How To Turn 8 Pennies Into $600September 2014
By William Faloon
This nation’s finances are being crippled by high medical prices.
Hidden from the debate is the fact that today’s healthcare cost crisis is largely a façade. The underlying culprit is an antiquated regulatory structure that inflates medical costs beyond rational affordability.
The government misleads the public into believing that generic drugs are a partial solution to high-priced pharmaceuticals. What few understand is that the FDA gets to pick and choose which companies are allowed to make certain generics. This favoritism enables collusive behavior among drug makers that results in extortionist prices for off-patent medicines.
To document this consumer rip-off, I did some research to uncover the active-ingredient cost for a popular generic drug. This price information was not easily obtainable, and I had to jump through some hoops to procure it.
What I discovered is beyond shocking.
If you encounter a shingles or herpes outbreak, you may be prescribed a topical ointment (acyclovir) that alleviates pain and slightly shortens disease duration.1,2 What may hurt more than the viral outbreak is the price of a 30-gram (about 1-ounce) tube of acyclovir! American pharmacies are charging close to $700 for this off-patent ointment.3 The cost of the active ingredient for the entire tube, however, is only 8 cents!
Don’t blame your pharmacy for this price gouging. The pharmacy’s cost for a 30-gram tube of acyclovir from the generic maker is around $600—and the pharmacy has its own costly bureaucratic mandates to contend with.
In a free market, the price of acyclovir ointment would fall to under $10. Today’s moronic regulatory structure precludes this.
Instead, pharmaceutical companies are able to collude in ways that deny low-cost competitors access to the marketplace. They do this using their political connections and massive wealth to influence Congress, the FDA, and other parts of government to erect barriers that protect their cozy price-gouging machine.
Their reward for maintaining the regulatory status quo is billions of dollars in excess payments from struggling consumers, government programs, and health insurance companies. Drug companies of course spend lots of money on lobbying. They’d hate to see anyone in government attempt to abolish regulations that guarantee their virtual monopoly.
The federal government would have you believe that the only way to provide affordable healthcare is to force each American to purchase health insurance or provide free medical care to those who can’t pay the premiums. Free healthcare is provided by Medicaid, Medicare, and the Veteran’s Administration. Most Americans forced to buy private insurance receive federal subsidies ultimately paid for by tax dollars.
A more efficient solution would be to remove needless regulations that cause the citizenry to pay pricy premiums for health insurance that has higher deductibles and co-pays than ever before.
Acyclovir Should Not Be A Prescription Drug
Acyclovir was approved by the FDA in 1981 and sold initially under the trade name Zovirax®.4 It’s far from a miracle drug, but it does provide much appreciated relief from the harsh stinging pain of herpes and shingles outbreaks.
Cold sores on the lips and face are typically caused by herpes simplex-1. A similar virus that usually affects the genital areas is called herpes simplex-2.5 The virus that causes shingles is called herpes zoster (also known as the chickenpox virus). Shingles occurs when one’s immune function that originally suppressed the chickenpox virus becomes impaired by aging (immuno-senescence).6
In addition to providing temporary pain relief, the topical application of acyclovir ointment reduces viral shedding (to lower risk of transmitting the virus to others) and slightly shortens the duration of the herpes virus outbreak.7-9
Acyclovir ointment is one of many overpriced prescription drugs that should be sold over-the-counter without any kind of FDA registration requirement. It is not generally associated with serious side effects.10,11 If a disreputable company made an ineffective product, users would discover this immediately since it would not provide immediate pain relief when applied to skin lesions. It is doubtful that any company would fail to put into the tube the 8 cents worth of active ingredient. A bigger expense is the cost of the tube and the quality-control to ensure that the acyclovir is evenly spread through the ointment. Acyclovir comprises 5% of the finished product. The remainder is filler.3
If acyclovir were sold over the counter, those who encountered a herpes outbreak could purchase it anywhere and obtain some immediate relief. The risk of transmitting the disease to others would be reduced and the disease duration shortened. The cost would quickly plummet from $700 to under $10. At some point it would cost less than $5. Those with recurrent herpes/shingles outbreaks would not need to squander money and time for needless doctor visits merely to obtain a refill for what is now “prescription” acyclovir ointment.
What Prompted Me To Investigate This?
A member asked me why their CVS pharmacy charged so much for a tube of acyclovir the size of a small tube of toothpaste. Their co-pay was $52, while their insurance company got stuck with a tab of around $648.
At first I thought this must have been an error as I knew acyclovir had been around for decades. It’s no longer even the best treatment for cold sore outbreaks since newer topical drugs (like Denavir®) purportedly work better.12
I had to make quite a few calls and send many emails to get makers of the active acyclovir ingredient to disclose the actual cost. It seemed obvious to me they did not want to reveal this pricing information. In fact, 8 cents a tube for the active ingredient was the highest price I found. Other manufacturers of acyclovir quoted less money.
Herpes has been a pandemic disease dating back to ancient times.13 Worldwide sales of acyclovir are gargantuan.14,15 It sells for less in countries that don’t have the onerous regulatory strangleholds that exist in the United States.
