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New England Journal of Medicine Exposes Generic Price Scandal

March 2016

By William Faloon

William Faloon
William Faloon

No one has fought against high drug prices longer or harder than Life Extension®.1-20

The penalty for exposing health care corruption is endless governmental investigations aimed at destroying our organization. The tide may be turning in our favor.

The New England Journal of Medicine published a report that uncovered a drug price scandal that we’ve sought to expose for the past four decades.21

CBS News turned this consumer swindle into a headline report that graphically depicted the devastating impact that skyrocketing generic drug prices are having.22

The next day, I gave an impromptu speech at an Alzheimer’s seminar where I asked the audience to join me in amending the law to prohibit the FDA from granting monopoly status to generic drug makers. Virtually everyone in the audience said they would personally take the time to protest high drug prices at local congressional offices.

Two months later, 60 Minutes featured an in-depth report on today’s broken sick care system. A quote from this 60 Minutes broadcast relating to the Affordable Care Act stated that it is the product of an:

“… orgy of lobbying and backroom deals in which just about everyone with a stake in the $3-trillion-a-year health industry came out ahead—except the taxpayers.” 23

The 60 Minutes report went on to state there is “no way in the world that we’re gonna be able to pay for it.”

Investigative journalists have since corroborated how high drug prices are causing American consumers to become serfs of the pharmaceutical industry.

This month’s issue of Life Extension® reveals shocking new details of a price-gouging disgrace that is contributing to the insolvency of our sick care system.

New England Journal of Medicine Exposes Generic Price Scandal  

Today’s medical system provides mediocre efficacy at prohibitive prices.

When you read news stories about municipal, corporate, or personal bankruptcies, the high cost of health care is a consistent underlying factor.

Misguided politicians believe that government subsidies, mandates, and giveaways can resolve high sick care costs.

Even a cursory glance at the extravagant prices of new medications exposes the falsity of this charade. When a single new drug can cost $100,000, and protocols are being developed that combine several drugs priced in this range, how can any form of “cost-sharing” be expected to work?

It has become mathematically impossible for these outlandish sick care costs to become “affordable” via government edict.

How Deprenyl Works in the Brain  

For example, the bottle of the prescription drug Valcyte® you see pictured below with my name on it contains 60 tablets. The price for this bottle of Valcyte® is around $4,200. This works out to approximately $70 per tablet.

My cost for a four-month course of this medication is over $16,000. Some people are spending over $50,000 a year for this drug to stay alive—and this is often just one of many medications they need.

Before I describe a simple solution to this epidemic problem, I want to enlighten you to a growing scam in the prescription generic drug arena that finally is generating mainstream media coverage.

Generic Drug Price Gouging
Generic Drug Price Gouging
Generic Drug Price Increase per Pill Percent Price
Increase
Doxycycline (antibiotic) 6.3 cents to $3.36 5,300%
Captopril (antihypertensive) 1.4 cents to 39.9 cents 2,850%
Clomipramine
(antidepressant)
22 cents to $8.32 3,780%

Magnitude of the Fraud

Price gouging on a growing number of generic drugs has grown beyond verbal description.

In the box you see on this page are examples of price increases occurring in the generic drug marketplace reported on by The New England Journal of Medicine.21

These kinds of price increases are not unique. They reflect a growing swath of generic drugs that cost virtually nothing to manufacture, but they are spiking to stratospheric consumer price levels.

The New England Journal of Medicine gave an example of a generic drug (albendazole) that costs less than one dollar per daily dose overseas, but has risen to $119 per typical daily dose in the United States ($3,570 per month). This is a 2,010% increase from what this same generic drug cost in 2010.

Medicaid spending on this one drug alone (albendazole) spiked from $100,000 in 2008 to $7.5 million in 2013—a 75-fold increase!21

We’re All Being Defrauded

We’re All Being Defrauded  

Whether or not you need a generic drug whose price has exponentially increased, you are paying through higher health insurance premiums, higher deductibles, and higher copays, as well as limitations on what physician you may use and what services that doctor may perform.

A generic drug that I use called tretinoin costs $1,100 per month. My health insurance covers $850 and I have to pick up the balance of $250 per month.

