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Tag: drug prices

At 'Washington Post,' Bezos' Bozos Struggle To Justify High Drug Prices

I am tempted just to ignore the Washington Trump-Post after Jeff Bezos’ purge, but perhaps there is some ridicule value that can be exploited for the purpose of educating the public. The Post ran an editorial complaining that people looking to lower drug prices in the United States were being short-sighted because it just means that we will see fewer new drugs in the future. It said the real problem is that Europe doesn’t pay enough for drugs because they don’t give drug companies unfettered government-granted patent monopolies, but instead limit prices based on a drug’s usefulness.

Two simple numbers show how ridiculous the Post’s argument is. Last year we spent over $720 billion on drugs and other pharmaceutical products. The industry spent around $150 billion on research. That means patients in the United States paid almost five times as much for drugs as what the industry spent on research.

It likely costs around $150 billion to manufacture and distribute the drugs. (We know this based on the price that generic drugs sell for.) That leaves the industry with $570 billion to cover $150 billion in research. The rest goes to profits, advertising, high pay for CEOs and other top executives, and payoffs to politicians, doctors, and media outlets.

Fans of arithmetic, which I guess excludes the Washington Post editors and other Trumpers, would know that Europe would be paying plenty to cover research costs, even if its prices were 40 percent of U.S. prices. The only thing that would be accomplished by raising the price of drugs in Europe is that Jeff Bezos’ rich friends would become even richer.

If we want to talk seriously about lowering drug prices, we would be looking to change the way we support research. Instead of relying on government-granted patent monopolies, we could just pay for the research upfront, say by vastly increasing the $50 billion we now spend funding research through the National Institutes of Health. Then all the research could be fully open source, with all patents in the public domain.

Not only would this mean that new drugs could be sold as cheap generics from the day they are approved by the FDA, but research would likely advance more quickly since new findings would quickly be made freely available. This would allow researchers all over the world to follow promising leads and avoid proven dead ends.

This way of financing research would also remove the enormous incentive the industry now has to lie about the safety and effectiveness of new drugs. We saw this problem most clearly with the opioid crisis where the industry misled doctors about the addictiveness of the new generation of opioid drugs, but the issue of misrepresenting research comes up all the time. It is exactly what economic theory predicts happens when a government monopoly allows companies to sell products at prices that are thousands of percent above production costs.

I have been screaming about the corruption of the pharmaceutical industry for a long time and pushing direct upfront funding as an alternative. I am happy to see a new paper from Dana Brown at the Vanderbilt Policy Accelerator making the same argument.

There’s an old saying that intellectuals have a hard time dealing with new ideas, and direct upfront funding of pharmaceutical research is certainly a new idea to people who can’t imagine an alternative to patent monopolies. Also, since the major media outlets are controlled by rich people like Jeff Bezos, they aren’t anxious to publicize policies that could cost their rich friends hundreds of billions of dollars.

But at least folks who read my stuff can know. The Washington Post is lying to you. There are more efficient mechanisms to finance biomedical research which can give us both lower drug prices and better medicine. Drugs can and should be cheap, we don’t have to make them expensive with patent monopolies. Maybe one day we will be able to have a serious discussion about alternatives to patents to finance the development of new drugs.

'Great Healthcare': White House Delivers Trump's Concept Of A Non-Plan

One year into his second term, President Donald Trump on Thursday called on Congress to pass a health care plan that would do next to nothing to lower employer-based insurance costs or reduce out-of-pocket expenses for individuals and families.

The 20-paragraph “fact sheet” on the administration’s plan contained few specifics; no new ideas; had only one estimate of projected savings or costs. Its insurance reforms included either provisions already on the books or previously rejected Republican proposals that would make things worse and force more people into the ranks of the uninsured.

The stock market took notice. Insurance stock prices (IHF) rose almost 2% on the news.

Its lead provision called on Congress to enact a law forcing drug companies to set prices at international levels. Given the pharmaceutical industry’s widespread support on Capitol Hill (most of the GOP and a hefty share of Democrats have routinely opposed so-called international reference pricing), passage of such a law is highly unlikely.

