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Unsustainable Drug Prices!

March 2017

By William Faloon

William Faloon
William Faloon

In the February 2000 issue of this magazine I wrote an editorial titled:

Are We to Become Serfs of the Drug Monopoly?

My article ignited a firestorm of activity in Congress aimed squarely at the FDA.

Back then, many members of Congress were upset that the FDA prohibited Americans from importing lower cost medications from other countries.

To underscore this consumer rip-off, I compiled a chart showing how much more Americans were paying for pharmaceuticals compared to Europeans.

This chart was enlarged by a congressman and shown on the floor of the House of Representatives. The purpose was to educate other lawmakers about the magnitude of the price-gouging.1

The eventual result was passage of a bill by Congress and signed into law by President Bill Clinton. The bill allowed Americans to import prescription medications from countries that sold them at a fraction of the price Americans were paying.

Image with Caption
Donna Shalala
US Secretary of Health
and Human Services
January 1993 to
January 20, 2001

The bill had one fatal loophole. If the FDA determined that it lacked the resources to ensure the safety of imported drugs, then the Secretary of Health and Human Services could nullify the bill with one stroke of a pen. And that’s exactly what Donna Shalala did in the final days of Bill Clinton’s term.

This cruel act of sabotage by an unelected bureaucrat set the stage for the staggering increases in generic drug prices that now make headline news.

The burden of high medical costs has reached a point that is unsustainable by the American economy. This problem will not abate until the public regains some control over Congress, which is currently dominated by pharmaceutical lobbyists.

As you’ll read in this article, the FDA wants to further benefit pharmaceutical interests by suffocating innovation in the dietary supplement industry.

No one has fought longer or harder against high drug prices than Life Extension®.2

We’ve exposed how off-patent generic drugs whose active ingredients cost only pennies are sold to consumers for hundreds of dollars.

We have shown that this price gouging is caused by over-regulation of the prescription drug marketplace.

What’s sparked recent media outrage is that the healthcare burden now falls squarely on middle-class America.3 That represents the majority of citizens who are facing economic hardships via high medical insurance premiums, high deductibles, and restricted access to the best doctors.

Magnitude of Problem

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There was a time not so long ago when most employers paid 100% of their employees’ health insurance premiums. This included the spouse and children of each employee.

If a serious medical issue arose, the company-paid insurance covered virtually 100% of the expenses. There was no such thing as first having to pay a large deductible, or being told of denial of coverage for a physician-prescribed therapy, or even denial of payment to the physician you chose.

Employees today pay a growing percentage of their own medical insurance premiums and usually 100% for their spouse and children. (Recall this was a free employee benefit just a few decades ago.)

In today’s upside-down world of so-called health “insurance,” the middle class is often limited to using physicians who are in their insurance company’s narrow “network.” These physicians relinquish decision-making regarding diagnostics and prescribing to what the insurance company permits, which is often substandard care based on Life Extension’s treatment protocols.

Before the insurance company covers anything, a deductible has to be paid out of pocket that can run $4,000-$6,000. This deductible must be paid every year for treating the same medical condition. (Deductibles vary considerably depending on the plan chosen.)

So what used to be a benefit for most working Americans is now a farce. The typical working person does not run up $4,000-$6,000 in medical expenses. So they may wind up paying 100% of the healthcare costs they do incur out of pocket—even though they are paying higher health insurance premiums!

High co-pays (ranging from 10%-40%) even after the annual deductible is met means that the middle-class cannot afford to fall ill, especially as skyrocketing premiums for substandard insurance deplete their savings. (Low-income individuals are eligible for government subsidies to offset many of these costs, which means they are borne instead by taxpayers.)

Alarming New Reports

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Last year, a report published by the Brookings Institute revealed the nightmare facing middle-income Americans.

The findings showed that middle-income household spending on healthcare has risen 25% from 2007 to 2014.4 The only reason the middle class has survived this sharp price increase is that the costs of other necessities has plummeted during that same time period.

A Kaiser Family Foundation report confirmed this bleak picture. Deductibles for individual workers have risen 67% since 2010, which is roughly 7 times more than earnings growth over the same period.4,5

A separate Kaiser analysis of tens of millions of insurance claims found that patient “cost-sharing” has skyrocketed since 2004. This has been driven by a 256% surge in deductibles that consumers now have to bear.4,6 Recall that in the not-so-distant past, deductibles were only a few hundred dollars.

