let Americans buy their drugs from other countries at these lower prices.)

These conversations always circle back to the drugmakers’ argument that Americans must pay their price to cover the high expense of developing wonderful life-enhancing products.

We can close that circle by asking: To the extent that high U.S. drug prices support research and development benefiting the world, why are Americans the only ones footing the bills?

The drugmakers don’t talk much about that publicly for a very simple reason. It is not in the interests of their executives and investors to stop Americans from playing the chump. If they can get the job done by writing checks to obedient U.S. politicians and the chumps keep re-electing them, why make trouble for themselves?

In a recent annual report, Read told shareholders of Pfizer’s desire to earn “greater respect from the public,” which entails “acting as a respectable corporate citizen.”

Read may have reason to take the American public for easily deceived children. Basic decency, however, demands that he limit such thoughts to private dinner parties.

 

By: Froma Harrop, The National Memo, December 3, 2015

December 4, 2015 Posted by | Big Pharma, Congress, Corporate Mergers, Pfizer | , , , , , , | Leave a comment

“Improving The Quality Of Life”: It’s Time To Get Serious About Science

Some policymakers, including certain senators and members of Congress, cannot resist ridiculing any research project with an unusual title. Their press releases are perhaps already waiting in the drawer, with blanks for the name of the latest scientist being attacked. The hottest topics for ridicule involve sex, exotic animals and bugs.

The champion of mocking science was the late William Proxmire, whose Golden Fleece Awards enlivened dull Senate floor proceedings from 1975 until 1988. His monthly awards became a staple of news coverage. He generated good laughs back home by talking about a “wacko” in a lab coat experimenting with something seemingly stupid. Proxmire did not invent the mad-scientist stereotype, but he did much to popularize it.

The United States may now risk falling behind in scientific discoveries as other countries increase their science funding. We need to get serious about science. In fact, maybe it’s time for researchers to fight back, to return a comeback for every punch line.

Toward that end, we are announcing this week the winners of the first Golden Goose Awards, which recognize the often-surprising benefits of science to society. Charles H. Townes, for example, is hailed as a primary architect of laser technology. Early in his career, though, he was reportedly warned not to waste resources on an obscure technique for amplifying radiation waves into an intense, continuous stream. In 1964, he shared the Nobel Prize in Physics with Nikolay Basov and Alexander Prokhorov.

Similarly, research on jellyfish nervous systems by Osamu Shimomura, Martin Chalfie and Roger Y. Tsien unexpectedly led to advances in cancer diagnosis and treatment, increased understanding of brain diseases such as Alzheimer’s, and improved detection of poisons in drinking water. In 2008, the trio received the Nobel Prize in Chemistry for this initially silly-seeming research. Four other Golden Goose Award winners — the late Jon Weber as well as Eugene White, Rodney White and Della Roy — developed special ceramics based on coral’s microstructure that is now used in bone grafts and prosthetic eyes.

Across society, we don’t have to look far for examples of basic research that paid off. Larry Page and Sergey Brin, then a National Science Foundation fellow, did not intend to invent the Google search engine. Originally, they were intrigued by a mathematical challenge, so they developed an algorithm to rank Web pages. Today, Google is one of the world’s most highly valued brands, employing more than 30,000 people.

It is human nature to chuckle at a study titled “Acoustic Trauma in the Guinea Pig,” yet this research led to a treatment for hearing loss in infants. Similar examples abound. Transformative technologies such as the Internet, fiber optics, the Global Positioning System, magnetic resonance imaging (MRI), computer touch-screens and lithium-ion batteries were all products of federally funded research.

Yes, “the sex life of the screwworm” sounds funny. But a $250,000 study of this pest, which is lethal to livestock, has, over time, saved the U.S. cattle industry more than $20 billion. Remember: The United States itself is the product of serendipity: Columbus’s voyage was government-funded. Remember, too, that basic science, the seed corn of innovation, is primarily supported by the federal government — not industry, which is typically more interested in applied research and development.

While some policymakers continue to mock these kinds of efforts, researchers have remained focused on improving our quality of life. Scientific know-how, the engine of American prosperity, is especially critical amid intense budgetary pressures. Federal investments in R&D have fueled half of the nation’s economic growth since World War II. This is why a bipartisan team of U.S. lawmakers joined a coalition of science, business and education leaders to launch the Golden Goose Awards.

Federal support for basic science is at risk: We are already investing a smaller share of our economy in science as compared with seven other countries, including Japan, Taiwan and South Korea. Since 1999, the United States has increased R&D funding, as a percentage of the economy, by 10 percent. Over the same period, the share of R&D in the economies of Finland, Germany and Israel have grown about twice as fast. In Taiwan, it has grown five times as fast; in South Korea, six times as fast; in China; 10 times. In the United States, meanwhile, additional budget cuts have been proposed to R&D spending for non-defense areas. If budget-control negotiations fail, drastic across-the-board cuts will take effect in January that could decimate entire scientific fields.

Columbus thought he knew where he was going, but he didn’t know what he had found until many years later. He was searching for the Orient, but he discovered something even better: the New World.

Let’s honor our modern-day explorers. We need more of them. They deserve the last laugh.

