Too easy on pharma?

by Daniel R. Hoffman, Ph.D.

Published Apr. 13, 2016, 10:54 a.m. ET

Readers here have seen denunciations of the pharmaceutical industry for its routine price gouging, its deceptive marketing, R&D that makes only favorable studies available, and payoffs to prescribers, investigators, and patient advocates. Yet Donald Light, a professor at Rowan University and a research fellow at Princeton, thinks these critiques don't go far enough. He has published extensive research that leads him to label the industry a "dystopia," a cesspool of greed-driven corruption that swindles Americans and exposes us to needless harm.

In Light's view the very foundation of the pharmaceutical industry – developing therapeutics for profit – constitutes a fatal flaw that makes it resistant to major reform. Instead pharma operates, in the words of Dr. Sidney Wolfe, as the world's "largest organized crime entity."

During a productive academic career, Light has been specific and unrelenting in showing the many ways that pharma's greed exploits consumers and taxpayers. Some of his findings, sketched below, are devastating.

• Light contends that pharma has totally "captured" the FDA, the government agency created to monitor the approval and use of drugs by Americans. This has occurred because Congress, in return for generous campaign contributions from the industry, has passed lax regulations allowing the companies to gain approval for their new products without demonstrating superiority over existing drugs. Instead the legislative mandate for the FDA allows the approval of new drugs based on comparisons to placebos and demonstrations of non-inferiority to existing drugs.

Light points to another prime example of FDA laxity – allowing companies to test their own products. This has led them to design trials in ways that minimize the detection and reporting of safety concerns among test drugs while emphasizing their benefits.

The FDA again lies down for pharma, according to Light, by permitting rules that allow the companies to exclude from clinical trials those patients "most likely to have adverse reactions" to test drugs, "while including those most likely to benefit." As a result, "drugs look safer and more effective" than they actually are for the population as a whole.

• Pharma companies, in Light's phrase, "treat trials and journals as marketing vehicles." They design trials to produce results that support the marketing profile they wish to create for a drug and "then hire 'publication planning' teams of editors, statisticians, and writers to craft journal articles favorable to the sponsor's drug."

• Pharmaceutical companies, according to Professor Light, are not really innovative or research-driven. He shows they "devote only 1.3 percent of revenues, net of taxpayer subsidies, to discovering new molecules." By comparison they spend 25 percent of their revenues on promotion. When pharma uses the term "R&D," he says it really refers to developing variations on existing drugs, rather than path-breaking research. Instead of conducting genuine research to substantially advance the standards of care, the companies rely "on patents and other protections from market competition" which they use for developing new drugs that offer few if any additional therapeutic benefits, even though the companies tout them as new and improved. In return for these marginal new benefits, the companies then charge higher prices because their patent rights prohibit genuine competition.

Professor Light marshals a raft of international evidence to support his point that pharma is not an innovative industry. This material includes studies of all the drugs available in France, Canada and the Netherlands. Those studies found that from 1981 to 2001, only 12 percent of the drugs available in those countries – for the most part, the same drugs on the market here – offered therapeutic advantages over older medications. In the following decade, 2002-2011, only 8 percent offered some advantages. Nearly twice that many — 15.6 percent – were judged to be more harmful than beneficial.

• Professor Light punctures a falsehood the pharmaceutical industry has promoted for more than fifty years in which it claims that drug prices have to be high to recover the large and constantly rising R&D costs for every new drug.

Contrary to the industry's myth, Light notes that half of pharma's R&D costs are actually subsidized by taxpayers, while another chunk consists of estimated costs that the companies claim they would have received as profits if they had invested the money in ventures other than drug R&D.

Beyond that, he shows that pharma's inflated cost estimate for developing new drugs "is based on the most costly 20 percent of new drugs but attributed to all drugs – a three-fold distortion."

Just these factors, he concludes, make it necessary to divide the industry's cost figure by 12. Light maintains that other factors justify reducing pharma's cost estimates still more.

Light specifically attacks another pillar of pharma's egregious myth about drug prices. The object of his derision is the industry's claim it that it has to charge U.S. taxpayers and consumers enormously higher prices than the rest of the world because profits from this country are necessary to fund worldwide drug development.

On this he agrees with the authors of a British Medical Journal study that used data from the U.S. National Science Foundation and came to the conclusion that pharmas would be able to earn back all their expenses and still earn healthy profits if they set U.S. prices at the far lower levels they charge in Canada and Europe. Price gouging in the U.S. simply generates windfall profits for pharma companies as a result of government protections from free-market competition.

• Perhaps even more appalling than the rigged legislation that allows pharma to extort profits from Americans is what Professor Light sees as "an epidemic of harmful side effects" caused by prescription drugs.

He provides evidence showing that prescribed medications are the 4th leading cause of death, accounting for approximately 113,000 deaths just among hospitalized patients. Prescribed drugs are also a "major cause of falls, accidents, anti-social behaviors." Yet these "harmful side effects," he argues, "generate more sales," for still more medications to prevent or treat those adverse reactions.

Given this intrinsically corrupt nature of the worldwide pharmaceutical industry, the inevitable question is whether it is even possible to envision an alternative that would be based on advancing the public's health instead of sacrificing it to private profit. Professor Light has an answer for that too and we'll examine it in a later post.