With many generic drugs now costing thousands of dollars, and some new medications costing $100,000, it is clear that only the wealthy or very poor have affordable access to healthcare in America.

Very low-income individuals have Medicaid coverage which, after a small copayment, usually pays 100% of medical costs, even for expensive drugs that exceed $100,000 each year.7

Like those with today’s substandard insurance, however, Medicaid recipients are refused treatment by some of the better physicians. But at least they don’t have to pay large premiums and deductibles only to be told by their insurance carrier that the therapy they need to live is “not medically necessary” or “not approved by the FDA for their specific indication.”

These two excuses are routinely used by insurance carriers to deny seriously ill people access to drugs that published studies indicate are efficacious.

This healthcare cost crisis is projected to worsen as employers increasingly shift more healthcare costs to workers.

The Drug Rip-Off

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In 2016, the media woke up to the magnitude of overpriced drugs. This prompted Congress to hold hearings about price gouging including a generic device used to save children who suffer allergic reactions.

The device is the EpiPen®, and its cost has risen about 550% since 2007.8,9 There is nothing unique about the drug (epinephrine) in this auto-injector (EpiPen®) that parents carry to save their child’s life. The maker nonetheless enjoys a virtual monopoly based on effective lobbying, aggressive legal defense against competitors, and the high costs of getting the FDA to approve competing versions of the identical drug.

The retail price for a pack of two EpiPens® is $608 (up from $94 in 2007).9 Many parents cannot afford this outlandish price and risk their children suffocating to death if an acute allergic reaction occurs.

In case you’re wondering what it costs to make this drug, experts are quoted as stating that “one milligram of epinephrine, which is three times more than what’s needed in an EpiPen, costs just a few bucks” and “the auto-injector is available for between $3 and $7.”10 With sterile quality control, this drug could be profitably sold for less than $100—if it were not for the power Congress bestows on the FDA to pick and choose who gets to make it.

In response to media backlash, the maker of the EpiPen® promised to make a generic version that costs only $300...which is still as much as one hundred times more than what it costs to make.11

The $300 price for a drug that may be needed multiple times each year is still unaffordable by many parents whose deductibles are thousands of dollars each year.

Why Generic Drug Prices Are Skyrocketing

Back in 2003, it cost less than $1 million to file a generic drug application with the FDA. That price was way too high, as most generics can easily copy the branded drug and deliver the same bioequivalence.12

Today’s cost of gaining FDA approval of a generic is $5 million and sometimes much higher. As a result of these oppressive approval costs, many generic drugs face no competition. This can result in consumers paying almost as much for the generic as the patented version’s previous price.

Excessive regulatory burdens have resulted in delaying new generics for years and needlessly driving up the costs of making them.

None of this excludes the probability of collusion amongst certain generic makers as many cease producing a generic even after paying the costs of FDA approval. This sometimes happens when one company pays another to cease production, at which time the remaining generic propels upwards in price.

Exposing Scandalous High Drug Prices
SIDEBAR IMAGE ALT TEXT

Chart Published by Life Extension in 1999 Exposing Scandalous High Drug Prices

(This problem has exponentially worsened since then)

Comparison of US and European Drug Prices

Drug Quantity Potency US Price European Price
Premarin280.625 mg$14.98$4.25
Synthroid50100 mcg$13.84$2.95
Coumadin2510 mg$30.25$2.85
Prozac14120 mg$36.12$18.50
Prilosec2820 mg$109.00$39.25
Norvasc305 mg$44.00$23.00
Claritin2010 mg$44.00$8.75
Augmentin12500 mg$49.50$8.75
Zocor2820 mg$96.99$45.00
Paxil2830 mg$63.69$43.00
Zestril605 mg$53.49$15.00
Prempro280.625 mg$23.49$4.75
Glucophage (metformin)50850 mg$54.49$4.50
Cipro20500 mg$87.99$62.75
Zoloft10050 mg$480.00$65.00
Pravachol2810 mg$55.60$31.00

There Is a Free Market Solution

We at Life Extension have long espoused an easy solution to drug price gouging, which is to amend the Food, Drug, and Cosmetic Act to allow 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 320 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.

