We recently wrote about the media’s coverage of the 2013 Open Payments data, noting the ease in which a government database emboldens journalists to imply misconduct. Although the Justice Department has not used information from the database to bring forward specific legal action in court, the media has not been as restrained, quickly moving to try their own cases in the “court of public opinion”. These stories create a chilling effect on industry-physician collaboration, as many interactions could subject either party to unwanted—and perhaps more importantly—unjustified attention.
These stories nearly universally paint the pharmaceutical industry in a poor light, fostering public distrust, and ultimately hurting patient care around the globe.
But the industry is fighting back. Last year, for example, we highlighted the Pharmaceutical Research and Manufacturers of America’s (PhRMA) website—the “Innovation Hub”—which showcases the latest data and research on innovation in the biopharmaceutical industry. The website offers a central place for PhRMA’s resources related to the R&D process, the biopharmaceutical pipeline, and progress fighting diseases such as hepatitis C, cancer, Alzheimer’s, leukemia, and HIV/AIDS.
John Lechleiter, the Chairman, President, and Chief Executive Officer of Eli Lilly and Company recently added to this debate, writing an opinion piece, “Debunking The Five Big Myths About ‘Big Pharma’” in Forbes. In his article, Lechleiter criticizes myths about “industry that routinely poison debates, obscure genuine problems, and distort policy recommendations on health care.” Concerned about the growing power of these myths, he critiques them head on.
First, Lechleiter addresses the claim that pharmaceutical companies exaggerate costs of developing new medication to justify higher prices. Lechleiter points out that research and development (R&D) expenditures are incredibly expensive. He notes this information is publicly available and that PhRMA spent over $51 billion on R&D in 2014 alone. The pharmaceutical industry accounts for 21 percent of all R&D spending by businesses in the United States. “This level of investment is what is required today to bring forth new medicines,” he writes.
Another criticism of industry—that government and university labs develop most new medicine—is not entirely correct. Lechleiter acknowledges the important contributions of government and academic research, but they are a collaborative partner with industry. He points out that “the complex and expensive process of turning insights on diseases and promising leads into approved treatments for patients occurs almost entirely in private industry.” A recent study confirms this, demonstrating while publicly funded research often indirectly contributes to the discovery and development of medications, “fully 91 percent of [FDA approved drugs between 1988-2005] were patented in the private sector—demonstrating that they were substantially discovered and developed by private firms,” notes Lechleiter.
Lechleiter continues by addressing the myth that prescription medications are the main driver of health care cost increases. In fact, 10 cents of every health care dollar spent in the United States, now and also the same back in 1960, goes toward prescription medications. However, during this time life expectancy increased more than nine years, despite the same leveling of spending. Lechleiter also points to a study in which the researchers compared total medical expenditures for patients with major diseases who regularly took their medication versus those who did not. The former group saw greater overall health care savings and it exceeded the extra medication costs by a significant margin.
Lechleiter additionally answers two other myths: that public and private health care payers must accept and pay whatever price drug companies charge, and that government-controlled pricing of medication lowers health spending in other countries. Lechleiter points out that health insurance companies can control spending by establishing “formularies” of treatments, by requiring prior authorization of prescriptions, and adding incentives for physicians to prescribe generics. In fact, hospitals and the Pharmacy Benefit Management (PBM) companies purchase medication in large bulks, garnering a large market share and ultimately significant leverage over the prices paid.
Finally, Lechleiter cites an analysis from the Organization for Economic Cooperation and Development, showing that American health spending is twice per-capita than that of Canada and Germany. However, medicines account for a small percent of the difference in total spending. “In order words, if we equalized drug prices with those countries tomorrow, we would further reduce the economic incentives for new-drug innovation—but we would do essentially nothing to lower the cost of health care.”
Lechleiter cautions against the creation of myths regarding the pharmaceutical industry. These claims hinder efforts to develop new medications and innovative ideas, often produced by collaboration between industry and medicine. Myth-making also diverts our attention from significant culprits in American health spending, such as perverse insurance structures and shorter periods of exclusivity for biopharmaceutical intellectual property. He concludes by stating: “No one should fear the truth when it comes to our shared goals of improving our health-care system, continuing medical progress, and making life better for patients.”