This drug (tretinoin) was approved in 1995 and long ago lost patent protection, yet it is costing me $13,200 per year. I say me because I pay this extortionist price via my insurance premiums along with the many “exclusions” that cause me to pay out-of-pocket for what health insurance used to cover.

What may shock you most is what the active ingredient of this drug costs. Consumers are paying over $1,100 for this bottle of tretinoin. Yet the active ingredient for the entire bottle costs a mere 80 cents. Even including encapsulation and quality control, that’s a markup of about 400 times over the cost to make this off-patent drug.

As we reported in the September 2014 edition of Life Extension® magazine, collusion amongst drug makers is causing generics to be priced beyond rational affordability.

The cover headline of the September 2014 issue was titled “How to Turn 8 Pennies Into $600.” This was based on an article where I reveal that an antiviral cream (acyclovir) that long ago lost patent protection was being sold to pharmacies for 7,500% over the active ingredient cost. The active ingredient (acyclovir) costs only 8 pennies, yet pharmacies are paying a generic maker $600 for this drug and selling it to consumers for around $700.

The media has just started reporting on the magnitude of generic drug price gouging. As a reader of Life Extension® magazine, you’ve been the first to learn about what generic drugs really cost to make.

These kinds of price markups are unsustainable. They are part of the reason why health care has become unaffordable whether or not you have so-called “insurance.”

An increasing number of experts are coming to this realization, including editors of The New England Journal of Medicine and other publications. We are all being defrauded by this unconscionable price gouging made possible by overregulation of prescription drugs.

I Used to Own a Pharmacy

I Used to Own a Pharmacy  

I established a retail pharmacy (Life Extension Pharmacy) in an attempt to slash the high cost of generic drugs. I was able to witness some of the manipulation going on behind the scenes that results in consumer prices for generics spiraling upwards.

Our pharmacists never knew what the price of a generic drug would be from day to day. Some drug companies “stop making” certain generics altogether, which usually results in a massive price spike from the remaining maker(s). This happens because competition has all but disappeared.

One reason I set up the Life Extension Pharmacy in 2008 was to slash the prices of generic drugs to our members. Back then, pharmacies were selling generic drugs at out-of-pocket prices that were higher than what average people could afford.

My goal of slashing consumer prescription drug costs was short lived, as generic makers raised prices so high that even copays on certain drugs remained unaffordable, even though the cost to make most generics is virtually nothing.

The Politicians Are Clueless

There has been more criticism leveled against the Affordable Care Act than perhaps any other piece of enacted legislation.

Sound-bite-speaking political candidates constantly state that if elected they will “abolish it.”

The problem is none has the faintest clue what to replace it with. The reason they can’t even pretend to have a solution is that none understands what’s behind the health care cost crisis.

Do you think any politician today knows that there are generic drugs being sold for over $1,000 a month whose active ingredient costs only 80 cents?

The politicians don’t know this and it’s hard to expect they would.

It is up to the citizenry to enlighten Congress and demand that the Food, Drug, and Cosmetic Act be amended so that free-market forces can quickly resolve this generic price-gouging scandal.

Why This Concerns Life Extension®

New readers may wonder why an organization like Life Extension®, which is best known for pioneering lifesaving nutrients like coenzyme Q10, is making a big deal about generic drug price gouging.

One reason is that Life Extension® does far more than formulate advanced dietary supplements. Our Disease Prevention and Treatment protocols contain recommendations for people to ask their doctors about trying off-label drugs in order to achieve a better clinical outcome.

Our track record of recommending off-label drugs like metformin and cimetidine to better treat disease is unparalleled.24 Insurance companies, however, often refuse to pay for the off-label prescribed drugs were commend.

If this price gouging does not stop, it will render off-label use of these drugs meaningless as consumers will not be able to afford the generic drug’s high cost.

So in addition to sparing this nation’s sick care system from economic collapse, we at Life Extension® need to ensure that affordable generic medications are available when the need arises for them.