Moreover, the administration could do this on its own if it really wanted to. The first Trump administration in its waning days proposed a far-reaching rule for international reference pricing, which was rejected by the Biden administration in favor of pursuing price negotiations with manufacturers. Last month, it proposed two pilot projects that would apply international reference pricing to only 25% of Medicare patients, and then for only five years. The plan unveiled today made no mention of either effort.

Nor has the administration moved to expand rules over the drug prices it already has some say over — those for Medicare. The Medicare drug price negotiations law affected only a handful of high-priced drugs. The plan makes no mention of expanding that authority.

Financial markets took notice. Drug company prices (XPH) fell by less than 1% after the announcement.

The health care trade press was duly skeptical about the plan, calling it “a hodgepodge of health care policies that would create new price-control power over pharmaceutical companies, but that otherwise wouldn’t fundamentally overhaul America’s existing system,” as StatNews report opined.

Here’s what one investment advisory firm told its clients: “We view this new document as a largely political exercise. We think it is intended to demonstrate that the White House is doing ‘something’ about affordability and healthcare prices, but we believe the policies either stand little chance of being enacted by the current Congress or will have a minimal impact if enacted.”

The ‘details’

For drugs:

Beyond asking Congress to codify international reference pricing, the plan calls for making more drugs available as cheap over-the-counter medications. While this could limit sales of a few prescription anti-acids and pain relievers, for which there are already plenty of cheap over-the-counter alternatives, it would have no impact on the high prices of biotech specialty drugs, which are the major drivers of escalating pharmaceutical spending.

Nor would it affect the slow progress in bringing biosimilars to market, or their pricing. Most biotech drugs are either injected or infused in clinical settings, which makes them inappropriate for over-the-counter sales.

The plan also calls for Congress to end the kickbacks pharmacy benefit managers receive from large drug companies for including their products on preferred drug lists. The CBO estimated the GOP bill that passed the House in December with this reform would save drug insurance plans about $15 billion a year, a tiny fraction of the more than $300 billion that patients and their insurers spend at retail pharmacies each year.

For health insurance premiums:

The plan calls for scrapping the existing subsidy system for Obamacare plans and replacing it with a voucher that allows people “to buy the health insurance of their choice.” This refers to the GOP-backed Lower Health Care Premiums for All Americans Act (H.R. 6703), which would expand association plans that don’t meet basic Obamacare requirements like providing essential benefits or setting limits on out-of-pocket expenses.

The White House fact sheet touts the Congressional Budget Office estimating the association plan proposal would save $36 billion for the federal government. It didn’t mention the CBO’s conclusion it would cause 100,000 people to drop existing coverage each year over the next decade while adding just 700,000 newly insured through inferior association plans.

The White House plan also calls on insurance companies to publish the percentage of their revenues paid out in claims versus overhead and profit costs. The Affordable Care Act of 2010 already limits insurers, both on the exchanges and in the private market, to paying out at least 85% of the revenue in medical costs for large company plans and 80% for small businesses.

If there’s a problem, it’s in enforcement, not the standard. Indeed, I would like to see a 90% medical loss ratio as the best way to limit insurance industry marketing spending.

For providers:

The plan includes nothing about limiting hospital pricing; enforcing antitrust rules in every health care sector; or rectifying pay inequities between primary care physicians and specialists. Instead, its sole approach to addressing provider sector pricing is greater price transparency, which is already required by a rule adopted by the Centers for Medicare and Medicaid Services in 2019.

That has been a bust for two reasons. First, hospitals post those prices on websites or in places where consumers can’t find them or in such complicated tables that the average person has no idea what they mean.

But more importantly, even if prices were published in an easy-to-read format and posted on a wall, as the plan proposes, what would mean to most people? An analysis by the Health Care Cost Institute of the 70 most shoppable services (routine procedures like colonoscopies or cataract surgeries, for instance) accounted for just 12% of health care spending.

