The Generic Drug Rip OffAugust 2009
By William Faloon
I did everything I could—including risking life in prison. Back in the 1980s-1990s, the Life Extension Foundation® crusaded to enlighten Americans about the economic ruination that would occur if this country’s corrupt drug regulatory structure was not abolished. At the behest of pharmaceutical interests, the FDA brutally retaliated against us.
What I am about to divulge is a shocking revelation about why prescription drugs cost so much. Before I describe this pervasive fraud, I want to remind readers what happens when an apathetic public allows archaic government regulations to rule the marketplace.
The Economic Collapse of Argentina
In the 1940s, Argentina was the ninth wealthiest country in the world. At one point it was richer than France and boasted a higher standard of living than Canada. It was considered one of the best countries in which to live.1
After an endless series of reckless governmental actions including uncontrolled borrowing and economic mismanagement, Argentina’s standard of living ranking has plummeted to 46th.2 If you had money in an Argentinean bank in 1999, it vanished. If you owned Argentinean government bonds, you lost most of your principal as the central government defaulted on its obligations.
Other countries have faced worse problems, including the mass murder of their citizens in one form or another by the central government.
The reason I mention Argentina is that its economic collapse has similarities to what the United States is facing.
Misguided and corrupt government policies, combined with citizen apathy allowed financial ruination to happen in Argentina. We in the United States are not immune to the same calamity.
If what I expose in this article does not motivate citizens to take action, I don’t know what will. It is beyond my comprehension that the common-sense free market solution I propose will be ignored by the American citizenry.
Health Care Costs Bankrupting United States
Everything Life Extension® predicted about the health care cost crisis is happening before our eyes. Major corporations, individuals, and the government are being bankrupted by out-of-control medical costs. Some say the economic challenges facing the United States will result in substantially reduced standards of living. This does not have to happen.
As we long ago identified, the cause behind spiraling medical costs is a crooked and ludicrous regulatory structure.
Today’s health care cost crisis is widely acknowledged and feared. No one, however, has yet proposed a practical solution to resolve it.
Even We Are Selling Overpriced Drugs
Three years ago, we established the Life Extension Pharmacy™ to provide members with unique health services and the lowest drug prices. Even though our prices are consistently at the rock bottom end of the marketplace, you still grossly overpay for generic drugs—no matter where you buy them.
The reason for high-priced generics is not because the active ingredients are expensive. On the contrary, compared with complicated nutrient extracts, the ingredients in drugs are usually synthetic chemicals that cost only pennies a day.
The culprit behind overpriced generic drugs is an archaic regulatory environment that functions to protect pharmaceutical financial interests, forcing consumers to pay artificially inflated prices for their generic medications.
If our proposal to overhaul today’s inefficient regulatory system succeeds, at least part of the health care cost crisis will disappear quickly. A side benefit to lower-priced generic drugs is that it will force pharmaceutical companies to bring out life-saving medications faster, since almost-as-good generics will cost virtually nothing.
An Example of a Grossly Inflated Generic Price
Once a brand drug comes off patent, generic equivalents emerge, but they cost far more than they need to because of FDA over-regulation.
Take the drug finasteride (Proscar®) for example. It came off patent in 2006, but at the end of 2008, chain pharmacies were charging about $90 for 30 tablets (a one-month supply). All it takes to make this drug is to put 5 mg of finasteride into a tablet that dissolves in the stomach. Vitamin companies do this every day with nutrients, but the FDA does not allow them to freely do the same thing with drugs.
We checked on the cost of buying finasteride and making it into tablets. The free market price for 30 tablets is only $10.25, which includes an independent assay of the ingredient quality, potency, and tablet dissolution—and a reasonable profit margin. It is against the law, however, for GMP (Good Manufacturing Practices)-certified vitamin manufacturers to offer low-cost generic drugs. This prohibition must be lifted as America can no longer afford to subsidize those who are politically connected while the country is driven into insolvency.
Finasteride is a drug that not only helps relieve benign prostate enlargement, but may also reduce the risk of prostate cancer.3-5 Widespread use could save Medicare lots of money in expensive prostate treatments. Those who follow Life Extension®’s other recommendations would be expected to reduce prostate cancer risk even more.