A Free-Market Solution

The solution to this problem of rip-off drug pricing is to amend the Food, Drug, and Cosmetic Act to allow more competition in the generic marketplace. If enacted, generic prices will plummet to levels so low you won’t even worry about what percentage your insurance company pays.

When generic drugs drop this much, it will push down many patented pharmaceutical prices because generic substitutes often work as well as newer branded drugs.

Against us are pharmaceutical lobbyists who will do virtually anything to protect their lucrative monopoly against free-market competition.

On our side are 330 million American consumers, most of whom cannot afford to fall ill even if they have health insurance. That’s because the deductibles, copays, and exclusions result in enormous out-of-pocket expenses that are today’s leading cause of personal bankruptcies.

My question is how many of you want to take political action to stop this price gouging?

We’ve Fought the Drug Cartels since the 1980s

Life Extension® learned about the rip-off prices Americans were paying for their medications in the 1980s.

We launched a relentless campaign to educate the public and Congress about the high prices Americans were forced to pay compared to what identical medications cost in Europe and other countries.

When digging through a box of old papers, I ran across one of the many newspaper ads our supporters paid for to expose the corrupt prices and drug approval delays that were killing American citizens. We’ve reprinted one of those ads from year 1991 on the next page.

You can see the date on this newspaper ad is October 11, 1991. On November 7, 1991, we were in handcuffs standing before a federal judge with the FDA insisting that we be denied bond because we represented a danger to the public (for informing Americans that lower-priced medications could be obtained almost anywhere else in the world).

Fortunately, an avalanche of letters from our supporters to the judge helped persuade him to grant us bond ($1 million). The multiple charges the FDA tried to use to indict us were eventually dismissed by the Department of Justice in 1995-1996.

If it were not for our supporters standing up to the FDA’s attempts to incarcerate us, there would be no Life Extension® organization today, and supplements like coenzyme Q10 would likely be available only via expensive prescription.

Americans today routinely obtain lower-priced medications from Canada because they can access offshore pharmacies via the Internet. This was not the case in the 1980s-1990s. Back then, the FDA viciously fought anyone who dared to inform Americans where they could purchase less expensive medications.

 
Newspaper ad our supporters paid for 25 years ago

Legislation Urgently Needed!

Fighting the FDA’s ban on personal use importations of medications was only one battle we spearheaded. The other dealt with FDA’s attempts to turn many dietary supplements into prescription drugs.

When we initiated action to combat FDA’s attempts to ban dietary supplements, a huge percentage of our supporters rallied to stop this from happening.

The result was passage of a bill (Dietary Supplement Health and Education Act-1994) that protected supplements and substantially lowered consumer prices.

For those who think it’s not worth the effort to let your voice be heard, consider the consequences of failing to take action. Seniors may have to return to the work force to afford their medications. Those working full time may have to find additional part-time work to pay the high premiums and many out-of-pocket expenses no longer covered by medical insurance.

This problem can be partially resolved if free-market competition is allowed in the generic drug market place. If we can persuade Congress to amend the Food, Drug, and Cosmetic Act, the price of many generic drugs will plummet more than 90%.

We at Life Extension® are organizing a grass roots campaign to overwhelm the lobbyists that currently dominate Congress and the federal agencies that are adversely impacting our health and longevity. A website has been set up for those who want to enlist as activists to combat the atrocities perpetrated against the citizenry by our politicians and unelected/unaccountable bureaucrats.

To enroll in this campaign to tear down high drug prices, log on to: LifeExtension.com/consumer

Feeble Suggestions from the American Medical Association

In recognition of the generic drug pricing scandal, the Journal of the American Medical Association (JAMA) published an editorial on November 24, 2015, titled:

“Options to Promote Competitive Generics Markets in the United States”

Of interest was the citing of a statistic showing that 86% of all prescriptions written are for generic drugs. The editorial goes on to describe the problem of generic drug shortages as one reason why prices have seen such colossal increases.

Some of the solutions proposed in this JAMA editorial resemble Soviet-era attempts to regulate their economy that all proved disastrous. The JAMA authors make it appear impossible to predict competitive pressures in the generic drug arena. Their solution is for the federal government to enact new laws to protect generic manufacturers against the uncertainties of the marketplace, such as limiting the number of makers who could produce the same generic drug.