To sum up: When it comes to health care, affordability is most Americans’ number one concern. The plan the Trump administration announced Thursday does almost nothing to address that problem.

Merrill Goozner, the former editor of Modern Healthcare, writes about health care and politics at GoozNews.substack.com, where this column first appeared. Please consider subscribing to support his work.

Reprinted with permission from Gooz News

How Trump's Patent Office Appointees And Big Pharma Delay Low-Cost Drugs

What’s the easiest and smartest thing a president could do right now to bring down drug prices? That’s easy. Allow quicker market entry for generic versions of biologics.

What’s the biggest thing the Trump administration has done in recent months to impact biologic prices? It made it far more difficult for biologic generics, better known as biosimilars, to enter the market.

How did that happen when the president is constantly using his Truth Social platform to brag about how much he’s doing to lower the price of drugs? He appointed leaders at the Patent and Trademark Office (PTO) who are imposing policies that will make it far more difficult for biosimilar manufacturers to challenge improperly granted patents.

They are already allowing Big Pharma companies to maintain their illegitimate patent portfolios, known as patent thickets, which they use to deny market entry to cheap, generic competitors. These delays can last for years — even decades — beyond the expiration of an initial patent.

Why is this such a big deal and such a big gift to Big Pharma? While biologics make up only two to five percent of prescriptions (estimates vary), they generated around half of the pharmaceutical industry’s $634 billion in revenue in 2024. When still on patent, the price of individual biologic treatments can reach as high as several hundred thousand dollars per year. But when biosimilars enter the market, patients and their insurers save nearly 80 percent on average, according to a recent study in Health Affairs.

Before I get into the shenanigans at the PTO and how it will delay biosimilars, allow me to share some background for those not familiar with the complexities of the pharmaceutical industry and its biotechnology offspring, which was birthed by government-funded inventions that began in the mid-1970s.

Biologics are large organic molecules produced through genetic engineering that are usually delivered through injection or intravenous drips. Many of the greatest advances in drug therapy over the past half century have been through biologics.

The genomic revolution allowed scientists to replace proteins that patients’ bodies cannot produce because they have organ failure or genetic mutations. Genetic engineers also created monoclonal antibodies that target specific cancer mutations and the blood vessels that feed tumors. Vaccines are biologics. Scientists are now working on gene therapies that may permanently repair genetic birth defects.

Producers of biologics – like all drug makers – get patents on their inventions, a right guaranteed in the Constitution (thank you, James Madison) to promote innovation in “science and useful arts.” The idea was to create a limited period that incentivized creation of new inventions, but eventually ended so patent owners couldn’t use their patent monopoly to permanently levy exorbitant prices.

Patent terms have been changed repeatedly over the nation’s history. In 1994, Congress established a 20-year term for patents that began with the date of filing, an increase from the previous 17 years. In 2010 it added a 12-year guarantee of exclusivity to biologic manufacturers, whose products often remain in development for years after the initial patents are filed.

While that add-on was controversial, potential biosimilar manufacturers embraced the bill because it finally provided them with a pathway for entering the market. They also stood to benefit from the 2011 America Invents Act, which created a streamlined process at the PTO for challenging questionable patents. Instead of long and costly litigation in federal court, patent challenges would be heard by expert judges inside the PTO at a fraction of the cost. Appeals would be heard by an internal appeals board.

Information technology’s role

The impetus for the streamlined challenge process came from leading information technology firms (Google, Amazon, Facebook, etc.) who were being besieged by so-called patent trolls, who would buy or write patents they never intended to use that were similar to cutting edge info-tech technologies. The trolls, often backed by private equity investors, used those patents to file patent infringement lawsuits against well-heeled high-tech firms who had actually developed, patented, and used similar technologies. The goal: To extract huge settlements through patent purchases or licensing fees.

