Richard Master: Our family's been in business in Eastern Pennsylvania for almost 70 years, and we do have a commitment to our employees and make sure that the wages and benefits are competitive and give them some hope for the future. Many of our employees have been with us their whole working careers. 25, 30, 35 years. 35 years tomorrow.
Speaker 2: Yes.
Richard Master: And now with healthcare costs rising radically year after year, it's become the biggest challenge we face. We're considering insurance for our employees for next year, and the proposal that we've received is for a 40% increase. We have 160 employees. It's going to cost us an average of $4 an hour for each of those employees, just related to the increase in insurance. I don't think the employees can handle it well.
Sue Shantzenbach: What are other companies doing? Are they just passing the burden onto the employees?
Richard Master: That's a good question. A third of MCS's total healthcare expense is just for prescription drugs that are driving the cost of healthcare out of control in the United States. I see pharma as a threat not only to MCS's bottom line profitability. I see it as a threat to the US economy.
Speaker 38: And other members of the Senate Committee on Aging are now launching a hearing into the pricing practices at four big pharmaceutical manufacturers.
Don Dahler: Members of Congress have called for an investigation into steep increases in drug prices. Actavis increased the cost of an antibiotic from $27 a bottle to over $1,800.
Michael Gusmano: But the big problem with the purchase of drugs and the cost of drugs in the US really gets to a larger problem with the US healthcare system, which is that we don't negotiate price. Nothing illustrates this clearer than Medicare Part D. As part of the law, CMS was told that they could not negotiate drug prices.
Walter Tsou: We are stuck paying these outrageous sums which no other country in the world does.
Kevin Outterson: We're buying billions of dollars of products and never negotiating the price. I can't imagine that we do that on anything else. Tanks and trucks and fuel and corn to feed the troops, and I'm sure that on all of those, we don't just take whatever price is offered. We actually negotiate.
Wendell Potter: The pharmaceutical industry has immense power in Washington. In fact, it has 1,100 lobbyists, which is two lobbyists for every Member of Congress, and that's why when any kind of legislation is ever introduced to try to control healthcare cost, pharmaceutical cost in particular, never even gets out of committee.
Donald Light: The pharmaceutical lobby has made sure that America is a free market. Now, what a free market means is free for companies that have a monopoly through a patent to charge anything they want.
David Balto: There's nothing that currently constrains any company owning a branded pharmaceutical drug from increasing its prices by thousands of percents. Market forces aren't going to prevent that from occurring.
Donald Light: So we're getting lots of new drugs and uncontrolled prices that drive up insurance costs and insurance premiums.
Sue Shantzenbach: Our average employee here in Pennsylvania, average length of service is 20 plus years.
Richard Master: 20 plus years.
Sue Shantzenbach: Yes.
Richard Master: Which is a great testament to loyalty—
Sue Shantzenbach: It is. It's awesome.
Richard Master: And to the wages and benefits and the whole package we offer, but it's also problematic because many of our employees are older and at a higher risk of illness.
Stephanie Woolhandler: Well, out-of-pocket costs of medications are a huge problem for seniors or for anyone with a chronic illness. We're seeing rising co-payments for routine medications.
Victoria Smith: There have been several times where I've not been able to pick up the prescriptions because they've been too much money and we just did not have it.
Stephanie Woolhandler: We know that when you put a high co-payment on a drug, folks will use less of it. They'll skip pills, they'll cut the pills in half, they'll go without the pills completely. That's going to have a devastating influence on health.
Edmond Weisbart: I have diabetics who come in. I see them and I prescribe insulin for them, and they come back next month and their diabetes is nearly as bad as it was and I ask, "What's going on? Did you get your insulin filled?" "Yes, I did." "Well, are you taking it?" "I'm taking it every other day." Supposed to be taking it say twice a day. "I'm taking it a little bit every other day because that's all that I can afford."
Robert Langreth: And the interesting thing about the insulin market is there's really only three companies in the insulin market. So it's a very small number of companies. There's no generics and the prices just seem to go up for these drugs in tandem.
David Belk: People die from asthma every day in this country, but a lot more people just end up going to the emergency room and getting very expensive treatment that often costs thousands of dollars simply because they were not able to get ahold of an inhaler that cost a few 100 dollars.