When I read this I thought, are educated people really this stupid? Every day in the private sector, projections are made for future inventory needs, often for products that have razor-thin margins. Yet when you walk into a grocery store, the shelves are consistently well stocked and shortages almost never occur. How do all these private sector companies manage this without federal protection against overly optimistic projections?

Completely overlooked by the JAMA authors is the fact that when a free market is allowed to determine supply and demand, there are no shortages and consumer prices usually go down over time (inflation adjusted).

There is no secret to making ample quantities of quality generic drugs. Yet consumers are being blatantly lied as to why their costs for generic drugs are surging.

We Are More Than a Supplement Supplier…

I know many of you view us as a trusted maker of innovative dietary supplements. The reality is that your support helps fund a variety of programs that challenge conventional dogma relating to human longevity and consumer justice.

To reiterate what I said at the beginning of this editorial, no one has fought longer or harder against extortionist drug prices than Life Extension®. We have battled pharmaceutical interests for decades and won concessions in Congress and the courts that no one would have ever believed possible.

You’re finally seeing news media revelations about the price gouging we predicted would inevitably happen back in the 1980s. The sad fact is that none of our politicians have the basic knowledge needed to rein in today’s runaway health care costs.

We at Life Extension®, on the other hand, have a 36-year track record of involvement in all ends of the pharmaceutical arena. We know the only impediment to slashing generic drug costs is citizen apathy that allows the FDA to continue enforcing a defacto monopoly that benefits the entrenched pharmaceutical establishment.

To enlist as an activist to combat high drug prices log on to: LifeExtension.com/consumer

For longer life,

For Longer Life

William Faloon

Prescription drug spending is expected 
to rise

Prescription drug spending is expected to rise to $1.3 trillion by the year 2018, up from only $326 billion in 2013.*

Who is going to pay for this?

* Am J Health Syst Pharm . 2014 Mar 15;71(6):482-99.

* Available at: http://www.imshealth.com/en/thought-leadership/ims-institute/reports/global-outlook-for-medicines-through-2018. Accessed December 9, 2015.

Bloomberg-September 21, 2015

Price of 62-Year-Old Drug Jacked up by $736 a Pill

  • Martin Shkreli is under criticism after raising the price of the anti-parasite medication Daraprim® from $13.50 to $750 per pill.
  • Turing Pharmaceutical was founded in February 2015, bought the US marketing rights to the drug in August 2015, and hiked the price 55-fold in September 2015.
  • Some people will now pay over $100,000 per year to stay alive.
Price of 62-Year-Old Drug Jacked up
Unsustainable

Unsustainable

  • Albuterol sold at an average market price of $11 for a bottle of 100 2 mg tablets in October 2013.
  • By April 2014 the average price for albuterol sulfate jumped to $434.
  • A price increase of over 4,000%.*

* Available at: http://www.pbs.org/newshour/making-sense/price-increases-generic-drugs/. Accessed December 11, 2015.

Price Gouging

  • Divalproex Sodium ER is used to treat seizures and prevent migraines. This drug had an average market price in October 2013 of around $31 for a bottle of 80 tablets.
  • By April of 2014, the price for the same drug rose to $234…a price increase of 736%. *

* Available at: http://www.pbs.org/newshour/making-sense/price-increases-generic-drugs/. Accessed December 11, 2015.

Price Gouging
We’re All Being Defrauded

We’re All Being Defrauded

  • A generic drug called tretinoin costs $1,100 per month.
  • The active ingredient in this generic drug costs 80 cents.
  • Consumers pay $1,100 for a bottle of 40, 10 mg tretinoin capsules.

Impact on Economy

  • Pravastatin saw a price increase of 573% from October of 2013 to April of 2014.
  • The increased cost to Americans is an additional $5.9 billion per year.*

* Available at: http://www.pbs.org/newshour/making-sense/price-increases-generic-drugs/. Accessed December 11, 2015.

Impact on Economy

DON’T BE SILENCED—LET YOUR VOICE BE HEARD!