 

By: Jim Cooper and Alan I. Leshner, The Washington Post, September 9, 2012

September 10, 2012 Posted by | Science | , , , , , , , , | Leave a comment

The Make-Believe Billion: How Drug Companies Exaggerate Research Costs To Justify Absurd Profits

For years the government has sought to make brand-name drugs cheaper and more widely available to the public. It has tried and failed to limit to a reasonable time period various patent and other “exclusivity” protections. Or it’s tried and failed to negotiate volume discounts on the drugs that the feds purchase through Medicare. Every time, the pharmaceutical lobby has used its considerable wealth and political clout to block any government action that might trim Big Pharma’s profits, which typically amount to between one-quarter and one-half of company revenues. And just about every time, Big Pharma has argued that huge profit margins are vitally necessary to the pharmaceutical industry because drug research and development costs are so high.

The statistic Big Pharma typically cites (see, for instance, this PhRMA video on how Mister Chemical Compound becomes Mister Brand-Name Drug) is that the cost of bringing a new drug to market is about $1 billion. Now a new study indicates the cost is more like, um, $55 million.

Big Pharma has been making its R&D argument for half a century, but the specific source of the $1 billion claim is a 2003 study published in the Journal of Health Economics by economists Joseph DiMasi of Tufts, Ronald W. Hansen of the University of Rochester, and Henry Grabowski of Duke. I will henceforth refer to this team as the Tufts Center group, because they were working out of the (drug-company-funded) Tufts Center for the Study of Drug Development. The Tufts Center group “obtained from a survey of 10 pharmaceutical firms” the research and development costs of 68 randomly chosen new drugs and calculated an average cost of $802 million in 2000 dollars. That comes to $1 billion in 2011 dollars based on the general inflation rate since 2000 (28 percent). One billion dollars for every little orange prescription bottle in your medicine cabinet! And according to PhRMA, even that is way too low! As of 2006, its calculation of the drug-development average had already risen to $1.32 billion. That means costs specific to drug development increased by 64 percent between 2000 and 2006. Medical inflation typically outpaces general inflation, but PhRMA’s calculation puts its rate of cost increase at more than twice the rate for medical inflation during that period (26 percent). If Pharma’s alleged inflation rate hasn’t slackened since 2006, then the drug-development average should be now approaching $2 billion. But let’s not go there. We’ll stick to Big Pharma’s official last-stated estimate of $1.32 billion.

The new study, by sociologist Donald W. Light of the University of Medicine and Dentistry of New Jersey and economist Rebecca Warburton of the University of Victoria, and published in the journal BioSocieties, builds on some excellent previous research by journalist and health care blogger Merrill Goozner, author of The $800 Million Pill, and the consumer advocate Jamie Love. Light and Warburton begin by pointing out that drug companies submitted their R&D data to the Tufts Center group on a confidential basis and that these numbers are therefore unverifiable. Light and Warburton find it a little fishy that only 10 of the 24 invited firms chose to participate, given “the centrality of the issue and the prominence of the Center” within the industry. “The sample,” they suggest, “could be skewed” toward companies or drugs “with higher R&D costs.” Light and Warburton also observe that if the Tufts Center group made any effort of its own to verify the information it received from the drug companies, the group makes no mention of it in the study.

The first research phase involved in developing a new drug is basic (as opposed to applied) research. Very little of this type of research is funded by drug companies; 84 percent is funded by the government, and private universities provide additional, unspecified funding. The Tufts Center group assumed that drug companies spent, on average, $121 million on basic research to create a new drug, but Light and Warburton find that hard to square with their estimate that industry devotes only 1.2 percent of sales to all their basic research. Add in a few additional considerations and Big Pharma would have us believe basic research costs end up constituting more than one-third of the Tufts Center’s $802 million estimate. That’s way too much, Light and Warburton say.

Another problem Light and Warburton have with the Tufts Center group is that they didn’t subtract from their R&D calculations pharmaceutical firms’ tax breaks. Research and development costs, they point out, are not depreciated over time like other investments; rather, they’re excluded entirely from taxable profits. This tax break lowers net costs by 39 percent. Add in other tax breaks and that cuts the Tufts Center group’s R&D estimate in half.

Now take that figure and cut it in half again, Light and Warburton say, because half the Tufts Center group’s estimate was the “cost of capital,” i.e., revenue foregone by not taking the money spent on R&D and investing it in securities instead. But R&D is a cost of doing business, Light and Warburton point out; if you don’t want to spend money on it, then you don’t want to be a drug company. And who says that investing in securities always increases your capital? Sometimes the market goes down. Many of us learned that the hard way in 2008.

There are other problems. The Tufts Center group’s per-subject calculation of how much clinical trials cost was six times that of a National Institutes of Health study. Its calculation of how much time it takes to conduct clinical trials and have them reviewed by the Food and Drug Administration—7.5 years—is twice as long as Light and Warburton’s calculation, which is less than four years. The Tufts Center group’s use of the average (mean) cost rather than the median cost, Light and Warburton argue, is also misleading, because R&D costs for different drug products vary widely, and a very few expensive drugs will skew the mean. That appears to have happened in this case, because the Tuft Center group’s median was only 74 percent of the mean.

When Light and Warburton correct for all these flaws—well, all the ones that can be quantified—they end up with an average cost of bringing a drug to market that’s $59 million and a median cost that’s $43 million. In 2011 dollars, that’s a $75 million average and a $55 million median.

So the drug companies’ $1.32 billion estimate was off, according to Light and Warburton, by only $977 million. Let’s call it a rounding error.

By: Timothy Noah, Slate-March 3, 2011

March 4, 2011 Posted by | Big Pharma, Pharmaceutical Companies | , , , , , , , | Leave a comment

   

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