As evidence mounts about the prostate cancer risk reduction associated with drugs like finasteride, more companies are competing to make it, but its average price at chain pharmacies is around $86 a month—a staggering eight times higher than what its free market price would be!
Please note that generic prices tend to wildly fluctuate. In this case, as more competitors entered the market, chain pharmacies did not substantially lower the price of finasteride. In some cases, the opposite occurs, and by the time you read this, the price could vary.
How the “Generic” Regulatory System Works
If a company wants to manufacture a generic drug, be it a prescription drug like finasteride or an over-the-counter (OTC) drug like ibuprofen, it must file an Abbreviated New Drug Application (ANDA) with the FDA, even if it is manufactured by others already.
While the company does not have to perform clinical trials for an ANDA, it does have to show its bioequivalence to the original drug. For drugs that are difficult to synthesize, this requirement is important. For most drugs, however, the raw material can be purchased, often from the identical supplier that provides it for the branded drug.
To show bioequivalence, the company typically needs to perform human studies that take 1.5-2 years, unless a sufficient number have already been performed successfully, in which case it might be able to use those prior studies to support the ANDA. But the FDA could reject the ANDA and require the company to perform studies anyway.
The cost and time involved in the ANDA process varies, depending on the drug, its safety, how long it has been on the market, etc.
To have an ANDA approved, it typically requires an investment of about $2 million, and it takes a total of two to three years to get the drug to market.
To manufacture a common drug like ibuprofen (the active ingredient in Advil® and numerous other OTCs) might cost about $1 million and take 1.5 years, because the company would not have to do its own studies, and because it is a drug with a known safety profile.
In addition to these costs, a company should budget 15% for legal fees, because wherever there is a big manufacturer with a sizable market share involved, they will sue, just to try to eliminate more competition from the market.
One’s political connections with the FDA are critically important. Those who are not in the FDA’s good graces might find it more difficult to get an ANDA approved. The company should have experience with this bureaucratic process to know when and how to object to unreasonable FDA requirements.
So as you can see, what should be a straightforward process to manufacture drugs like finasteride instead turns into a bureaucratic quagmire that results in generic drugs costing far more than they need to. If a person was to take 5 mg finasteride tablets made by a vitamin manufacturer, all they would need to do to document its efficacy would be to test their blood levels of dihydrotestosterone (DHT). Finasteride alleviates benign prostate enlargement symptoms by inhibiting the 5-alpha-reductase enzyme that converts testosterone into DHT. Properly made finasteride will lower DHT.
Under a free market system, consumers would have the choice of paying $86 for a one-month supply of FDA-approved generic finasteride, or $10.25 for a one-month supply of generic finasteride made by a GMP (Good Manufacturing Practices)-certified vitamin manufacturer.
How Much Are You Overpaying?
Life Extension® investigators have spent an enormous amount of time identifying what it really costs to make a generic drug. The price of the active ingredient for most drugs is remarkably low. A greater expense involves GMP manufacturing and the kinds of quality control measures that we at Life Extension® mandate for the supplements that carry our label.
The chart on this page reveals the shocking numbers. Compared with what chain pharmacies are charging today, the free market prices are an astounding 51% to 94% lower!
On average, Americans are paying 837% more at chain pharmacies and 236% more at the Life Extension Pharmacy™ compared with what the free market price would be for the identical medications.
When looking at the ultra-low free market prices, it becomes evidently clear that there is no real prescription drug cost crisis. A month’s supply of some of the most commonly used drugs could be obtained for the price of a box of cereal.
There never was a need for Congress to pass the thoroughly corrupt Medicare Prescription Drug Act that involves the massive expenditure of tax dollars to pay full retail prices for these hyper-inflated drugs.
The free market price of generics would be so low, in fact, that even those with medical insurance will save money on most drugs compared with what their co-pays are now.
If these free market medications became available, medical insurance premiums will be lowered, Medicare’s day of insolvency postponed, and many businesses and consumers spared from bankruptcy. The chart above reveals how little free market generic drugs would cost.