One major user of the new challenge process, called inter partes reviews (IPRs), turned out to be biosimilar manufacturers, who wanted a faster and cheaper way to challenge the patent thickets being erected by Big Pharma and biotech firms. Virtually every company that produces FDA-approved biologics and small molecule drugs (pills and capsules) files follow-on patents at the PTO. Any individual product may win a dozen or more, usually involving small changes in dosages, formulations or routes of administration.

“By creating large patent portfolios, companies can make it more difficult for competitors to enter the market by increasing transaction costs and/or delaying US Food and Drug Administration (FDA) approval,” law professors Sean Tu of the University of Alabama and Ana Santos Rutschman of Villanova University wrote this month in JAMA Health Forum. “Patent thickets can also be leveraged to force competitors to settle litigation, thus delaying market entry, or to enter under unfavorable conditions (such as restricted volume entry).”

One study they cited showed 78 percent of all “new” drug patents are part of a post-approval patent thicket for an already approved drug. This tactic has slowed adoption of biosimilars to a crawl. Fifteen years after passage of the law creating a pathway for biosimilar market entry, there are still fewer than 50 on the market, despite there being over 600 FDA-approved biologics, according to the Association for Accessible Medicines, the trade group for biosimilar manufacturers.

The process sped up during the Biden administration as biosimilar manufacturers increasingly turned to the IPR process to challenge questionable patents. They were aided by the fact that the administrative process at the PTO takes only 12 months and costs about $725,000, according to another recent paper co-authored by Tu. Patent litigation in federal court, by contrast, costs on average over $6 million and takes years to resolve.

Biosimilar manufacturers started racking up an impressive IPR win rate at the PTO. Another recent study showed biosimilar manufacturers won 14 of 20 challenges that were holding up market entry for their products. They eventually won FDA approval and saved patients and their insurers tens of billions of dollars. Five are shown in the following chart.

(Note: The bottom scale (-4 to 4) represents the years before and after a biosimilar manufacturer won a patent invalidation case at the PTO. The solid lines represent five of the more expensive biologics that lost exclusivity over the past decade. In each case, the sharp drop in revenue due to lost sales to biosimilars didn’t show up until a year after the PTO ruled because the Big Pharma firm defending the patents had a year to appeal. The bottom dotted line shows how one representative biologic that didn’t face biosimilar competition more than doubled its revenue over a similar time period.)

Big changes at PTO

But the PTO reversed field this year. PTO acting director Coke Morgan Stewart, who had worked at PTO during the first Trump administration before joining O’Melveny & Myers, a major corporate law firm, began using a process she dubbed “discretionary denial” to block patent challenges. In 2024, the patent appeals board had approved nearly 75 percent of all patent challenges. By September of this year, the first under Trump, that rate had declined to 35 percent, according to another study by Tu, this time with Arti Rai of Duke University and Aaron Kesselheim of Harvard Medical School.

The scholars reviewed Stewart’s decisions and found she had created a novel rationale for dismissing patent challenges. She argued that after six years (about the average age for drug patents being challenged), the patent holder should expect they will no longer be administratively challenged. “Before 2025, the ‘settled expectations’ rationale never even existed,” Tu and his colleagues wrote. “It now accounts for a large percentage of denials and is even used when administrative review petitions raise reasonable technical grounds for invalidation.”

In September, the Senate approved John Squires to run the PTO, though he is not a registered patent attorney. He did chair the Emerging Companies and Intellectual Property practice at Dilworth Paxson LLP in Washington where he represented numerous AI, blockchain, crypto, and financial technology companies. He also made campaign contributions to both of Donald Trump’s victorious election campaigns and more recently to the Never Surrender PAC, which is one of the president’s vehicles for supporting GOP candidates in the 2026 mid-term elections.

One of Squires’ first acts after winning Senate approval was to centralize the IPR decision-making process in the director’s office, thus removing it from the experts who understood the technical issues. He also limited the length of briefs that petitioners could file. Then, in mid-October, Squires announced that “he would personally decide every IPR proceeding,” which cannot be reviewed judicially. He also declared he could issue “summary notices,” that may include little or no explanation for denials.