Edmond Weisbart: And we're not talking about people who are irresponsible, who smoke and make this worse. We're talking about people who are really doing their best, but they can't afford to spend $150 or $200 for their inhaler, that in other countries would cost $30. This is economically foolish to do this to people because they wind up with complications that are way more expensive.
Brian Klepper: The cost of specialty drugs threatens the entire system and it is the single issue that employers are most worked up about.
Richard Master: At any time, we could have four or five or seven employees who have very serious illnesses. Some of the drugs cost us more than their annual salary. It can be double or even triple. This is not sustainable. It's an impossible situation.
Health insurance cost is clearly the driving force behind flat wages in the US. We're committed to providing annual raises that are better than the inflation rate, but year after year, the extreme health insurance increases make that an almost impossible challenge. We were paying about $18,000 a year for a high deductible insurance plan for a family of one of our employees. Family coverage under this new set of rates will be $28,000.
We're looking at a 40% increase in our health insurance cost for— It's about $4 an hour per employee and it's crazy, and I'm wondering how efficient we are out here?
Sue Shantzenbach: Over the years, we've actually reduced our headcount while increased sales and products that we ship out the door, so we have gotten much more efficient over the years. We've gotten pretty lean.
Richard Master: If someone told me 10 years ago that MCS would face a $4 an hour increase in employment cost just related to the increase in health insurance, I would say, "You're crazy. It's never going to happen." Well, that's what we're looking at right now.
We're going to have to reduce our profitability and see what we can do in terms of pricing for our products.
Speaker 15: We haven't raised prices in over five years.
Speaker 16: Some of our bigger accounts have wanted us to bring our price down. How can we do that if we're absorbing more costs?
Richard Master: In fact, this year we lost a core product line into our major customer. I see pharma as a threat, not only to MCS's bottom line profitability. I see it as a threat to the US economy.
Marc Fishman: We know that medical bankruptcy is the number one cause of bankruptcy in the United States and bankruptcy from cancer care is the number one cause of bankruptcy and healthcare. When I started practice, the most expensive drugs cost less than $200 a month, and now the starting price for most pharmaceuticals is somewhere in the order of $10,000 a month for each new drug. Sometimes we're seeing DOUBLUTS, so with DOUBLUTS it can be $15,000 or $20,000 a month.
Kevin Outterson: Unlike every other drug which physicians are not allowed to make a profit on, for these specific category of Medicare Part B drugs, the doctors make profits.
David Belk: All doctors who currently give infusion medications get a 6% commission based on the price of the medication.
Kevin Outterson: So we see all sorts of amazing behavior, which the company with a certain drug will offer incredible discounts to the physician. And we know from historical data now that when these discounts are offered, oncologists will switch the drugs that they use in their practice.
David Belk: If you have a drug that's not quite as good as the drug that they're already giving or only just as good, well, how do you get your doctors interested in it? Raise the price. And what that's done is it's led to this massive price escalation in drugs that are administered in doctors' offices.
Marc Fishman: We've had an opportunity at Oncology Analytics to review hospital pricing from various hospital systems around the country, and it's amazing how much variation there is. We've seen $100 drugs priced at $10,000. We've seen $500 drugs priced at $40,000. The difference is extraordinary. It seems that the hospital systems can determine whatever price that they want.
Brian Klepper: One in every four hospitals in the United States is now putting in a cancer center because that's the most lucrative area.
Marc Fishman: I don't use the word crisis lightly, but I think that this is a crisis for the quality of cancer care. If patients can't afford it, it doesn't matter how good the drugs are. And in oncology, we have a lot of drugs that behave like monopolies. You have one choice and if you take the drug, you will do better, perhaps be cured, and if you don't take it, you will die.
Richard Master: Not only are cancer drug prices going out of control, there's a whole new category of specialty drugs that are driving the cost of healthcare out of control in the United States.
We had 10 of these expensive specialty drugs in 1990. Now we have over 300. By 2020, specialty drugs is forecast to be 50% of our nation's overall drug spent.
Megan Murphy: Hepatitis C affects as many as 200,000,000 people worldwide.
Speaker 20: The virus enters the body, circulates in the bloodstream.
Dr. Thomas Perry: 3,000,000 people in the US are believed to carry hepatitis C and chronic infections that result [inaudible 00:12:36].
Megan Murphy: Nearly 3,000,000 Americans have hepatitis C, a viral disease that can cause liver disease, cirrhosis and liver cancer.
