Drug Money

There are now historic shortages of many prescription drugs in the United States.  The reasons for these shortages are said to be complex, but really they are pretty simple.   It is about making money.  Here is the story in a nut shell:

Pharmaceutical companies make most of their money on brand-name drugs. Then, when the patents run out and the very same drugs go generic, the prices plummet and profits dry up.  What is happening right now is that drug manufacturing companies are putting all their marketing, production, and distribution efforts into the more profitable brand name drugs, and the generics are becoming increasingly scarce.

Doctors are a big part of this problem too, especially in oncology, where the cost of some new brand name drugs can be over $100,000 per course of treatment.  Oncologists have historically made a substantial proportion of their income from the intravenous delivery of chemotherapy drugs in the clinic.  They used to buy the drugs wholesale, then charge the insurance companies or patients retail, making quite a profit. That practice has been largely stopped now, but oncologists are still paid for their administration as a percent of the cost of the drug.  So the fee for administering a generic medication is very low compared to what could be a 100-fold higher administration fee for a brand name agent.

So both the drug companies and their administering agents (oncologists) push for brand names.  Meanwhile, many generic drugs are becoming unavailable. There is another more sinister reason for shortages now.  There is a loophole in federal policies that allow drug manufacturers to re-set their prices for “new” drugs.  Old drugs can qualify as “new” drugs only if manufacturers stop making them for 6 months.  This is another incentive for shortages. 

What is happening now with the many drug shortages is hurting patients and wasting money.  We need a better system. Doctors need to be paid for the work they do.  An administration fee needs to be tied to the time, effort, and resources required for the administration, not to the cost of the drug; and health care systems need to pay more attention to the value in care.  This shortage is yet another shameful chapter in our struggle to develop a rational health care system in the United States.