This blog features information about the political campaign nationally and in the state of Pennsylvania. it will discuss congressional races western PA, but it won't restrict comments to those jurisdictions. On many occasions, it will feature humor, but its main purpose is to "cut the legs off" political jihad. This is a site for political grown-ups of all ages.

Location: Ambridge, Pennsylvania, United States

I have a Ph.D. from the University of Rochester (English and American Literature). I taught for 10 years at various educational institutions (Univ. of Rochester, my alma mater, College of William and Mary, and University of Georgia, where I was also Asst. Ed. of the Georgia Review. Later, I worked as a speechwriter and "thinker" at various large companies, including Phillips Petroleum, Gulf Oil, Aetna, Merck (consultant), and Eli Lilly (consultant), among many others. I'm a full-time writer and political commentator/analyst. Favorite company: AudioTech Business Books. Favorite female: my wife, Patricia Ann Maloney. Favorite politcal candidate: Diana Lynn Irey (PA's 12th congressional district)

Monday, December 04, 2006

Iraq & Pharmaceuticals: Sea-changes Underway

From December 4 - December 10, this blog will deal with two big issues: (1) the report of the Baker-Hamilton Iraq Study Group, currently leaking like a water-tower hit by a 500-pound bomb; (2) the continuing developments in the pharmaceutical industry.

In recent columns, I've been discussing (railing about?) the policy statements of one Jason Altmire, recently elected to congress from PA's 4th District. A self-described "health expert," Altmire has generated a steady stream of demagoguery and misinformation on health care in general and medications in particular.

Today's (December 4) news features the world's biggest drug company, Pfizer, pulling the plug on what seemed an especially promising -- and life-saving -- drug: torcetrapid (TOR-CET-RAH-PIB), designed to increase a patient's "good cholesterol."

In clinical trials, the drug produced an unexpected number of heart problems and deaths. After Pfizer discovered that sad reality, it notified the FDA and ceased the trials, leaving torcetrapid itself dead as a doornail.

Heart disease kills 510,000 American deaths per year. Pfizer was making a good faith effort to cut sharply into that sad total.

How much had the company spent in its 15 years of researching, developing, and testing the drug? Reports range from $800 million to nearly a billion dollars.

The money for that effort derived from profits the company realized on other medications it had developed in the past. Those drugs include truly wonderful products like Norvasc (blood pressure), Lipitor (cholesterol), Zoloft (depression), and Viagara (for you-know-what).

Pfizer is one of the world's greatest companies. In the past, it's also been one of the most profitable.

Of course, someone like Jason Altmire thinks drug profits are too high. But somehow he never comes up with an alternative way for companies like Pfizer to finance the development of essential drugs.

Presumably, Pfizer would have charged top-dollar for an innovative drug like torcetrapid. But balancing the drug's costs would have been its ability to preserve lives -- perhaps your life or that of family members.

Of course, the high cost of pharmaceuticals is an economic and social concern. As I've detailed, it's also a personal concern for people like my wife and me through the Medicare prescription drug plan.

The good news is that there are various factors underway that are driving down the overall cost of drugs.

In my local newspaper, the Beaver County Times, a story appeared today about the $4 generic drugs ("Cut-rate generics tempting"). Written by Stephanie Waite, a talented reporter, it's worth reading.

In response to the piece, I wrote the following letter to Ms. Waite:


I've been writing a lot in my blog lately about drug prices, particularly the generics offered by Wal-Mart, Target, and Giant Eagle. Generally, I think your article in the Beaver County Times is excellent.

I dissent somewhat from the article's "hook." where you ask whether this is just a promotion. It's a lot more than that. As your Wal-Mart source indicates, it's serious and it's permanent.

Your article reinforces my belief that "free enterprise" (competition) is coming quickly to the pharmaceutical industry, which has has resisted it. Some elements are still resisting, but they're losing that battle.

On the point of whether companies are making money on with the $4 generics: Wal-Mart says it is, and I believe the company. In most cases, it costs about as much to make a bottle-full of drugs as it does a bag-full of M & Ms.

Perhaps 95%-plus of the price tag on branded drugs reflects marketing costs, coupled with recouping of investments, and profits.

Historically, by the way, pharmacists (in contrast to drug-makers) have bigger margins on generics (make more money on them) than on the branded drugs.

I disagree with the independent pharmacist (Michael Hornick) you quote who says Wal-Mart, Giant Eagle, etc. don't really care about patient health because they sell tobacco. Hornick is himself blowing smoke.

CVS, Eckards, and Walgreens sell tobacco, as do most independents, but I don't recall any of them saying that cigarettes are good for you.

A major reason for seniors to sign on for the $4 medications is that it reduces their costs for generics (usually a $5 co-pay under Medicare Plan D). If a senior just pays the $4 out-of-pocket (where the co-pay comes from anyway), he or she will delay -- and perhaps avoid -- reaching the insurance limit ("the doughnut hole").

The Hornicks of the world miss a major point about health care: the critical role controlling costs plays in keeping people healthy.

By the way, you mention Philadelphia's Independence Blue Cross telling members of its Preferred Provider Program that they'll receive receive FREE GENERICS for the first three months of 2007. I salute Independence for doing that, but the reality is that they'll save money by giving the generics away, mainly because branded drugs prices are a big multiple of those for generics.

In short, this is one of those cases where giving something away actually costs less than charging for it.

As your article notes, generic drugs aren't in any way inferior. They're the chemical and therapeutic equivalents of branded medications. They just cost a lot less.

Steve Maloney, Ambridge, PA

Most of us tend to be suspicious when we get something for "free" -- or at a very low cost. In this case, we're seeing the workings of what economist Adam Smith called "the invisible hand" of free markets.

Unfortunately, this kind of development mystifies many of the "new Democrats" (such as Altmire) and baffles all of the "old Democrats" (Murtha, Pelosi, Rangel, and Gaggle).

At times, admittedly, the pharmaceutical industry has adopted a "take it or leave it approach," one we might almost call a "take it -- or die" policy. But when purchasers of medications get an opportunity to vote with their pocketbooks, they make good choices, hold costs down, and ensure their good health.

Note: Although I had many pharmaceutical clients in the 20th century, I've elected not to work for such companies (or their trade organization, PhRMA) anymore. I'm busy enough without them.


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