Dr. Thomas Perry: This is a huge public health epidemic in multiple countries. It entails enormous healthcare costs and a great deal of suffering, including early death of people who have no interest in dying in their 50s or 60s. Hepatitis C, like HIV is not only an individual disease because it is transmissible, or like hepatitis B, one person who is a carrier potentially can infect thousands of other people and therefore, just like Ebola, it is a public health crisis, only much more extensive than Ebola.
Bob Goldfarb: I've had hepatitis C for over 20 years. There has not been, until recently, a viable cure.
Jasmine Bailey: The Food and Drug Administration approved a new form of treatment for hepatitis C Friday. It's called Sovaldi and was created by US [inaudible 00:13:34].
Bob Goldfarb: When I heard about Sovaldi, I was very, very excited.
Walter Tsou: The great thing about this drug is that it actually can provide a cure for hepatitis C.
Jasmine Bailey: But at a hefty price. On average, it costs about a $1,000 a pill.
Walter Tsou: And you have to take this pill for 12 weeks. So you're talking about something that could cost like $84,000.
Jasmine Bailey: The high price tag has medical professionals on edge. The President of the AIDS Healthcare Foundation told the New York Times, "This is unbearable to the healthcare system and is completely unjustified."
Richard Master: We've had two people in the last three years that have been treated for hepatitis C.
Brian Klepper: Insurance companies are calling their hep C patients and saying, "We need to wait until you get sicker and your liver is further gone before we're willing to fund this."
Kevin Outterson: If a company has a monopoly, a patent on a drug, if they choose to put an $84,000 price tag on it and to not budge at all, that's their right.
Walter Tsou: We have something like 3,000,000 people with hepatitis C and we're going to have to make an economic choice here because of the price of Sovaldi, that either they're going to be able to afford the price, which very few people can, or they're going to essentially come up with chronic liver disease cirrhosis and possibly die. And that's really a huge moral dilemma for our society.
David Belk: Only 10% of the hepatitis C in the United States has been treated by these drugs in the last two years because they're so fantastically expensive.
Donald Light: Sovaldi announced that it has negotiated with Indian manufacturers for a generic version, and the price is going to be 1% of the US price, a 99% discount, and that's with profit.
Richard Master: In other countries, they have patented medicine price review boards. If you want to sell your drugs in that marketplace, you have to sit down and negotiate based on the size of that particular marketplace.
David Belk: Gilead Sciences made over $18 billion in pure after tax profit in 2015, which by the way, is more profit than was made by Microsoft, General Motors, Bank of America, ExxonMobil or Walmart last year.
Richard Master: And it is outrageous that one manufacturer producing a handful of drugs can have a higher level of profitability than major corporations. They have hundreds of thousands of employees and hundreds of billions of dollars of revenue.
David Balto: Patented brand name drugs have a monopoly. So if they want to engage in tons of advertising or just pad their profits and increase prices by 1,000% or 2000%, nothing prevents them from doing that. No market force is going to prevent them from being able to do that.
Dr. Peter Bach: There is no system in place to hold down drug prices, and so companies are just becoming increasingly bold.
Speaker 42: Everybody is making more money, except the consumer who's spending more money.
David Balto: We rely on a free market system to make sure that consumers receive the benefits of competition. When the market doesn't work, when consumers don't receive a fair price, when consumers are paying too much, the economic term is market failure. We need to turn to regulation to effectively replicate the forces of competition to hold those market forces in line and make sure that consumers receive a fair deal. We really can learn from other industrialized countries. They apply sound regulatory principles that provide the right incentives to market participants and assure that consumers receive a fair deal.
David Belk: A good portion of what pharmaceutical companies claim is research is what they call in-process research. When they find a smaller pharmaceutical company that has a product that they think they might like, they go in and buy the company. So really, in-process research is just another word for corporate takeovers.
Donald Light: They're basically huge marketing companies that do less and less research and development. They buy the innovations done by other companies.
Kevin Outterson: So first of all, the company that's selling it right now didn't actually invent it. It's not something that came out of their research lab. They bought the company, they bought the intellectual property. It's a tremendous investment. It's a great windfall.