To enlist as an activist against high drug prices, log on to: LifeExtension.com/consumer

(When you enlist as an activist, you can easily email the letter on the next page to your representative and two senators.)

References

  1. Available at: http://www.lifeextension.com/Magazine/2014/4/Unsustainable-Cancer-Drug-Prices/Page-01. Accessed November 30, 2015.
  2. Available at: http://www.lifeextension.com/Magazine/2014/9/How-To-Turn-8-Pennies-Into-$600/Page-01. Accessed November 30, 2015.
  3. Available at: http://www.lifeextension.com/Magazine/2012/4/Lethal-Shortages/Page-01. Accessed November 30, 2015.
  4. Available at: http://www.lifeextension.com/Magazine/2011/3/No-Real-Healthcare-Cost-Crisis/Page-01. Accessed November 30, 2015.
  5. Available at: http://www.lifeextension.com/Magazine/2009/9/Why-American-Healthcare-is-Headed-for-Collapse/Page-01. Accessed November 30, 2015.
  6. Available at: http://www.lifeextension.com/Magazine/2009/8/The-Generic-Drug-Rip-Off/Page-02. Accessed November 30, 2015.
  7. Available at: http://www.lifeextension.com/Magazine/2009/3/FDA-Ending-the-Atrocities/Page-01. Accessed November 30, 2015.
  8. Available at: http://www.lifeextension.com/Magazine/2007/8/awsi/Page-01. Accessed November 30, 2015.
  9. Available at: http://www.lifeextension.com/Magazine/2007/4/awsi/Page-01. Accessed November 30, 2015.
  10. Available at: http://www.lifeextension.com/Magazine/2005/3/awsi/Page-01. Accessed November 30, 2015.
  11. Available at: http://www.lifeextension.com/Magazine/2004/4/awsi/Page-01. Accessed November 30, 2015.
  12. Available at: http://www.lifeextension.com/Magazine/2002/10/awsi/Page-01. Accessed November 30, 2015.
  13. Available at: http://www.lifeextension.com/Magazine/2002/4/awsi/Page-01. Accessed November 30, 2015.
  14. Available at: http://www.lifeextension.com/Magazine/2000/2/awsi/Page-01. Accessed November 30, 2015.
  15. Available at: http://www.lifeextension.com/Magazine/2000/7/cover_story/Page-01. Accessed November 30, 2015.
  16. Available at: http://www.lifeextension.com/Magazine/2000/8/awsi/Page-01. Accessed November 30, 2015.
  17. Available at: http://www.lifeextension.com/Magazine/2000/9/awsi/Page-01. Accessed November 30, 2015.
  18. Available at: http://www.lifeextension.com/Magazine/2000/7/cover_story/Page-02. Accessed November 30, 2015.
  19. Available at: http://www.lifeextension.com/Magazine/1999/6/awsi/Page-01. Accessed November 30, 2015.
  20. Available at: http://www.lifeextension.com/Magazine/1998/12/awsi/Page-01. Accessed November 30, 2015.
  21. Alpern JD, Stauffer WM, Kesselheim AS. High-cost generic drugs--implications for patients and policymakers. N Engl J Med. 2014;371(20):1859-62.
  22. Available at: http://www.cbsnews.com/news/generic-drug-prices-skyrocketing/. Accessed November 30, 2015.
  23. Available at: http://www.cbsnews.com/news/obamacare-60-minutes/. Accessed November 30, 2015.
  24. Available at: http://www.lifeextension.com/about/lef-scientific-achievements-in-health-and-longevity_01. Accessed November 30, 2015.

This letter will be automatically emailed to your congressional representative and two senators by logging on to LifeExtension.com/consumer

Dear_______________________________________ , (Name of your representative and two senators)

According to a report published in The New England Journal of Medicine, prices for certain generic drugs are skyrocketing beyond rational affordability.

In many cases, prices charged to consumers for off-patent drugs are hundreds of times higher than what they cost to manufacture, yet generic companies are mysteriously failing to compete against one another.

This outlandish situation has been featured on national news stories, and there have been Senate hearings to investigate why this price gouging is occurring, but Congress has done nothing to stop it.