“By aggressively invoking discretionary denials, the USPTO is subverting an important administrative pathway that Congress specifically created to check weak patents,” Tu, Rai and Kesselheim wrote. Seven lawsuits have already been filed challenging the new policy. They call on Congress to “step in” and “explicitly prohibit denials based on non-merit-based criteria such as ‘settled expectations’.”

This Congress? Fat chance. Look for a dramatic slowdown in the pace of biosimilar adoption over the next few years and for a continuing sharp rise in consumer and payer spending on biologics, the most expensive drugs on the market.

Reprinted with permission from Gooz News

One Big Problem With Trumponomics: The President Can't Do Arithmetic

It is striking that many people feel the need to claim that Donald Trump has some coherent economic plan for the country. It’s understandable that Trump’s team likes to pretend that his random ramblings and angry acts of revenge are all part of some grand strategy, but why would anyone not on his payroll play along with this obvious absurdity?

To anyone paying attention, it should be pretty clear that Donald Trump is clueless about the economy. Just to take an obvious example to make the point: Trump has repeatedly promised to lower drug prices by 800, 900, or even 1,500 percent. As he rightly says, no one thought it was possible.

It wouldn’t be a big deal that he got confused once or twice and forgot that you can’t lower prices by more than 100 percent, unless you envision drug companies paying people to use their drugs. But Trump has done this repeatedly, over many months.

This tells us two things. First, he really doesn’t have even a basic understanding of arithmetic and percentages. That would be bad in and of itself. After all the president is sometimes directly negotiating deals and it would be bad if he agreed to something and then had to call back his negotiating partner and tell them he didn’t understand what he had agreed to.

But the other issue is even more serious. Surely people like Treasury Secretary Scott Bessent and Kevin Hassett, Trump’s National Economic Advisor, understand percentages. But apparently, they are too scared of Trump to explain how they work. Instead, they let him go out week after week and make a fool of himself by making nonsensical promises on lowering drug prices.

This fact is crucial if we are trying to assess whether Trump has a coherent economic strategy. The point is he is obviously confused about many things when it comes to the economy. He seems to think that other countries pay tariffs and send the U.S. checks. He also seems to think that wind and solar power are very expensive sources of energy. And he seems to think that the economy was collapsing when he took office.

All of these claims are 180 degrees at odds with reality, but it is extremely unlikely that his aides would be able to correct him on these or other absurd views that Trump seems to hold. Given how out of touch Trump is with reality and the inability of his aides to correct him on anything, why would anyone think that he has a coherent economic strategy?

As many of us have pointed out, even most hard-core free traders will concede tariffs can serve a useful purpose. They can be used strategically to build up important industries. This is what Biden tried to do when he used tariffs, along with subsidies and regulatory changes, to promote domestic production of advanced computer chips, electric vehicles, batteries, and wind and solar and other forms of clean energy.

But what is the coherence in a tariff policy when some of the highest tariffs, like Trump’s 50 percent tariff on imported steel, are reserved for intermediate goods that are inputs for other manufacturing industries? How does it make sense to impose an extra 10 percentage point tariff on imports from Canada because Trump didn’t like a television ad they ran during the World Series? And India got whacked with a tariff of 50 percent on its exports because its president would not support Trump’s drive to get a Nobel Peace Prize.

Anyone trying to weave together these and other tariff decisions by Trump, along with many other economic decisions he has made since taking office, is really stretching if they think they can find anything coherent. It is bad for the country and the world that policy in the United States is being determined by a man child who has no idea what he is doing beyond stuffing his pockets, but that is the reality.

There may be a market for thoughtful pieces describing the grand Trump strategy in major intellectual outlets, but that is yet one more example of market failure. There ain’t nothing there.

Dean Baker is a senior economist at the Center for Economic and Policy Research and the author of the 2016 book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer. Please consider subscribing to his Substack.

Reprinted with permission from Dean Baker.

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