Richard Master: They're using the power of our commercial banks and Wall Street investment banks to raise enormous sums of capital to buy these smaller biomed operations, and then they become marketing firms and they market these drugs at exorbitant prices. Let's look at 2014, 2015. The investment banking community financed $550 billion of merger and acquisition activity, 300 transactions just in biomed and pharmaceutical acquisitions alone. It's become almost a feeding frenzy of merger and acquisition activity, and the end result is a bonanza for the Wall Street investors, for the inventors of the drug, for the pharmaceutical companies at the expense of the American public because they know at the end of the day, they can charge whatever they want. There is no regulation on Wall Street. A new company can come in, take over the product, raise the price. That's the formula for profiteering.
David Balto: There was a drug for premature infants that was the subject of an acquisition about six or seven years ago. There was no justification for them increasing the price 2,000%, except they knew they could do it.
Speaker 43: The price of prescription drugs in America is not regulated, so it's not against the law when Turing Pharmaceutical makes headlines buying up the rights to a 60-year-old drug and raising its price 5,000%.
Speaker 23: The reaction, particularly when you read the papers today has been quite critical of this move. So why?
Martin Shkreli: Well, we needed to turn a profit on the drug.
Brian Klepper: All of pharma tried to treat him as though he was castigated. He was really not doing anything that they hadn't set down the rules for.
Mr. Chafetz: What do you say to that single pregnant woman who might have AIDS, no income, and she needs Daraprim in order to survive? What do you say to her when she has to make that choice?
Martin Shkreli: On the advice of counsel, I invoke my Fifth Amendment privilege against self-incrimination and respectfully decline to answer your question.
Wendell Potter: And you would think that the insurance companies would be concerned and really try to do something about the ever-increasing prices of drugs. They're actually benefiting in various ways. Many of them own pharmacy benefit management companies, that some of the most profitable businesses within those insurance companies are those divisions that contain the pharmacy benefit management companies.
Richard Master: Pharmacy benefit managers are supposed to negotiate best prices from drug manufacturers to reduce the cost to our company, but for many high price drugs, instead of a best price for us, the manufacturer offers a rebate to the PBM and the insurance company. These are backroom deals with no transparency. Our company pays inflated prices while the insurance company and its PBM pocket the rebate. What is this rebate? It's just a fancy name for a kickback.
David Balto: PBMs are making decisions not because the drug is the lowest cost, not because the drug is the most efficacious. Those types of rebates are prohibited in every other segment of the healthcare marketplace.
Richard Master: Mylan Pharmaceutical's EpiPen is an example of our corrupt system, from the drug manufacturer through the PBMs and insurance company middlemen to the dispensing pharmacy. The system clearly incentivizes price increases.
Speaker 45: Mylan CEO, Heather Bresch speaking out for the first time since the EpiPen price hike controversy blossomed in a wide-ranging interview.
Heather Bresch: My frustration is there's a list price of 608. There is a system. I laid out that there are four or five hands that the product touches and companies that it goes through before it ever gets to that patient at the counter.
Richard Master: And we see a drug that's $600 in cost where $300 of it becomes a rebate that goes to the PBM, who then shovels the money to the insurance company.
Heather Bresch: Our healthcare is in a crisis. It's no different than the mortgage financial crisis back in 2007.
Richard Master: What is Mylan's CEO telling us? The system is in crisis. There are no market forces driving prices down. She sees incentives that drive prices higher and higher.
Wendell Potter: If we negotiated fair national drug prices like other countries do, there would be no need for all those middlemen that are grabbing a piece of the action and inflating our prices at every turn.
Richard Master: As a business person among a whole group of other business people that are paying 60% of the commercial insurance and paying a substantial portion of that to pay for these pharmaceutical drugs, I feel aggrieved by this system. I feel aggrieved by the US Congress. They are not representing my interests.
Speaker 25: Newsmen rush the president's report to a waiting world. It's official. It's all over. It's total victory.
Dr. Thomas Perry: At the end of World War II, we had almost no drugs. When streptomycin was discovered as the first drug effective against tuberculosis, the entire world celebrated. My late father used streptomycin in 1948 to '50 to cure babies who would always have died without that. It was absolutely revolutionary. I don't know how the costs were handled in those days, but it was not an issue that prevented even the poorest child from receiving streptomycin.
Speaker 25: Then in 1954, a vaccine to prevent paralytic polio developed, by Dr. Jonas Salk was tested in the largest field trials in medical history.
Bob Goldfarb: When the polio vaccine came out, it wasn't patented. It wasn't offered at a premium. It was considered a wonderful creation, a life-saving creation and was offered to everybody.
Speaker 25: The next challenge, commercial production of the polio vaccine in quantity.
Dr. Thomas Perry: So the old model of Jonas Salk donating his patent and wanting the entire world to benefit from it is now seen as anachronistic and even graduate students want to know, "Can I patent this discovery?" The ethics have been switched completely around and turned on their back.
Kevin Outterson: So we have to ask the question, do we really want to be living in a world in which we deny absolute life-saving treatment simply because the price of the drug is a $100,000 per person per year?
Bob Goldfarb: To have something that can literally save people's lives, literally save their lives and not make it available to them is evil.
Robert Weissman: And the story that the industry has always told, why do they charge so much for drugs? Well, because the cost of research and development are so extraordinary. Now they say it costs more than $2 billion to develop each new product that comes to market. Well, that comes from a research institute at Tufts University, which is funded by the pharmaceutical industry, which has access to data provided by pharma that no one else is able to see, that is put out under the patina or respected university, told over and over by pharma, by pharma supported researchers, by its lobbyists, and it becomes part of the culture.
Marcia Angell: We need to get access to critical information that drug companies withhold or deliberately obscure. There's now no way to know what they spend to bring any given drug to market.
David Balto: Patented brand name pharmaceutical manufacturers always try to justify their tremendously high prices that a return is necessary for them to engage in research and development, but people are increasingly seeing through that argument. The returns that they ultimately receive are vastly higher than their research and development budgets.
Donald Light: A substantial percentage of the funding for major clinical advances, the small percent of new drugs that are really clinically better comes from government foundation and charitable contributions, that is comes from taxpayers and from donations.
Gerald Friedman: The drug companies say, "We need the money for research and development." We paid for that research already. The original research, the basic research is done by the National Science Foundation and National Institute of Mental Health, National Institutes of Health, by universities, by not-for-profit organizations.
Sen. Dick Durbin: When it comes to medical research, the victims, the patients, the families don't care, don't give a damn about political party labels. The increase in the National Institutes of Health in this budget that we've agreed to, 6.64%, 5% over inflation. It's a total of $32.08 billion in the National Institutes of Health.
Dr. Thomas Perry: Funding for basic research in the world has been the United States taxpayer. To now make drugs derived from that research inordinately expensive so that people cannot get them is obviously unethical.
Marcia Angell: When Novartis brought Gleevec to market, a drug that stops a form of leukemia in its tracks, the company priced it at $27,000 per year, even though the research and most of the development was done by an NIH funded investigator at the Oregon Health and Science University, then the price goes up every year and Gleevec is now priced at $120,000 for a year's supply.
Edmond Weisbart: If we are going to let them use our research, we should demand that these drugs are priced in a way that's fair enough for them to want to continue to produce them because we want them to produce them, but not so usurious that it's going to bankrupt the nation. It's just not right.
Donald Light: The FDA actually does not require companies to provide any information about whether a new drug is clinically better. This is amazing. That's what my neighbors think the FDA is doing when actually it's doing the opposite. It's approving scores of new drugs every year that are little or no better based on tests that do not test whether they're better.
Stan Prodes: Our FDA system here, it only requires that the new medicine is compared to placebo, certainly not compared to other medicines on the market.
Marcia Angell: So there's no way to know whether a new me-too drug is better, worse, or the same as older ones in the same class. The answer to it is to require a trial with three arms, new drug, old drug and placebo.
Marc Fishman: Is this new drug going to be better for my patient? That's the first question, and I'm going to say, is it going to be better than the best available drug? Not is it better than the worst available drug?
Donald Light: So the R&D and the patents are not rewarding significantly better drugs. In fact, they're rewarding the development of a lot of significantly trivial drugs.
Stan Prodes: From a drug company standpoint that's paying this money, well, I'd hate to spend $50 million on a research project comparing my new medicine to a tried and true medicine and it actually comes out to say that they look about the same. That's not going to help you sell your product.
For patients that need to take a medicine like Warfarin, which is anti-clotting medicine for folks that have like atrial fibrillation, there are now maybe three brand new medicines on the market. They're on the TV commercials non-stop.
Speaker 48: At first, I took Warfarin.
Speaker 49: I was taking Warfarin.
Speaker 48: I wondered, "Could I up my game?"
peaker 49: My doctor—
peaker 48: My doctor—
Speaker 49: Put me on Pradaxa instead.
Speaker 48: Told me about Eliquis.
Stan Prodes: And the fact of the matter is Warfarin has been around for so long that it's as good as all the new ones.
Speaker 48: I've got three important reasons to up my game with Eliquis.
Stan Prodes: It may be better for some patients or others, but the literature really doesn't support that.
Dr. Thomas Perry: And the marketing claims typically describe wondrous benefits.
Speaker 50: Only Zelnorm helps coordinate the nerves muscles—
Dr. Thomas Perry: And often they're not really that much better than placebo, sometimes not better at all. Even more important, they may not be better than what we already are using, but are much more expensive.
Donald Light: Their goal is to maximize patents and profits and now and then some important clinical advance occurs.
Speaker 30: Ask your doctor today about Vioxx and find out what [inaudible 00:32:46].
Donald Light: About 90% of the time they find that new drugs are little or no better. So the research and development is new tweaks that allow companies to get a new 20-year monopoly patent that really provides little or no clinical advantage.
Richard Master: The fact that Medicare cannot establish a value and effectiveness based formulary and cannot negotiate the price of the drugs incentivizes the pharmaceutical industry to develop drugs that are not innovative, drugs that can be marketed at high prices, 10 to 20 times the expense of generic medications.
David Balto: Every time a patent comes close to expiring, they may make some small, subtle change that doesn't really make a difference to consumers, but enables them to continue to reap monopoly profits.
Donald Light: Articles whose authors are on the take with companies are three times more likely to conclude in favor of the sponsor's drug. So your doctor, who is the end victim of double biased literature that makes new drugs appear more effective than they are and safer than they really are. In the early part of the 20th century, the AMA created an independent lab that reviewed new drugs, decided whether they were safe and effective, and then put them on a short list of recommended drugs.
Finally, in mid-century, the drug companies let the AMA know that if they didn't close their lab, they would withdraw their advertising from the Journal of the AMA and the other AMA journals and they closed the lab.
David Belk: People often refer to our healthcare system as a free market. Well, if there was a free market, you would expect competition to drive down the price of drugs. Yet that's never been the case with brand name prescription drugs. In many cases, they're 50 or a 100 or as much as 200 times the price of the exact same medication in generic form.
Stan Prodes: Patients may think they need a certain medicine.
Speaker 31: Prescription Celebrex can help relieve arthritis pain so your body can stay in motion, because [inaudible 00:35:17].
Stan Prodes: And they may see a commercial on TV and they're going to come in and say, "I'd like to take this medicine." Whereas the physician may know from the actual data that it's probably not going to make a whole lot of difference. It hasn't shown to be very effective in trials, things like that. Some patients will be very pushy and they'll say, "Well, it looks good on TV, what they're saying. Why am I not taking this medicine?"
Dr. Thomas Perry: We know, for example with Neurontin, a drug which is now considered to be relatively useless, achieved $3 billion per year in sales in the United States that a Boston jury convicted Pfizer of racketeering fraud for the way it was promoted.
Christie Duffy: I'm Christie Duffy for SmartTrend News. Shares of Pfizer closed down one-and-a-quarter percent Thursday to $17 and 39 cents after the world's biggest drug maker was found by a jury to have committed racketeering fraud in the marketing of its epilepsy drug Neurontin and must pay $142.1 million in damages.
Dr. Thomas Perry: I am a doctor who has used drugs primarily to treat people, so I like drugs that work well. I like drugs that save people's lives or relieve their suffering. I'm not in any respect anti-drug, but I do not like drugs that cause harm to people, that impair the quality of their life and that waste public resources because we lose the ability then to do useful things for people.
Richard Master: The rest of the world uses value effectiveness calculations to determine what is a reasonable price for a particular drug. We don't do that.
Edmond Weisbart: So I practiced medicine for 20 years and then was recruited to go work at one of the largest pharmacy benefit managers in the country. My primary function was leading the clinical process, helping select the drugs that would be covered on somebody's formulary. My problem with it is that we replicate this same process over and over and over again throughout the country and it's an expensive process. We could eliminate all of that redundancy and just do that once for the country. You need a formulary that that meets most needs for most people and then has an easy evidence-based exceptions process for the people that need that.
Richard Master: A well-designed formulary is based on science and value. It excludes overpriced drugs that are not clinically better than other less expensive drugs. It's a mechanism for controlling prices while providing maximum patient benefit.
Edmond Weisbart: Every modern nation has figured out how to build a clinically sound formulary and do it in a way that once that's built, you can cut the price of drugs by roughly 50%.
Richard Master: The Veterans Administration has a science and value-based formulary. It results in them paying 40% less than the rest of the country.
Edmond Weisbart: Politics aside, it would be so simple to design a process whereby we have a clinically solid formulary that we know makes all the important drugs available to everybody who needs them for a fraction of the price of what we're spending today. We could do this. We could do this easily. This is not rocket science. This is something that we know how to do. So we need a new way of dealing with the way these drugs are priced.
David Belk: Now, for this to work, we would obviously have to eliminate much of the politics and much of the lobbying that currently goes on.
Brian Klepper: If lobbying were not the driving force for how we'd make decisions in the country, how policy is shaped in the country, we would then be free to do things that actually do make sense for the common interest.
Wendell Potter: Nothing gets through Congress that isn't largely written by the special interest that the legislation will affect.
Richard Master: So the industry has monopoly patents, it has investment tax credits, it has accelerated depreciation. In general, it pays a lower tax rate than other corporations do, than my corporation does, and they make these exorbitant profits and they profiteer in the United States and they seem to get away with it. From 2007 to 2016, pharma spent $2.4 billion lobbying Congress. That average is out to $450,000 per Member of Congress each year. Lobbyists have enormous impact on legislation affecting pharma. Lobbyists make sure nothing Congress does negatively impacts their profits. That's why pharma can charge Medicare any price they want and by law, Medicare can't negotiate price.
Robert Weissman: That's a pretty great deal for the drug companies. "We're going to expand the market. We're going to buy your products and you get to set the price. We can't even negotiate with you." How did this possibly come to be?
Wendell Potter: One of the most prominent examples of how an industry is able to get what it wants out of a lawmaking process was Medicare Part D. The legislation was presented on lawmakers' desk, very big piece of legislation, and they were told that they would have to be ready to vote on this legislation by the end of the day. At first, it didn't pass. They kept the vote open for hours and hours and hours, way into the night, until they had twisted enough arms to get the number they needed to pass it.
George Bush: This legislation is the achievement of members in both political parties and this legislation is a victory for all of America's seniors.
Wendell Potter: They invested several million dollars, certainly in lobbying to get this legislation passed, but it clearly has resulted in many billions of dollars in additional revenue for the industry. And this legislation was different from most big pieces of legislation in that there was no provision for how this money was going to be raised. And it's estimated that by 2023, it will have added a trillion dollars to the debt.
Robert Weissman: The central figure in this story was a guy named Billy Tauzin, who was Chair of the key committee in Congress that was moving the legislation forward.
Wendell Potter: He carried the industry's water and he made sure that what the industry wanted, the industry got. That legislation undoubtedly would not have passed had it not been for the Congressman's leadership.
Robert Weissman: Billy Tauzin didn't stay in Congress very long after that deal.
Billy Tauzin: What's it going to take to wake up this country? To make us understand what a national treasure are our scientists in our laboratories around America?
Nick Penniman: So if you take a guy like Billy Tauzin for instance, when he was in the House of Representatives, he was probably making $175,000 a year. Well, when he left Congress early to become a pharmaceutical lobbyist, he's all of a sudden making $2 million a year.
Charles Lewis: The George W. Bush Prescription Drug Plan, that would never have passed without the interests of the pharmaceutical industry at heart. And about 20 or more Congressional staff who worked on that legislation all went to work for the pharmaceutical industry immediately after it passed.
Sheila Krumholz: In 2015, 60% of lobbyists representing the pharmaceutical industry were largely made up of former Hill government staffers and Members of Congress.
Robert Weissman: This revolving door between Congress and the lobby industry on behalf of pharma is central to their power.
Wendell Potter: The pharmaceutical industry is able to persuade members of both parties to do what they want.
Jacob Hacker: So the biggest interest groups in America, pharma is definitely one of the biggest and most effective. They do not choose one side of the partisan aisle. No, they diversify their investments. So they're building a blue team and a red team, and depending on who they think is going to be in power or who's going to be in the key committees, they can shift their funding around.
Wendell Potter: During the debate on healthcare reform in 2009, the pharmaceutical industry spent more that year than any industry has ever spent lobbying on a single piece of legislation. They spent $275 million just to influence the Affordable Care Act.
Barack Obama: Today, after all the votes have been tallied, health insurance reform becomes law in the United States of America.
Wendell Potter: The Affordable Care Act was an important piece of legislation that does a lot of good. It reforms the health insurance industry in particular in certain important ways. For example, it makes it unlawful for them to rescind coverage or drop people from coverage just because they get sick. It prohibits them from blackballing people, declaring them uninsurable just because of a preexisting condition. And it also has expanded coverage by about 20,000,000 people. Those are the positives, but it also has fallen far short when it comes to controlling costs. The pharmaceutical industry had a few objectives going into healthcare reform. They wanted to make sure that whatever was passed would not in any way interfere with profits. Then they got what they wanted.
Nick Penniman: I think it's clear to almost anyone in this country that the pharmaceutical industry controls the price of drugs in an almost criminal way. And if you look at the fact that we tried to regulate drug pricing in the past and were incapable of getting it done, what that shows you is the tremendous power of the pharmaceutical industry over Congress, over Washington.
Brian Klepper: Pharma is the biggest contributor of lobbying dollars of any health industry sector in America, 43% more than the number two industry, which is insurance.
Richard Master: It's a Congress that's reflecting the purposes of the industry and not really the will of the American people.
Wendell Potter: Poll after poll shows that Americans on both sides of the political aisle are very supportive of efforts to reign in the cost of drugs. Yet Congress is never able to act. So this is a poster child, if there ever was one, of Congress not being able to act on their constituents' behalf, but votes instead to protect the status quo, to protect profits for a particular industry.
Rep. Lloyd Doggett: Our colleagues have asked in the Commerce Committee, "How about a hearing to look at what is happening to the American people on these outrageous prescription price increases that just keep increasing and increasing?" The Commerce Committee has refused to hold a hearing on it.
Nick Penniman: It's absolutely criminal what Americans pay for drugs. It's criminal that we can't do generic reimportation of drugs. We can't as a country bulk bargain to reduce the cost of what it's paying for drugs. These are things that occur in other countries, just as a matter of fact. There's no debate about it. It just makes sense.
Richard Master: If a pharmaceutical manufacturer wants to sell its products in Canada, it goes through a Patented Medicine Price Review Board.
Gerald Friedman: People cross the border from New York, Vermont to go to Canada to buy drugs because it's cheaper. It's illegal, but they do it anyway.
Richard Master: We're the largest market for pharmaceutical drugs in the world. Why are we paying twice as much?
David Balto: We have the most consumers. We buy the most drugs. We have tremendous buying power, but we don't use it. We don't use it to drive down costs. We don't pass sensible legislation and regulation to allow government buyers to unite to try to lower costs to a fair level. The costs of the lack of competition in the pharmaceutical market are astronomical, and they're effectively a cost on US business, a tax on US business that prevents them from being effective competitors and they're a cost that consumers pay out of their pocketbook every day. That cost could easily exceed a $100 billion dollars a year.
Richard Master: This is an industry that does not play by the same rules that the rest of the economy plays by. So at every turn, the industry uses the government to protect its profiteering in the United States.
Tanya Rivero: So can anything be done to stem the tide to help those Americans struggling to pay for their prescription drugs?
Speaker 37: The monthly cost of cancer drug therapy has increased from $100 to $10,000.
Wendell Potter: The news is full of drug companies jacking the price of drugs up unconscionably. Members of Congress express their indignation, their outrage, they'll hold hearings. There's never any real attempt by Members of Congress to actually get anything done.
Richard Master: The real issue here in this concern about healthcare is that the business community really has not focused on the issue. The business community and the general public need to come together. They need to demand that Congress pass legislation to allow Medicare to set up a national value-based formulary with fair pricing. Medicare would establish a panel of medical experts that would make sure there is price justification based on rational scientific evaluation. All Americans should get drugs based on Medicare's negotiated prices. It's the only way we can get drug prices under control. We can do this. Getting drug prices under control is an easy fix. Every other country does it. It's just a matter of political will.