New Threat to Dietary Supplements

The FDA has issued new guidance rules for natural ingredients that will deny consumers access to improved approaches to better health.13 These rules will stifle innovation in the dietary supplement marketplace.

This is great news for drug companies that can now patent natural ingredients and convert them into expensive drugs. These new rules will also deny nutrients to Americans that can prevent degenerative illness, thereby creating even more demand for expensive pharmaceuticals.

Fight Back against FDA Tyranny!

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In 1992, the FDA proposed reclassifying certain dietary supplements as prescription drugs.

This ignited an avalanche of protests by consumers. Congress was inundated with letters demanding legislation to prevent the FDA from censoring access to natural ingredients that had demonstrated health benefits.

The result was passage of the Dietary Supplement Health and Education Act in 1994.14 This Act spared many lives by providing consumers with affordable access to nutrients like coenzyme Q10 and higher-potency vitamin D.

Life Extension is now coordinating with other health freedom groups to stop Big Pharma from further monopolizing consumer access to affordable dietary supplements and conventional healthcare. We need the support of everyone reading this article to win this battle.

For those who think it’s not worth the effort, consider the consequences of failing to take action. Innovation in the natural ingredient marketplace will be stifled while pharmaceutical companies grab dietary supplements and gain FDA protection to sell them as prescription drugs.

Many retired seniors will have to take jobs 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.

These problems can be partially resolved if free-market competition is allowed in the generic drug and dietary supplement marketplaces.

Log on to Our Legislative Action Website

Life Extension is mobilizing a grass roots campaign to overwhelm the lobbyists that have dominated Congress and federal agencies.

We’ve updated our website with the current Representatives and Senators so you can easily send them an email protesting FDA’s draconian actions taken against your supplements and the unnecessary high cost of generic medications.

To let your voice be heard on Capitol Hill, please log on to:

LifeExtension.com/consumer

For longer life,

For Longer Life

William Faloon

References

  1. Available at: http://www.lifeextension.com/Magazine/2000/9/awsi/Page-01. Accessed November 30, 2016.
  2. Available at: http://www.lifeextension.com/Magazine/2016/3/New-England-Journal-of-Medicine-Exposes-Generic-Price-Scandal/Page-01. Accessed November 30, 2016.
  3. Available at: http://liveclinic.com/blog/healthcare-news/burden-u-s-health-care-costs-moving-middle-class/. Accessed November 30, 2016.
  4. Available at: http://www.wsj.com/articles/burden-of-health-care-costs-moves-to-the-middle-class-1472166246. Accessed November 30, 2016.
  5. Available at: http://kff.org/health-costs/press-release/employer-family-health-premiums-rise-4-percent-to-17545-in-2015-extending-a-decade-long-trend-of-relatively-moderate-increases/. Accessed November 30, 2016.
  6. Available at: http://kff.org/health-costs/issue-brief/payments-for-cost-sharing-increasing-rapidly-over-time/. Accessed November 30, 2016.
  7. Available at: https://www.medicaid.gov/medicaid/cost-sharing/out-of-pocket-costs/index.html. Accessed December 12, 2016.
  8. Available at: http://www.businessinsider.com/epipen-price-increases-about-500-percent-2016-8. Accessed November 30, 2016.
  9. Available at: http://www.businessinsider.com/how-much-price-of-mylans-epipen-has-increased-2016-8. Accessed November 30, 2016.
  10. Available at: http://money.cnn.com/2016/08/30/investing/epipen-alternative-100-dollars/index.html. Accessed November 30, 2016.
  11. Available at: https://mic.com/articles/152912/generic-epipen-mylan-half-price-300-dollars-still-shows-drug-pricing-crisis-in-the-united-states. Accessed December 1, 2016.
  12. Available at: http://www.wsj.com/articles/how-obamas-fda-keeps-generic-drugs-off-the-market-1471645550. Accessed December 1, 2016.
  13. Available at: http://www.anh-usa.org/fda-new-sneak-attack-on-supplements/. Accessed December 1, 2016.
  14. Available at: https://www.congress.gov/bill/103rd-congress/senate-bill/784. Accessed December 1, 2016.