The solution to this problem is to amend the Food, Drug, and Cosmetic Act to allow a free market option for consumers to purchase generic drugs sold by reputable companies that are clearly labeled “Not approved by the FDA.

This would give consumers the choice of purchasing medications that in some cases will be more than 90% less expensive than the current rip-off prices being charged by certain generic drug companies.

I urge you to introduce legislation that reforms the Food, Drug, and Cosmetic Act to enable GMP-certified (Good Manufacturing Practice) facilities to produce generic prescription drugs that do not have to undergo the excessive regulatory hurdles that force consumers to pay egregiously inflated prices for generic drugs.

The inevitable concern raised by this free-market solution is safety. Who will protect consumers from poorly made generic drugs?

First of all, there would be the same regulation of these drugs as there are with GMP-certified supplement makers. FDA inspectors would visit facilities, take sample products, and assay to ensure potency of active ingredient, dissolution, etc. Laboratories that fail to make products that meet label claims would face civil and criminal penalties from the government.

Secondly, there is no incentive to not provide the full-potency active ingredients in these less regulated generic drugs. The price of the active ingredients makes up such a small percentage of the overall cost that a manufacturer would be idiotic to scrimp on potency.

Those companies who foolishly made inferior generics would be viciously exposed by the media, along with the FDA, consumer protection groups, and even prescribing physicians who would be suspicious if a drug were not working as it was supposed to.

Companies producing inferior products will be quickly driven from the marketplace as consumers who choose to purchase lower-cost generics will seek out laboratories that have reputations for making flawless products.

Companies that produce inferior products would not only be castigated in the public eye, but would face civil litigation from customers who bought the defective generics. When one considers that GMP-certified manufacturing plants can cost hundreds of millions to set up, a company would be committing suicide if it failed to consistently produce generic drugs that at least met minimum standards.

I understand that no matter how many facts I list showing that these free-market drugs will be safe, there are some who believe that even if one person suffers a serious adverse event because of a defective generic drug, then the law should not be amended to allow the sale of these less regulated products.

What few understand is that enabling lower-cost drugs to be sold might reduce the number of poorly made drugs. The reason is that prescription drug counterfeiting is a major issue today. Drugs are counterfeited because they are so expensive. When a month’s supply of a common generic drug plummets to under $10, it is difficult to imagine anyone profiting by counterfeiting it. So amending the law to enable these super-low-cost drugs to be sold might alleviate the counterfeiting that exists right now.

Another reason these less regulated generics will do far more good than harm is that people who need them to live will be able to afford them. The media has reported on heart-wrenching stories of destitute people who cannot afford generic prescription drugs. They either do without, or take a less-than-optimal dose. The availability of these free-market generics will enable virtually anyone to be able to afford their medications.

To alert consumers when they are getting a generic whose manufacturing is not as heavily regulated as it is currently, the law should mandate that the label of these less regulated generic drugs clearly state:

“This is not an FDA-approved manufactured generic drug and may be ineffective and potentially dangerous. This drug is NOT manufactured under the same standards required
for an FDA-approved generic drug. Purchase this drug at your own risk.”

The cost of prescription drugs is a significant contributing factor to today’s health care cost crisis, a problem that threatens to bankrupt consumers and this nation’s medical system. Passage of this common-sense legislation would quickly slash the cost of generic drugs so low that consumers could obtain them for less than what their copays currently are. This would save governmental and private health insurance programs, and ultimately consumers, enormous amounts of money.

Please don’t be influenced by pessimistic alarmists who claim that less regulation automatically means more dangerous drugs. These kinds of scare tactics have been used for decades to force Americans to pay outlandish prices for their medications. And please don’t be influenced by pharmaceutical lobbyists, who will do and say anything to protect their virtual monopoly over generic drug manufacturing.

The bottom line is that we as a nation can no longer afford to be bound by today’s inefficient regulatory system that artificially inflates the cost of our prescription medications. The money is no longer there to support this bureaucratic morass, and you know that as well as anyone.

Kindly let me know how you plan to implement this legislation that will help save this country from horrifically overpriced prescription drugs.

Sincerely,

Name:

Address: