Modern Day Scrooges Are Ruining Our Health Care System

Opinion

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of us suspect that buybacks are engineered by top management to boost their sizeable compensation packages.

Excessive Lobbying

Virtually every industry has one or more trade groups that seek to influence legislation that affects their bottom lines; this is true for healthcare as well. Efforts at reforming our medical system are stifled by some of the strongest, best funded lobbying organizations that you can think of: the ones representing doctors (American Medical Association), insurance companies (Aetna, UnitedHealth, Humana), and drug companies (PhRMA and BIO). In 1971, only 175 companies had lobbying offices in Washington DC. A decade later, the number was up to 2,445. As of June 2012, there were 12,553 registered federal lobbyists. Is anybody wondering why it’s so difficult to get any reforming done in Washington? The healthcare industry’s 2,176 lobbyists have spent around $500 million annually every year since 2008. What do you think all of that money is buying? No doubt it’s higher prices in our healthcare system.

Excessive Drug Pricing

Many drugs are exempt from cost competition for years because they’re covered by patents, which allow them to be sold under monopoly pricing. Biopharma companies need to charge high prices for their drugs because development costs are high and the odds of success are low. Some of that money will be recycled to fund the development of even more new medicines. The real question is: when do these prices move from reasonable to gouging? The cost of drugs for chronic myelogenous leukemia in particular have recently drawn complaints from oncologists who question whether the prices being charged in the U.S. (where costs are twice of what they are in Europe) are morally justifiable. Oncology drugs in particular are starting to get significant pushback due to their astronomical prices (in the range of $100,000 plus for a course of treatment). These prices might be defensible if the medicines were curative, but the majority of them only extend the lives of most patients by a small number of weeks or months.

High drug prices mean greater profits, and make no mistake that for all of its current problems, biopharma remains a highly profitable industry. The PhRMA and BIO folks have processes to help patients afford their meds, including drug coupon programs. However, some of these programs simply shift the costs of these medicines to the insurers. And how will they respond? They’re likely to raise their insurance rates and co-pays, making it more difficult for other consumers to afford their meds.

Biopharmaceutical companies have sullied their once bright reputation via a lengthy series of bad actions, including off-label drug promotions, ghost written papers, and hidden clinical trial data. Industry problems have been spotlighted in numerous books, and the media have done a good job of reporting on all manner of high crimes and misdemeanors. I know of one biotech company that many industry boosters are hoping will actually go out of business. Why? It appears the primary role of the company’s management team is to line their pockets with cash rather than actually develop useful medicines. They adhere to the philosophy of William Henry Vanderbilt, at one time the richest man in the world, who said, “The public be damned…I don’t take any stock in this silly nonsense of working for anybody’s good but our own because we are not. When we make a move we do it because it is our interest to do so, not because we expect to do somebody else some good. Of course, we like to do everything possible for the benefit of humanity in general, but when we do we first see that we are benefiting ourselves.”

The fittingly named Raptor Pharmaceuticals is my current poster child for selling the most overpriced drug (others might argue for Sanofi/Regeneron’s ziv-afilbercept (Zaltrap) or K-V Pharmaceutical’s hydroxyprogesterone caproate (Makena). Raptor’s drug, cysteamine bitartrate (Procysbi), was recently approved by the FDA for treatment of the rare disease nephropathic cystinosis.

Raptor didn’t spend 20 years doing groundbreaking research to identify the cause of this disease, nor did they screen millions of chemical compounds to develop their drug. Its medicine is not even a new chemical entity. It’s actually … Next Page »

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Stewart Lyman is Owner and Manager of Lyman BioPharma Consulting LLC in Seattle. He provides strategic advice to clients on their research programs, collaboration management issues, as well as preclinical data reviews. Follow @

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3 responses to “Modern Day Scrooges Are Ruining Our Health Care System”

  1. Tom Hopp says:

    Amen Stewart. You have laid it out beautifully. If I thought any of those big medical industry moguls had half the conscience Scrooge did, I might have some hope for their enlightenment. But I think we’ll only see cheaper healthcare when these new robber barons are forcibly compelled to surrender some of their vast, immoral, personal cash-grabs. By that I mean, vote Democrat.

  2. JSchaible says:

    Modern day Scrooges? What a load of liberal tripe.

    The issues with modern healthcare are more the natural result of layer upon layer of government mandated bureaucracy, defensive medicine and separation of the buyer and seller from free market forces.

    As you point out, many supermarkets see razor thin margins. But not all.
    High end grocery stores still exist, where customers who value service
    and quality products still shop and thus reward those stores with higher
    margins.

    The rest are forced into a death fight volume business, given astute price sensitive buyers know the price of milk and are willing to switch from one store to another to save a nickel. Are you seriously suggesting this is your solution to healthcare? Unlike hospitals, grocery stores are still not
    forced to give what they sell (say that milk) to all who walk in their doors, regardless of if they can pay or not. If they did, you can bet they too would charge exorbitant prices on zucchini and tomatoes just to survive. (Ethically, is healthcare so much different from food?)

    So maybe today’s healthcare market is on the verge of collapse. But it is not from greed of providers that is causing it to fail. Still, ever the rational optimist, I see green shoots at the same time. You note “medical tourism”. Such is little more than free market capitalism returning to a broken system – where allowed. Educated customers seeking out better pricing and higher end services, allowed to be provided in countries with free healthcare
    markets by those seeking to profit from the exchange.

    In the early 1990’s I had the privilege of spending a day with the late Harold Nue of New York City’s Columbia Presbyterian Hospital, the legendary Chief of the Division of Infectious Disease specialist. We spent most of the day in the isolation wards seeing the legions of uninsured ill from the Harlem
    community. Full blown AIDS, multidrug resistant TB, you name it. But then, after lunch, we rode the elevator to the McKeen pavilion. The doors opened to a different world. Gone was the hospital, replaced with all the appointments of a high end hotel. There was even a piano player in a tux and tea service making the rounds. I was amazed. The cost? A mere $250 out of pocket over the $1,250 insurance billed cost of a standard room. I asked about the disparity. Dr. Neu agreed the optics seem stark, but
    pointed out that patients on this floor paid so much extra out of pocket (plus
    in charitable donations to the hospital) that for the profit margin was so wide
    it allowed for another five patients without insurance to be treated for
    free.

    Like Scrooge, most Americans prove at this time of year, in the end we freely give generously. But the key is in the gift. No one is generous when it is mandated, coerced and extracted from us, which is the way healthcare is headed.

  3. Pasteur says:

    One thing is for sure, if I was looking for consulting for my enterprise I’d NEVER use Lyman Consulting. After reading this garbage, I thought it was a joke when I read the background on the author. Wow.