What’s wrong with the US health care system

is exemplified by drug manufacturer Cephalon’s drug pricing strategy. The company’s narcolepsy drug Provigil is coming off patent in 2012. So, like any good corporation seeking to maximize shareholder wealth, it has developed a replacement drug – Nuvigil, that is a longer-acting version of the same medication.
But Cephalon is not content with just doing what other pharma companies do – patenting a long-acting version of an old standby, and releasing that LA version just as the older drug goes off patent. Instead, the fine folks at Cephalon are jacking up the price of Provigil now, to make it even more expensive. Then, when Nuvigil comes out, it will be priced less than Provigil, encouraging patients to switch.
And because there won’t be a generic for Nuvigil for years, Cephalon holds on to a nice revenue stream.
Cephalon is the poster child for sleazy pharma marketing practices. Just a couple months ago Cephalon pled guilty to illegally marketing Provigil and pain drug Actiq, and paid a $444 million fine for their criminal behavior. The company has been shoving Actiq down the throats of workers comp patients for years, despite the drug not being FDA approved for anything but breakthrough cancer pain.
No matter to the profit-at-any-cost execs at Cephalon. In their dedicated, unending quest for more shareholder wealth, they have proven they will do anything to gain more revenue.
Realists will understand that Cephalon’s strategy is short-sighted at best. With national health reform coming, one of the earliest items on the agenda is likely to be legislation encouraging/allowing the Feds to negotiate prices with big pharma. Although few industries are as adept at marketing as big pharma, there’s a new sheriff in town.
House Energy and Commerce chair Henry Waxman’s record on pharma is mixed. Co-author of the landmark 1984 Hatch-Waxman Act in 1984, which has had the effect of speeding up the introduction of generics while offering some protections for branded drugs, Waxman has more recently taken a more aggressive stance, putting drug development firms on notice that their attempts to circumvent patent expiration terms is unacceptable.
In a speech in 2005, Waxman stated:
“Current law does not strike the right balance. We cannot continue to have a system that
effectively enshrines permanent monopoly status for some of our most important medicines. Of course, some intellectual property protections are needed to encourage innovation by brand-name manufacturers. But permanent monopolies are neither needed nor wise.”
Waxman has been a loud and consistent critic of pharma’s reaction to Part D. Here’s an excerpt from the Congressman’s letter to the GAO in January 2006:
“A report I released in November showed that prices for brand-name drugs under the new Medicare drug benefit are 84% higher than the prices that the Department of Veterans Affairs negotiates for the federal government.[13] An analysis that GAO did for me in October 2000 showed that on average, Medicaid’s prices for brand-name drugs were 43% higher than the prices negotiated by the VA.”
What does this mean?
Cephalon’s shareholder-wealth-maximization strategy is short-sighted. There will be a major push in the next Congress to find the money to do something big in health care reform, and pharma profits may be a very attractive source. Cephalon’s blatantly greedy practices make it even more likely the Feds will negotiate price.