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Watch that expiration date – your friendly pharmaceutical company certainly is!
By expiration date, I am not referring to the date when that $350 bottle of pills will lose their effectiveness or become unsafe – I a referring to a much more significant date – the date when the patent expires on that designer drug.
When a drug is first released, there are days of wine and roses for the drug company. Because they are the only company who can manufacture that particular drug, they exploit the consumers who rely on it and they peddle the drugs at hundreds of times what they are worth. Think of that bottle of ibuprofen that you can buy at Wal-Mart. From a technical standpoint, that drug shouldn’t be any more difficult to manufacture then many patent medicines. So how come the Wal-Mart ibuprofen costs only 2 cents a tablet while that name brand pharmaceutical costs $6.00 for the same dose?
One big reason is that the pharmaceutical company realizes that the drug has a limited life before the patent expires – and they need to recoup their considerable R&D costs during that time period. So they are certainly within their rights to charge a significantly higher price for that in-patent drug. The problem is that, as time went by, the drug companies have gotten overly-greedy with this practice. Someone at a pharmaceutical company realized that, if they could over charge for that pill, why not REALLY overcharge for it? After all, they had a captive audience, so what were the consumers going to do about it? Especially of there wasn’t another effective drug on the market that did the same thing.
One problem that they faced was overcoming the initial resistance to these over-priced drugs. To combat this, they employ a two-pronged approach. First, they brainwash the doctors who write the prescriptions that their particular drug is the only viable and effective treatment for a particular ailment. In the old days, this was done at ‘seminars’ for the doctor and their spouse. In exchange for an hour of the doctor’s undivided attention, the drug company would put them up – often with their office staff – in a 4 star hotel for a weekend, with free meals, transportation, and show tickets. Thankfully, this practice is no longer permitted. Today, drugs are promoted by high-priced drug reps buying $300 lunches for a doctor and their staff, in the hopes of speaking with the doctor for a few moments. The second prong is advertising to the consumer with expensive television commercials and print ad campaigns.
Of course, some one has to pay for all of this expensive promotion, so they just roll this cost into the price of the drug. And that, boys and girls, is how that 2 cent pill (that should cost 60 cents so that the drug company can recoup their R&D costs) becomes a $3.00 pill.
However, like a Monday morning after a weekend of binge drinking, there is going to be hell to pay.
Some of the larger drug companies, like Merck and Pfizer, have several top-selling drugs that have had their patents expire over the last few years. To make matters worse, even more of their high-profit drugs will have their patents expire over the next decade. Once the patent expires, the name brand drugs will have to compete with generic versions that will be sold at a much more realistic price. Plus, the companies can’t come out with new patentable formulations fast enough to replace the drugs with expired patents.
In an effort to tighten their belts, these companies have executed a series of cost-cutting layoffs. Over the past few years, Pfizer has laid off some 30,000 employees, and Merck has cut some 25,000 jobs, and even more layoffs are forecasted for the future.
Even more importantly, they have adopted an even more frightening strategy to cope with this downturn. Like a binge drinker that hears ‘last call’ they are backing up their still full glasses by ordering another round.
Which is how, boys and girls, that $3.00 pill has now become a $6.00 pill.
Drink up.
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