What’s obscenely absurd is when politicians and bureaucrats pretend that drug regulations “protect” consumers. Reality is these regulations enable pharmaceutical companies to collude and financially exploit the citizenry by selling drugs at exploitive prices.
New Hepatitis C Drug Costs $1,000 Per Pill!
Hepatitis C is a virus that primarily attacks the liver. Over 3 million Americans are infected with hepatitis C.16 Many don’t find out they’re infected until liver failure or primary liver cancer is diagnosed.16
There is now a good reason for everyone to have their blood tested for hepatitis C. A new drug called Sovaldi® has been shown to cure 90% of hepatitis C patients with relatively few side effects.17,18
If Sovaldi® works nearly as well in the real-world setting (as opposed to tightly controlled clinical trials), it represents a medical breakthrough. Up until now, curing hepatitis C has been challenging, involving drug regimens with harsh side effects that often did not work.
A typical course of treatment for Sovaldi® alone will cost $84,000, plus physician and necessary companion drug costs.19 Some people will need two courses of treatment, so their total price tag will be around $200,000.
Harsh criticism has been lodged against the maker of Sovaldi® for charging such high prices. Conservative estimates of the actual manufacturing costs of the drug for a 12-week treatment cycle are under $160. Yet patients and/or their insurance provider will have to pay $84,000—a staggering 525-fold markup over the cost to produce the drug!19
Said differently, a pill that costs under $2 to make will sell to consumers for $1,000 per pill.19 These estimates of less than $2 per pill to make with a sales price of $1,000 per pill leads to a gross profit margin of 49,000% for the formulation.
Since virtually no one can afford these outlandish prices, the federal government is forcing Americans to pay via their health insurance premiums, co-pays, high deductibles, and Medicare contributions. Low-income individuals will be covered by Medicaid and similar programs paid for by the taxes collected by federal and state governments. What this means is that all of us are paying these rip-off drug prices in one way or another.
How To Use Sovaldi®
The dose of Sovaldi® is one 400 mg tablet taken once a day. For hepatitis C genotype 2 or 3, the drug ribavirin must be taken with it.
For hepatitis genotype 1 or 4, the required dose is the same 400 mg/day of Sovaldi® plus ribavirin and peginterferon alfa.20
The maker of Sovaldi® justifies its $1,000-per-pill cost as a fair price for the value it brings to the healthcare system and hepatitis C patients.19 This argument can be supported by the high costs of caring for end-stage hepatitis C patients using less effective treatments. The bottom line, however, is that this nation is being rendered insolvent because of these kinds of drug prices. The reason they are so high-priced is the over-regulation that makes getting approval for a drug like Sovaldi® the equivalent to winning a lottery, and who wouldn’t want to cash in their winning lottery ticket?
Even when development costs for Sovaldi® are factored in, experts argue that this price is still exploitive. They point to the fact that once the first 150,000 patients are treated, development costs of Sovaldi® will have been covered. It is expected that Sovaldi® will be quickly used to treat about 2 million American hepatitis C patients.19
As we at Life Extension have long argued, if it were not for the burdensome regulations obstructing medical innovation, we might have already had several low-cost cures for hepatitis C. With the collusive behavior demonstrated by pharmaceutical companies, Sovaldi® prices are likely to remain exorbitant even when other new hepatitis C drugs come to market as expected.
Our Battle To Get Ribavirin Approved
Hepatitis C killed tens of thousands of Americans whose lives could have been spared if not for the FDA’s prior political bias against the drug ribavirin.
We at Life Extension recognized the efficacy of ribavirin in 1983 and fought a monumental battle to force the FDA to approve it by 1998.21 Even then, the FDA erected hurdles that precluded many hepatitis C patients from accessing it.
Ribavirin is a broad-spectrum antiviral drug that has been shown to significantly suppress hepatitis C infection when combined with interferon-alpha.22-24 After the FDA approved ribavirin, they required hepatitis C patients to first fail a grueling six-month regimen of interferon therapy before they were allowed to try combination interferon-ribavirin.22,25
The hepatitis C virus inflicts massive damage to liver cells that often leads to cirrhosis and primary liver cancer.26-29 It’s the leading reason why 17,000 Americans are awaiting liver transplants today—and no one should think a liver transplant is easy.30
It is crucial for those infected with the hepatitis C virus to eliminate the virus from their bodies before it causes irreversible liver damage. The scientific literature strongly supported the use of ribavirin and interferon as the primary treatment for most hepatitis C infections.22-24,31 The FDA disregarded these studies because they despised the company that made ribavirin. The company’s sin was to “publicize” favorable results from the ribavirin clinical trials. The FDA hates when companies promote a drug before approval because it puts pressure on the FDA to approve it sooner. The FDA would prefer to take their bureaucratic time in approving a new drug rather than capitulate to the pressure of dying Americans who might be cured by the yet-to-be-approved therapy.
The FDA’s political suppression of ribavirin provides a real world example of what’s wrong with today’s medical regulatory system. The clinical data consistently showed that when ribavirin plus interferon-alpha were combined during treatment, it resulted in complete eradication of the hepatitis C virus 50 to 100% more often than with interferon alone.32-35
The FDA preferred to punish the maker of ribavirin rather than save human lives.