How Little Pharma Grew Up

By SAM URETSKY

Some problems don’t go away. There’s global warming, nuclear waste, plastics disposal – and the costs of prescription drugs. This is not a new problem. Probably the first congressional investigations of drug pricing were the Senate Judiciary Antitrust and Monopoly Subcommittee, chaired by Sen. Estes Kefauver (D-Tenn.). These hearings, which began in 1959, focused in large part on the concept of “administered prices,” prices set without regard to either supply and demand or cost of production. The subcommittee reported that the drug market was controlled by a few large companies which had a disproportionate share of the market.

Two factors led to the rise of the pharmaceutical giants. Previously, most drugs were derived from plants, and the drug companies sold extracts and dried roots and leaves, purple foxglove for digitalis, coca leaves for cocaine. The prescriptions were written (in Latin) by physicians and compounded individually by pharmacists. World War II increased the demand for finished dosage forms so that mechanization came to production of tablets, capsules and liquid dosage forms. At the same time, major discoveries changed the sources of drugs so that they could no longer be prepared in the back room of a drug store.

Insulin was discovered by Banting and Best in 1921, and Eli Lilly and Co. began producing the hormone a year later, but the first long-acting (now considered intermediate-acting) insulin wasn’t developed until 1950, and the first human insulin, produced by chemical synthesis, came in 1963. Alexander Fleming discovered penicillin in 1928, but in spite of a remarkable joint effort by the United States and Great Britain to produce this wonder drug for the war effort, penicillin wasn’t available for marketing until 1946. Insulin was first extracted from the pancreas of food animals and penicillin derived from bacteria. Neither fit the traditional methods of drug preparation.

The drug manufacturers could set the prices of their products because of the anti-substitution laws. These had been passed in the 19th century to punish unethical pharmacists from substituting lower cost ingredients for those that were prescribed. Modern examples from the Journal of Medicinal Plant Studies include, “Example: Addition of wheat flour to powdered ginger, with enough capsicum to restore the pungency & curcuma to maintain the colour; Rose wood in capsicum powder; powdered bark adulterated with brick powder.” Older reports describe mixing quality ingredients with spoiled or degraded materials.

These laws were later interpreted to mean that if two companies made the same product, but sold it under different brand names, the pharmacist was obligated to dispense the brand ordered. It was illegal to dispense Equanil in place of Miltown, or Pen VK in place of V-Cillin K. The company with the best sales and marketing plan made the most profits.

In 1964, The New Yorker magazine published Richard Harris’ “The Real Voice.” From the magazine’s summary of the report: “Industry representatives said prices were high because of the huge expense of research. Competition in the development of new drugs is so intense that about 400 new ones reached the market yearly. One expert said possibly half of these were useless or worse. The US patent system, allowing inventors 17 years of exclusive rights, caused higher prices. Advertising and promotion of new drugs has been misleading at times; values exaggerated, side effects minimized or hidden.”

The states had a reasonable answer, replacing the anti-substitution laws with systems that facilitated and even required substitution with generic equivalents. The Food & Drug Administration published the Orange Book: Approved Drug Products with Therapeutic Equivalence Evaluations listing drug products that were therapeutic equivalents, and could be substituted for each other. This introduced competition into drug marketing (after the patents had expired) and lowered the prices of essential drugs. For a while.

More recently, Leslie Allen, in CQ Researcher (May 20, 2016), wrote, “Drug manufacturers blame the rising cost of research and development, but critics blame excessive profit-seeking and exorbitant marketing budgets. Meanwhile, prices for some common, decades-old generics also are rising as competition in that part of the industry collapses. The price of the antibiotic tetracycline, for example, rose more than 7,500% in two years. Martin Shkreli, former CEO of Turing Pharmaceutical, achieved infamy when he obtained a near monopoly on Daraprim, a life savings drug for toxoplasmosis, and raised the price from $13.50 to $750 a dose.

The Wall Street Journal reported (Jan. 18), “Virtus Pharmaceuticals in May raised the US price of a bottle of a muscle relaxant that has been in short supply, methocarbamol, to $105 from $8.49. The 1,137% increase was the biggest for a prescription medicine in 2018, according to a new analysis of pricing data.” But, the Canadian Therapeutics Initiative includes methocarbamol on its “Drugs to Avoid” list saying it has no proven efficacy and may cause skin and gastrointestinal adverse reactions.

For years, the Center for Disease Control (CDC) has imported and supplied drugs which are considered essential, but for which there is too limited a market in the United States. The government should consider a program of importation of drugs which are affordable in other nations, but exorbitantly priced in the US market. Alternately, Sen. Elizabeth Warren (D-Mass) wrote in the Washington Post, “Forty-seven states and the Justice Department are investigating a price-fixing conspiracy that’s driving up the cost of generic drugs in the United States. One investigator called it “most likely the largest cartel in the history of the United States.” This crisis calls for action. That is why I’m introducing legislation to authorize the public manufacture of generic drugs wherever drug companies have warped markets to drive up prices.”

Sen. Warren is running for President. Just saying.

Sam Uretsky is a writer and pharmacist living in Louisville, Ky. Email sdu01@outlook.com.

From The Progressive Populist, March 1, 2019

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