One reason why American medicine costs almost twice as much as the rest of the world: drug companies

The New York Times online edition yesterday published an article about how Amgen (a prominent drug maker) was able to have a bit of pork inserted into the emergency “fiscal cliff” bill passed on January 2.  Herewith, I print an excerpt of key points in this article.  These facts, while an egregious example of high costs in medicine, are only one of many similar methods that private companies use that increase their profits and raise costs for consumers.

The provision, inserted into the bill as “Section 632”, allows Amgen two more years of unrestricted pricing (read: however much the market will bear) on its oral drugs used to treat kidney dialysis patients.  Only Senate staffers saw this provision until a few hours before it was voted upon in the full Senate; thus, there was no way to fight its inclusion without derailing the entire bill, creating a disaster for the entire economy (as we were all told.)  The two year exemption from controls will cost up to $500 million in Medicare benefits.

Amgen makes a number of new drugs that are critical for the treatment of patients with kidney failure, including Epogen, which fights the progressive anemia associated with loss of erythropoeitin (normally secreted by the kidneys), one of many debilitating side effects of kidney failure.  Epogen is given by injection, and, as such, was included in an earlier cost-controlling measure passed by Congress which exempted oral medications.  The use of Epogen dropped by 25% in one year when perverse incentives that encouraged its use were ended by this cost-controlling legislation.

On December 19, 2012, Amgen  pleaded guilty to illegally marketing Aranesp (another anti-anemia medication) and agreed to pay $762 million.  The Justice Department stated that this penalty set a record for size.  Amgen had revenues of $15.6 billion in 2011.  Since 2007, Amgen employees and its political action group have paid $5 million to political candidates and committees.  Major recipients of Amgen contributions include Senator Max Baucus, Democratic Chairman of the Senate Finance Committee, and Senator Orrin Hatch, Republican and ranking minority Finance Committee member.  Republican Senator Mitch McConnell, the Senate Minority Leader, also got contributions, including a fund-raiser held this past December during the debate over the bill mentioned above.  Amgen has also contributed to President Barack Obama in similar amounts.  One of Senator Hatch’s top Finance Committee staff members, Dan Todd, was an Amgen employee until 2009 (he waited until 2011 to join Mr Hatch, but then worked directly on kidney dialysis legislative issues, which concern Amgen deeply).

The final “fiscal cliff” bill, which included provisions that prevented a 25% decrease in Medicare reimbursements to doctors on the first of the year, also called for a $4.9 billion dollar decrease in Medicare payments for dialysis over a period of ten years.  Nonetheless, hundreds of millions more could have been cut from Medicare payments without the provision exempting oral dialysis medications for another two years.

We pay about 40 to  60% more for our medical care than do people in other countries with longer life expectancy than the US, countries such as Japan, Germany, Canada, and Great Britain.  Most countries have “nationalized” control of their medical care systems, and people in those countries pay a basic tax which functions like an insurance premium, financing the system.  These are known as “single payer” systems.  In our country, each person is responsible for paying for his or her own medical expenses, and the government exerts little control over costs.  Private companies such as drug makers control costs and charge whatever the market will bear.

The basic reason behind the high cost of medicine in this country is the fact that private companies exert control over government policy in a way that supports their profit margins and their control over markets.  This is a result of our system of “democratic” government, in which those who wish to win elections and obtain government positions must pay vast sums of money to support their campaigns.  Only those who are very wealthy or who can organize groups of private companies into financial support networks are able to present themselves to the public as viable candidates for office.  Money alone is not enough to win office, but even those who are highly charismatic and who have highly popular campaign platforms still need large amounts of money, which they must raise privately.

Our so-called “democratic” system is completely controlled by private companies who pay for the campaigns of our elected officials.  The publicity needed to be elected costs so much money that the candidates are forced to sell themselves to private companies, who have obligingly created systems of financing that conceal the true source of the money from the voters.  Only when this unacknowledged system of money control is ended will democracy serve the interests of the majority of the people, rather than the interests of private companies.